What is a child allowance — it has nothing to do with chores — and why have diverse countries embraced it?
Bipartisan support exists in the U.S. now for government policy to help families afford to have children, experts say.
SALT LAKE CITY — Close to 1 in 6 children in the United States lived in poverty in 2018 — a staggering statistic in “The State of America’s Children 2020” report by the Children’s Defense Fund. That number could be low, as many Americans lost hours or jobs during the pandemic.
Some policy experts and members of Congress believe a child allowance — a benefit for parents to help with the cost of raising children — is family-friendly policy that could greatly reduce the number of children growing up poor.
“A child allowance is an idea that has remarkably broad appeal. It has a lot of support among centrists and progressives, but even Republican politicians like Mitt Romney and libertarian think tanks such as the Niskanen Center have backed versions of a child allowance,” said John Schmitt, vice president of the Economic Policy Institute.
Studies show lack of financial resources contributes to other disadvantages for impoverished children. They have worse health and less access to care. Experts say they’re more likely than those in financially stable homes to struggle academically and even drop out. They have more unemployment as adults and greater risk of entering the criminal justice system. They are also more apt to be poor into their 30s and maybe beyond.
A National Academies of Science report estimates child poverty in America costs between $800 billion and $1.1 trillion a year, including crime, poor health and lower earnings as adults.
Many countries have adopted a child allowance, including nearly the entire European Union, Canada, Australia, Argentina and Japan, said Elliot Haspel, an education policy expert at the Virginia-based Robins Foundation and author of “Crawling Behind: America’s Child Care Crisis and How to Fix It.” Some use a sliding scale based on income; others don’t.
But those who agree some form of child allowance would help, disagree on the best approach. Romney, a Republican senator from Utah, and Democrat Sen. Michael Bennet of Colorado have proposed a version of a child benefit based on changing existing tax law. Others favor monthly cash payments to families because a benefit in the tax code comes once a year and families live month to month. Some argue the tax code is too complicated and may leave out many in direst need.
Meanwhile, critics say a child allowance could diminish funding that does a better job of helping families, especially child care subsidies. And others balk at “paying” families for raising children.
Kids: Expense or asset?
Despite the cost of having kids — experts and parents agree children are expensive — a thriving society relies on having a robust generation of youngsters. When they become adults, their work supports the social safety net for needy people and senior citizens. Countries need adolescents who will work and spend as adults, driving future economies.
“The concept behind a child benefit is that it’s important for society to have kids and families. You want people to want to have kids and you want them to have healthy kids. But when you have children, it obviously raises your budget expenses without providing you (money) to compensate for that. So the government pays some amount of money to help you raise your kids,” Haspel said.
“It’s been pretty well established from research that the graying societies have more economic torpor, that they tend to experience more problems with social programs in general. It’s not good to move into a gerontocracy. You want to have lots of kids coming up,” he said.
Brookings Institution says one-third of workers — 41.2 million — have minor children, the majority of them younger than 14.
But America’s fertility rate of 1.7 is, like that of many countries, below the replacement level of 2.1 births per woman of childbearing age. Some experts believe concerns about the cost of raising kids contributes to the low rate.
“There are only two states where births are outpacing deaths, and one of them is Utah. That means a lot of families in our state are having children, and it also means added expenses for those families,” said Romney.
The child tax credit is one way to provide a child benefit, experts say. It was recently increased from $1,000 per child to $2,000, though a cap on the number of kids means some large families might actually lose some of the tax break.
Those who favor a child allowance say $2,000’s not nearly enough to help families. And the poorest families benefit even less.
An issue is whether help tied to tax policy is refundable, which means one receives it even if income is too low to file taxes.
Romney said his and Bennet’s plan would make the child tax credit fully refundable, which would “especially help parents handle the costs of raising children. While the proposal has not been enacted as law, it should serve as a blueprint for future conservative pro-family, pro-child tax policy.”
