In the past half century, the debate over the role of government has been consistently framed around big versus small.
This is a limited view, as TCF fellow Jeff Madrick states in his book, The Case For Big Government:
Big or small government is not the critical criterion in economics. To the contrary, government’s management of change is what is critical. Without an active government, a nation cannot respond adequately to its times.
And boy, are times changing.
America has the second-highest child poverty rate among its developed counterparts. (Editor's note: See TCF’s ongoing work about the issue here.)
The more pertinent question now is not “big or small?” but “how do we manage?”
Under the Hood of Our Social Safety Net
The first thing we must acknowledge is the effect America’s social safety net has on poverty.
The official poverty measure (OPM), developed in the early 1960s, measures income without factoring in taxes and transfers. It shows the poverty rate has stayed around 15 percent, consistently, since 1967. The OPM’s poverty threshold is calculated in the same archaic manner since it was invented—three times the cost of a minimum food diet (updated annually for inflation).
In 2010, the supplemental poverty measure (SPM) was created to address the OPM’s modern day shortcomings. For example, rather than measures based on a minimum food diet, the SPM sets the poverty threshold at the 33rd percentile of expenditures on food, clothing, shelter, and utilities. Another difference, among many, is that the SPM takes into account the safety net, allowing us to see its real effects.
The poverty measure using the official and supplemental poverty rate differed only slightly in 2012. However, exclusively using the SPM shows the before and after effects of government safety net programs. In the graph below, we see that after transfers, the poverty level goes from 30.5 to 16 percent, cut nearly in half.
The use of the SPM is an important development because it provides evidence of the positive effects of refundable tax credits, such as the Earned Income Tax Credit (EITC), and the Child Tax Credit (CTC).
Although Social Security lifts the most people out of poverty, the EITC and CTC affect the largest number of children, lifting almost 5 million out of poverty.
Unfortunately, recent expansions of these credits are scheduled to expire in 2017 (as Bob Greenstein emphasized in our conference, Inequality Begins at Birth).
To put this in perspective, if the improvements had expired in 2013, it would have caused almost 16 million children to lose some or all of their EITC, which amounts to almost $3,000 per year for a family with children. As one of our biggest anti-poverty measures, we cannot allow this to happen..
Where the Problem Creeps In
So, it turns out government action is clearly making lives better. But these successful anti-poverty measures are often stalled by rhetoric centered around who is deserving of welfare, and who is not.
It’s easy to justify grandma collecting her Social Security. She paid into the system for years, so she earned it, right? But we can’t make the same argument for kids.
The integral difference is that welfare for children is usually channeled through their parents, who, no matter how many minimum-wage hours they may work, can always be painted as undeserving by anti-government ideologues.
Are we doomed then, to relegate our children to the sidelines because their parents are not as politically digestible?
The answer, I believe, is to redefine the value of what it means to be a parent.
Lessons from Abroad
In many other Western countries, it is widely accepted that having children is an additional burden deserving of governmental support. To tackle this cost, numerous EU and Organization for Economic Cooperation and Development (OECD) countries offer up generous policies.
Family benefit policies in OECD countries often transfer cash directly to parents, while paid maternity and paternity leave, and universal child care policies, ease the difficulties of being both a worker and a parent. Moreover, numerous countries tack-on additional benefits for lone-parent households.
American parents would probably agree with this approach—the USDA recently released a report showing the cost of raising a child from birth to age seventeen is $241,080.
Furthermore, the U.S. child poverty rate is almost eight percentage points higher than the OECD average, so it would behoove us to listen up.
If Americans only sympathize with our children without recognizing the importance and difficulty of being a working parent, we cannot adequately tackle poverty in this nation.
In the words of Whitney Houston: “The children are our future.” That may be, but it’s the parents who have to pick up the tab.