When President Biden signed the last major coronavirus relief package — the American Rescue Plan — into law, he took a social program that already existed, the Child Tax Credit, and turned it into a major and potentially transformative safety net. By significantly expanding the dollar amount of the subsidy, applying it to families with no income as well as those who were previously considered too poor to be eligible, and direct-depositing it into people’s bank accounts on a monthly basis, the Child Tax Credit is projected to cut child poverty in half and increase social mobility.
The problem with the tax credit expansion, one of the president’s signature policies, is that it’s only temporary. And though most congressional Democrats and the White House want to make it permanent through the Build Back Better Act, the social program is now at risk of being watered down because Senator Joe Manchin of West Virginia is demanding that it be dramatically scaled back. As part of the ongoing negotiations over the price tag of the social infrastructure package, Manchin told the White House that the Child Tax Credit ought to include work requirements and a household income cap of around $60,000 — provisions that would seriously diminish its impact.
Neither Biden nor the Democratic leadership in Congress should take Manchin’s proposal seriously, for two main reasons: First, work requirements are at best ineffective at expanding the labor force and at worst harmful to the families who are most in need of assistance. Second, his proposed household income cap of roughly $60,000 is far too low and would cause many middle-to-low-income families to fall through the cracks. In other words, what Manchin is proposing would end up harming millions of Americans and prevent the government from using a surefire tool to meaningfully reduce child poverty.
Manchin’s argument to include work requirements is based on the premise that having large social programs will contribute to what he calls an “entitlement mentality,” where people would have too many disincentives to work. But that argument begins to fall apart as soon as any research is introduced. After all, if large social safety nets promote laziness and a disincentive to work, how is it that countries with bigger social welfare programs, like Norway, Denmark, and Finland, have a higher share of their populations in their labor forces than the United States? Indeed, study after study has shown that work requirements for welfare programs are not effective at promoting work and end up hurting some of the most disadvantaged Americans instead.
In fact, people who are most negatively impacted by work requirements aren’t people who voluntarily sit out of the labor force; it’s people who face barriers to work — most often as a result of health complications or disabilities. Imposing work requirements on them in order to receive welfare benefits does not give them an incentive to work; it punishes them for being in circumstances beyond their control. And while some small subset of Americans might be nudged into the workforce, their numbers relative to those who would suffer are insignificant.
As for Manchin’s desire to means-test the tax credit, it certainly does make sense to ensure that genuinely wealthy people aren’t receiving the benefit — which is why Biden’s plan begins to phase out for individual incomes over $75,000. But Manchin’s proposed income cap is simply too low. Under his plan, children whose parents make just over $30,000 each would no longer benefit from the Child Tax Credit. That’s well below the overall median household income and, in many parts of the country, households making just over $60,000 would be considered low-income.
One of Manchin’s stated reasons for wanting to gut programs like the tax credit expansion is that the government is simply spending too much money. But what Manchin fails to realize is that poverty is already a cost burden on the government, and refusing to proactively reduce poverty will only add to public expenditure in the long term. In fact, as a result of health care costs, reduced worker productivity, and criminal justice system costs relating to higher crime rates (to which poverty is a contributing factor), child poverty alone is estimated to cost the federal government up to $1.1 trillion each year. The child credit would, in the long run, reduce that cost burden on the US economy.
One way or another, the government will spend massive amounts of money on poverty. If Manchin has his way, that spending would uphold a system that punishes people for being poor. But if Biden is able to make his signature policy permanent, then that spending would instead lift people out of poverty. The pragmatic spending choice is clear.
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