Of the Bennet-Romney proposal unveiled last year, National Review’s Samuel Hammond wrote: “A strange thing happened this week amid the chaotic logrolling that has come to define America’s broken budget process: A conservative Republican and a liberal Democrat proposed a good-faith, bipartisan tax reform.”
The proposal would give families with children under 6 an annual refund of $1,500 and $1,000 for each child 6 to 17, increasing to $2,500 and $2,000 respectively for higher earners. The National Review noted separately that “this would make the per-child credit more like the child allowances found in Canada and Western Europe, dropping the conceit of ‘tax relief’ in favor of open support for families and children.”
Haspel wrote in The Atlantic that a July report by the Century Foundation on the American Family Act, an earlier and more generous proposal by Bennet and others, “would raise the value of the Child Tax Credit to $3,600 per year for young children and $3,000 for older children, make the credit fully refundable, and distribute it monthly — thus establishing a child allowance.” A one-year version was part of the COVID-related HEROES Act the House passed in May and is awaiting Senate action.
“You’ll find quite a few leading conservatives who think (a child allowance is) a good idea because it does provide, it strengthens families. You can make the argument from the family values standpoint as much as from an economic standpoint, that you don’t want stressed-out families. You want strong families,” Haspel told the Deseret News, predicting a “decent likelihood” some version will pass in the next couple of years. The details “will depend on the political environment.”
The National Academy of Sciences said the No. 1 way to slash child poverty would be to implement a robust child allowance, offering four suggestions. They all include making the child tax credit refundable, while one also included a separate benefit. The report said any of the suggestions would cost far less than child poverty.
Child benefit vs. child care
Haspel said resistance to a child benefit tends to be: “Why are we just giving people money?” or “Helping families financially has not been a traditional way that the U.S. thinks about providing for the poor. We like to do things through tax credits.”
Some see a rivalry between child care subsidies to help low-income parents who work and any potential child allowance.
“A lot of the child allowance proponents on the right like it because they either don’t like child care — either because they think it’s not good for very young children or because it’s not fair to families with stay-at-home parents,” said Shawn Fremstad, senior fellow at the Center for Economic Policy Research in Washington, D.C. “On the left, tension is more about what should be prioritized first when it comes to public spending.”
He points to Canada, where Prime Minister Justin Trudeau “went big on child allowances, while opponents to his left proposed going big on child care.”
Angela Rachidi, an American Enterprise Institute scholar, thinks spending more on child care is more helpful than either adjusting the child tax credit or creating a separate child allowance.
She called expanding the existing $2,000 child tax credit ”a poor and ineffective substitute for targeted child care assistance, even though it is often sold as a better alternative.”
A direct subsidy for child care expenses “increases employment and supports child development because parents can afford higher quality care. The (child tax credit) does not support employment and does not cover child care costs,” she said.
Rachidi said the expansions being discussed would cover a fraction of child care expenses, which can range from $5,000 to $20,000 a year for each child. But an expanded credit would limit the “employment-inducing effects of direct child care assistance,” she said.
“It risks becoming a subsidy for stay-at-home parents. I support stay-at-home parenting, but I do not support government assistance for stay-at-home parenting,” said Rachidi.
Rachidi called the Child Tax Credit “poorly targeted to low-income families. I support programs, like the EITC (Earned Income Tax Credit), that provide more support to the lowest income Americans rather than programs like the CTC (Child Tax Credit) that primarily benefit higher-income families,“ she said.
She also worries that more government payments could make someone less likely to work, while being pro-work does more to lift families from poverty.
Haspel thinks parents need both child care and a child allowance.
“If there was ever a time for this, it’s right now when families are struggling badly. There’s a new study from the University of Oregon that said 38% of parents with young children 5 and under are worried if they can pay for food in the next month. The time for getting cash support for families is right now.”
Romney said another bill he’s sponsoring, Coronavirus Assistance for American Families Act,” addresses immediate relief for families struggling in the pandemic.