Sen. Mitt Romney has set off a vital policy debate with his Family Security Act, an innovative and well-designed proposal that would pay a monthly benefit to most American households for each of its children, beginning during pregnancy. Payments depend on a child’s age, so a family with a 4-year-old and a 7-year-old, say, would receive $7,200 annually.
The proposal’s ambitious scale is appropriate to the enormous scale of the challenge. A recent survey by my organization, American Compass, highlights the economic pressure that families face: Only one-quarter of people 18-50 say they are living the American dream. Among everyone else, a majority say they have fewer children than they want, most often because they couldn’t afford to have more.
While public policy alone will not rescue the American family, an aggressive expansion of the nation’s social compact backed by a major financial commitment would shore up the economic and cultural foundations on which people build their lives.
The critical question is: Who should be eligible? Current federal policy provides a child tax credit of $2,000 per child, but it only cancels out taxes that you owe; a family with low earnings and little tax liability receives little benefit. Mr. Romney’s plan, and a one-year provision included by Democrats in the latest COVID-19 relief package, solve this by making their benefits essentially universal so that a family with no earnings receives the full value.
That goes too far. While universality may appeal in its simplicity, it violates the principle of reciprocity at the heart of a durable social compact. To strengthen a nation’s commitment to shared expectations and obligations, and to sustain broad-based political support, a program should ask recipients to do their part in supporting themselves. Many think of Social Security payments to retirees as a “universal” program, but it goes only to those who “have earned this benefit by contributing to Social Security with every paycheck,” as Sens. Chuck Schumer, Elizabeth Warren and Ron Wyden emphasized in a recent proposal to increase it.
Policymakers should conceive of a new family benefit the same way, in both rationale and structure. Monthly cash payments should go only to working households. The existing safety net remains the more appropriate support for the non-working poor.
At American Compass, our research director, Wells King, and I have proposed a Family Income Supplemental Credit, which shows how this could work. The plan mirrors Mr. Romney’s, but caps a family’s annual benefit at their earnings from the prior year. In the example above, the family would need to have earned at least $7,200 in 2020 to receive the benefit’s full value in 2021. One part-time job at the current minimum wage would be more than sufficient. The test is, essentially, “Did someone in your household work last year?” If so, you are “paid in” to receive the supplement.
A happy effect of this structure is that reference to prior income provides for periods of adjustment. Someone losing his job does not suddenly lose support; he has an entire year to find new work before the supplement might decline. Like Mr. Romney, we propose that payments start midway through pregnancy to assist with the costs of preparing for a new arrival. Our simple, backward-looking work requirement ensures that parents could take leave around the child’s birth without jeopardizing immediate or future eligibility.
This structure will frustrate fans of an unconditional benefit, who see payments to households with no earnings of their own as a potent weapon in fighting poverty. Certainly, giving cash to families so that their incomes rise above the poverty line could lower the poverty rate measured by the government. But that rate is an abstract statistic, which uses household income as a proxy for identifying the population living in conditions of poverty.
Money itself does little to address many of poverty’s root causes, like addiction and abuse; unmanaged chronic- and mental-health conditions; family instability; poor financial planning; inability to find, hold or succeed in a job; and so forth. Effective anti-poverty policy provides resources in ways that also help resolve such problems and push the recipient toward resolving them himself.
A generous cash benefit disconnected from work can also be economically and culturally counterproductive. Work plays a critical role in people’s lives, as a source of purpose, structure and social interaction; a prerequisite for upward mobility and a foundation of family formation and stability. Communities in which labor-force dropout is widespread and widely accepted are not happy ones; a policy that sustains people in joblessness is not ultimately anti-poverty.
A generous cash benefit disconnected from work can also be economically and culturally counterproductive.
A “child allowance” of $600 a month for a household with two children may seem plainly insufficient to support them, but combine it with $400 in food stamps and a $1,000 housing voucher and the case is less clear cut. Include roughly $750 per month in Medicaid payments for health care, and total annual support to the household would reach $33,000, including more than $7,000 in cash.
Beyond the direct economic implications lie equally if not more important cultural ones. Some rewards of work arrive not in people’s paychecks, but in the social status and respect that accompanies fulfilling their obligation to support themselves and their families. If the package of benefits afforded the nonworker approaches what workers labor to provide, those rewards dissipate — no one, it would turn out, is relying on them — with consequences every bit as real as a pay cut.
To be clear, America should provide basic necessities to those who cannot provide for themselves — we try to do this already and should strive to do better. But the safety net’s assistance should not replicate the income associated with engaging productively in the society. It should emphasize in-kind benefits for nutrition, shelter and so forth, attached to services aimed at helping people improve their lives.
Universal family benefits combine two ideas best assessed separately: the Family Income Supplemental Credit for working families, and unconditional cash for the non-working poor. The first has the prospect of winning broad-based, bipartisan support and building pro-family infrastructure. The second is a radical anti-poverty strategy running counter to centuries of American tradition and decades of welfare reform.
By all means, let’s debate each on its own merits. But don’t insist in packaging them together. Holding one hostage to the other is a recipe for political gridlock and policy failure.
Oren Cass is the founder and executive director of American Compass and the author of “The Once and Future Worker.”