Welfare expansion disguised as COVID relief

MARY REICHARD, HOST: It’s Thursday, the 25th of February, 2021. Thank you for joining us for today’s edition of The World and Everything in It. Good morning, I’m Mary Reichard.

MEGAN BASHAM, HOST: And I’m Megan Basham. First up: child tax credits.

President Biden’s $1.9 trillion pandemic relief package includes direct payments to families with children. Parents with kids 6 and younger would get $3,600. Those with older kids would get slightly less. And the payments would come in the form of a monthly check, rather than a lump sum refund at tax time.

REICHARD: The amount of money isn’t based on income and comes with no strings attached. That has many conservatives raising the alarm. WORLD’s Leigh Jones explains why.

LEIGH JONES, REPORTER: America’s current system of child tax credits dates back to the 1990s. That’s when then-candidate Bill Clinton made welfare reform a cornerstone of his campaign.

Three years after taking office, he signed the Personal Responsibility and Work Opportunity Reconciliation Act into law.

CLINTON: What we are trying to do today is to overcome the flaws of the welfare system for the people who are trapped on it. From now on, our nation’s answer to this great social challenge will no longer be a never-ending cycle of welfare it will be the dignity, the power and the ethic of work.

For decades, people receiving government assistance didn’t have to do anything to collect their checks every month. Robert Rector is an expert on welfare with The Heritage Foundation.

RECTOR: And it was just a disastrous environment for everybody. And at the peak of it, we had about one in seven children in the United States on that program.

That changed almost immediately when benefits for having children became tax credits tied to income.

RECTOR: As soon as we put these work requirements in effect, the caseload almost immediately collapsed. It dropped 60 percent within a few years. There was an amazing spike in the employment of the least educated single mothers, who were the predominant group on this program. And child poverty, which had been frozen for a quarter of a century before that dropped at a historically unprecedented rate, hitting record lows one year after another, particularly among black children. 

Rector says Biden’s proposed changes to the child tax credit wouldn’t just increase the amount families get. It would roll back 30 years of progress.  

RECTOR: What Biden is proposing to do is not only make it much greater, but to remove all the work requirements from it. So it effectively becomes an unconditional cash handout system, and it will dramatically reduce work, it will dramatically reduce self support. And it will increase the number of children that are born outside marriage.

It would also dramatically increase the amount of money the federal government spends on anti-poverty measures.

RECTOR: The United States spends a half a trillion dollars a year providing cash, food, housing and medical care for a low income parents with children. Okay? That is seven times the amount of money needed to abolish all poverty in the United States. And what Biden is doing is saying, well, a half a trillion dollars a year is not enough, we need to add another $80 billion a year on top of it, the Biden plan, by adding $80 billion in cash grants on top of a half a trillion dollars, this addition of $80 billion is the second largest expansion of the welfare state in U.S. history.

Although the current welfare system is an improvement over the previous one, it’s not perfect. For one thing, single parents get more assistance than married couples, a disincentive known as the marriage penalty. Another big problem: something known as the benefit cliff. That’s when families see their benefits drop suddenly when parents start making too much money.

Republicans have long wanted to fix the marriage penalty. And Democrats are anxious to chip away at the benefit cliff.

Earlier this month, Senator Mitt Romney proposed a bill designed to fix both problems. Like President Biden’s plan, it would divide the child-related benefits into monthly checks.

RACHIDI: This idea of a child allowance, expanding it to a larger group of people, and making it larger, has been around for for quite a while and has gained traction in more conservative circles.

Angela Rachidi is a poverty expert with the American Enterprise Institute.

She says some conservatives like the child allowance idea because it could encourage families to have more children and reverse declining fertility rates. And on principle, that’s not a bad idea.

RACHIDI: The child tax credit that we have in place was originally developed as tax relief. And so to the extent that people are thinking a child allowance is like a child tax credit, that, to me is a perfectly appropriate policy. And it’s actually a conservative policy, because it’s just reducing taxes for working families. But that’s only the case when a family has federal income tax liability, which we know a lot of families don’t. 

Like Biden’s plan, Romney’s Family Security Act would provide benefits regardless of whether parents are working. That makes it a non-starter for most conservatives, including Republican Senators like Marco Rubio and Mike Lee, who had previously argued for expanding child tax credits.

But some say Romney’s plan could strengthen low-income families by allowing one parent to stay home, rather than sending kids to daycare. Lyman Stone is with the Institute for Family Studies.

STONE: I think it makes a lot of sense to still have some subsidy for work because we want to encourage people to be contributing taxpayers and things like that. But not everyone has to be a contributing taxpayer. Some people are going to be contributing citizen raisers. And I think that’s valuable and worth rewarding.

Stone doesn’t believe Romney’s plan has enough support to pass right now. But Democrats could squeeze Biden’s plan through Republican opposition by using the budget reconciliation process. The expanded benefits would be temporary, but Robert Rector warns they’re not likely to stay that way.

RECTOR: And the history of this is once you start spending on these programs, Republicans are pretty reluctant to roll them back, which, which is why, contrary to fake news that you hear, roughly $1 in $20, in the U.S. economy is going to aid to the poor.

Reporting for WORLD, I’m Leigh Jones.

(AP Photo/Julio Cortez) Capitol Building, Wednesday, Jan. 20, 2021, in Washington. 

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