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The Expanded Child Tax Credit Is Gone. The Battle Over It Remains.

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Tax credit payments of $750 a month raised cash income by nearly 50 percent for Thomas Horton and his wife, Pamela Mudge, lifting them above the poverty line and providing them breaks from the familyÕs frugal norms. (Nate Smallwood/The New York Times) (Nate Smallwood/The New York Times)

Tax credit payments of $750 a month raised cash income by nearly 50 percent for Thomas Horton and his wife, Pamela Mudge, lifting them above the poverty line and providing them breaks from the familyÕs frugal norms. (Nate Smallwood/The New York Times) (Nate Smallwood/The New York Times)

WASHINGTON — When the history of American hardship is written in some distant decade, two recent events may capture the whipsaw forces of the age.

Child poverty fell to a record low. And the program that did the most to reduce it vanished.

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The story of that temporary program — technically, a tax-credit expansion but more plainly a series of monthly checks to most families with children — was extraordinary in every way. A guaranteed income in a country long resistant to one, the expanded child tax credit emerged from obscurity to win support from most of the Democratic Party, aided millions of low- and middle-income families during the pandemic and helped cut child poverty nearly in half.

Then it died, as President Joe Biden’s efforts to preserve it drew unified Republican opposition and the defection of a crucial Senate Democrat. Critics called the monthly payments of up to $300 per child an expensive welfare scheme that would deter parents from working by providing cash aid regardless of whether they had jobs.

The checks have ended, but the battle has not. Supporters say new evidence shows the payments lowered hardship and nurtured children without reducing parental employment. Some Democrats hope to revive payments to small groups of parents as part of a year-end tax deal, and despite Republicans taking control of the House in January, restoring the full program remains a long-term Democratic goal.

“It was soul crushing not to get it, but the commitment to the tax credit remains — absolutely,” said Maria Cancian, a former Obama administration official who is dean of the Georgetown University School of Public Policy. “We’ve shown that we can get money in the hands of parents and really make a difference.”

Skeptics argue the payments’ six-month run was too brief to test whether the guaranteed cash weakened incentives to work, and they find the short-term benefits less impressive than supporters say.

“There was a meaningful reduction in material hardship, but the reduction has been exaggerated,” said Michael Strain of the American Enterprise Institute. “It’s much smaller than you would expect when hearing the phrase, ‘Cut child poverty in half.’”

Each side might find support in the experience of Thomas Horton and his wife, Pamela Mudge, who are raising three children in Pitcairn, Pennsylvania, outside Pittsburgh.

Horton, 38, and a teenage son receive disability benefits, which became the family’s main support after Mudge lost work at the start of the pandemic. Tax credit payments of $750 a month raised their cash income by nearly 50% and lifted them above the poverty line.

While most of the aid went to bills, Horton cited two breaks from frugal norms that lent the children a boost. One was a trip to Walmart, to quiet their classmates’ taunts over their thrift-shop clothes. Another was the family’s first vacation — a single night in a state park, where they pitched a borrowed tent and made s’mores. “I saw a happiness in my wife and kids I hadn’t seen in a long time,” he said. “I felt like father of the year.”

At the same time, Horton acknowledged the payments’ end hastened his wife’s return to work — a point the program’s detractors would emphasize — and that her earnings roughly replaced the lost aid. (She works part time so she can assist with his care.) Horton said she would have returned to work anyway and, had the payments continued as supporters hoped, the children would be better off.

“We’re back to the everyday struggle,” he said.

Many countries offer cash aid to subsidize child-rearing costs. But historically the idea gained little traction in the United States, where faith in upward mobility held greater sway and racial divisions slowed the growth of the welfare state. As recently as the 1990s, a Democratic president, Bill Clinton, eliminated guarantees of cash aid to poor families.

In part the growing interest in family aid is rooted in concerns about inequality. It also reflects science that showed the importance of the formative years and research (summarized in an influential 2019 report) that found government aid helps children advance.

An unlikely force accelerated the drive: a Republican tax cut. A 2017 law elevated the child tax credit by doubling its value and extending it to high-income families while keeping earnings requirements that denied the poorest one-third of children the full benefit.

Republicans argued that tax credits logically favor taxpayers, but Democrats saw inequity in a children’s policy that excluded children who most needed help. They sought to subsidize all poor and middle-class families, regardless of parental employment, and increase the benefit.

The pandemic offered the chance. The aid Biden won last year included six monthly payments (of $250 a child or $300 for those under 6) and a lump-sum payment for an additional six months that was paid this spring. Supporters had hoped that the program, kept temporary to limit costs, would prove too popular to lapse.

The one-year expansion of the credit, which cost about $100 billion, cut child poverty by 36%, according to census data. The overall decline in child poverty reached 46%, a one-year drop without precedent.

Food insecurity among households with children also reached a record low, the Agriculture Department reported. Surveys have consistently found that the children’s payments reduced food hardship, variously defined, in some cases by 25% or more.

“That’s a very big impact — very big,” said Elaine Waxman, a researcher at the Urban Institute. “People clearly used the money to buy food or we wouldn’t be seeing those kinds of numbers.”

The JPMorgan Chase Institute found the payments increased bank balances, creating a cushion for emergencies. Researchers at Columbia University found the level of hardship among New Yorkers was the lowest in the five years for which there is data.

“To put it bluntly, the child tax credit was a really good thing,” said Megan A. Curran, an analyst at Columbia’s Center on Poverty and Social Policy who published a review of recent studies. “These are some of the most impressive results we’ve ever seen from a single policy.”

But some hardships seemed largely unaffected. Multiple studies found little or no impact on parents’ ability to pay rent, perhaps because housing payments are large. While supporters hoped the credit would boost educational or enrichment spending, a study that posed the question directly found it had not. And there was little impact on parental depression or stress, perhaps because payments expired too soon to address entrenched problems.

“The evidence is uneven,” said Elaine Maag, a researcher at the Urban Institute who helped conduct multiple studies. “But just because we didn’t see improvements in every aspect of someone’s life doesn’t mean we shouldn’t support a program that helped in some aspects. I thought people’s lives would be easier, and they were.”

The payments’ effect on parents’ decisions to work has drawn extensive interest. One study found the aid coincided with an employment decline of 2 percentage points, though only among the least-educated parents. But least six studies found no change in parental employment, though a decline would likely take longer than six months to fully appear.

A more nuanced question is whether a reduction in parents’ work hours might benefit children. While evidence is scarce, Louwanda Douglas, a Pittsburgh nursing aide, said the payments afforded her more family time.

Before the program, Douglas, 44, worked a second job as a night janitor to send her daughters — Londyn, 12, and Leslie, 7 — to cheerleading classes. With $500 a month from the tax credit expansion, she quit the night job and took the girls to practices. “My kids always want me to be there — they looked so happy,” she said.

When the payments from the tax credit ended, Douglas continued to work one job (to spend time with an ailing mother), and Londyn left the class in part because of the cost.

Scott Winship of the American Enterprise Institute argues that last year’s program has little predictive value because the conditions were so unusual, with short-lived payments, other forms of temporary aid, and a job market skewed by the virus. “Studying a six-month program in the midst of a pandemic just doesn’t give you much information,” he said.

But others say a real-world test that involved more than 60 million children is more rigorous than the small experiments that often shape policies. “It’s worlds ahead of the kind of evidence we usually have,” said H. Luke Shaefer, a researcher at the University of Michigan who found that hardships fell as soon as the payments started and rose as soon as they stopped.

Last year, Biden’s lengthy attempt to continue the payments failed to persuade Sen. Joe Manchin, D-W.Va., who criticized the program’s costs and said aid should be limited to parents who work.

Despite bets on its popularity, the program expired with little political backlash, and Democrats, accused of inflationary spending, said little about it in congressional campaigns. The credit reverted to its previous state: a $2,000 annual benefit that includes high-income families but fails to fully reach those in the bottom third.

“There’s been a deafening silence” from politicians and beneficiaries alike, said Sidney M. Milkis, a political scientist at the University of Virginia, who said the absence of protest illustrates the political alienation of the poor. “The people most affected feel unmotivated to vote.”

Robert Greenstein of the Brookings Institution, a longtime advocate for safety net programs, urged Congress to reinstate payments to some parents in exchange for preserving a corporate tax break that expires this year. “Its benefits are proven, while the idea that the there might be some small adverse effect down the road is merely speculation,” he said.

But at least one prominent Democrat warned that progressives are too focused on income guarantees. Isabel V. Sawhill, also at Brookings, said she agreed with Manchin that the aid should be reserved for working parents (she would include intermittent workers) and families of modest means.

She warned that a broader program could squeeze spending on other services low-income families need, like education and health care. “I could build you a Cadillac pre-K or child care system for that kind of money,” she said.

Supporters of the credit often lament that the United States has higher child poverty rates than many advanced countries (with poverty defined as half of each nation’s median income). Zachary Parolin, a researcher affiliated with Columbia University, found that the expanded credit raised the American rank to 21st of 53 nations, from 40th — to a place beside Germany, rather than Bulgaria.

He was stunned when the payments ceased. “I had this theory that once the policy is there there’s no way to get rid of it,” he said. “I was wrong — it’s gone.”

© 2022 The New York Times Company

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