Child Allowance Gains Ground
On: April 23, 2021

Is America at a turning point in its approach to child poverty? Experts hope so.

In 2018, veteran economics analyst Jeffery Madrick published “The Invisible Americans: The Tragic Cost of Child Poverty.” The book, a call for action on child poverty, was his eleventh and perhaps, at the outset at least, his most dispiriting.

He called his book “The Invisible Americans” because, as he discovered in his reporting, people just don’t believe children are poor in America, let alone 10.5 million of them. And that was before the pandemic—which experts believe will add 4 million children more to the ranks.

“When I told some friends here in Manhattan, very liberal friends I might add, that I was writing a book on child poverty, they jokingly asked, ‘Did you find any?’ It’s just hard for people to grasp the fact that kids are poor in the United States, that they are hungry, have poor health, and that there are millions of them.”

And if they did believe him, he said, they attributed poverty to laziness.

In the book Madrick calls for a government-funded payment of $4,000 to $5,000 per child per year to all American families, or about $300-$400 a month per child.

Giving families cash, Madrick says, gives parents the authority and control over how to raise their own children.

“The poor are often patronized,” he said. “We think we have to tell them how to raise their children. Giving them the opportunity to raise their children in the way they prefer is the right way to create policy.”

“The poor are often patronized. We think we have to tell them how to raise their children.”

Child Allowances Gain Political Steam

Turns out he’s not alone in this call. President’s Biden’s $1.9 trillion stimulus bill includes a monthly child allowance, and Sen. Mitt Romney offered up his own proposal, the Family Security Act. Seventeen other rich nations have some form of a child allowance.

Both the Democrats and Romney would send families $250-$350 per child per month, but the Democrats would do it through the tax system as a tax credit, even if a person didn’t earn enough to file. (The current child tax credit misses 70 percent of children of single mothers because they don’t earn enough to file taxes.) Tying it to work as a tax credit does makes it more politically feasible, many argue.

What that looks like in real life is that a single mother who earns $10,000 a year as a home health aide would now receive a child tax credit of $3,600, up from $1,125 she currently receives under the original program for her toddler.

Romney would bypass the tax system and let the Social Security Administration distribute the funds, and the payment would not be contingent on work, which is more in line with European versions. It would also reach higher income earners, stopping at $400,000 for joint filers and $200,000 for single filers. The Biden plan stops at $150,000 for joint filers and $75,000 for singles. That plan would add the costs to the federal budget while Romney would pay for it by cutting back on other safety net programs.

“The current child tax credit currently misses 70 percent of children of single mothers.”

This child allowance in the stimulus bill mirrors the recommendations in the National Academies of Science 2019 reporton the most effective ways to cut the child poverty rate in half. The NAS looked at 10 programs and found that a child allowance was the most effective way to cut child poverty in half. Or another way of looking at it, a child allowance of $250 per month would cost $14.5 billion to lift 1 million children above the poverty line.

Economist Greg Duncan, one of the members of the National Academies’ taskforce and who has spent his career studying the effects of poverty on children, finds it all very gratifying.

“It’s a game-changer for potentially improving the quality of the home environment for kids,” he said of Biden’s plan. Even more of a game-changer, he added, would be to bundle it with an expanded Earned Income Tax Credit.

A Refreshing Change—Tackling Poverty Systemically

The approaches are a refreshing change, says David Brady, professor of Public Policy and Director of the Blum Initiative on Global and Regional Poverty at University of California, Riverside. Brady’s own work argues for a retreat from the traditional approach to fighting poverty that incentivizes the poor to alter their behavior.

“I want us tothink more about poverty and not the poor,” he said. “The way we think of poverty is we study individual people—what they’re doing wrong, their traits, their ‘problematic’ culture, and then we try to fix it with incentives to correct their behavior.”

“I want us tothink more about poverty and not the poor.”

Or as Mark Rank has put it, the U.S. approach to fighting poverty is like the game of musical chairs. When the music stops, we ask why the loser lost, not why there aren’t enough chairs. Brady wants to focus on the chairs.

“I think we should view poverty as a systemic problem.” And a political will problem, he added. The lack of generosity in U.S. policies toward the poor in effect helps create poverty.

Conservative scholars are criticizing both Biden and Romney’s plans as a “moral hazard”—not enough penalty attached for “risky” behaviors like having children out of marriage or not working.

But Brady thinks that’s beyond the point. Even if we were to eliminate single-motherhood, Brady finds, we’d barely make a dent in child poverty. Contrary to popular belief there simply aren’t enough single mothers.

Reducing single-motherhood would only lower child poverty from 21 percent to 18 percent.

Brady and his colleagues Regina Baker and Ryan Finnigan proved as much in a simulation that reduced single-motherhood to rates akin to zero. The impact would be to reduce child poverty from 21 percent to 19 percent, using a relative measure of poverty that counts as poor anyone with incomes below 50 percent of median income. Child poverty among Black children would fall from 35 percent to 32 percent.

“Talking about whether this woman gets married or not is moot,” he said.

All this Points to a Child Allowance

 As it turned out, Madrick’s “The Invisible Americans” would become the inspiration for the Family Health Project. FHP takes to heart the findings in Madrick’s book and the deep body of research on child poverty. Rather than nudge behavior with penalties or rewards, the FHP solves for what we know is the cause of poverty: a lack of money. We’re offering a group of mothers in Lynn, Massachusetts, $400 a month, with plans to expand.

As Madrick argued, we know cash helps. We know the return on our investment will be enormous. We know children’s health and futures will improve. The National Academies confirms it in an exhaustive review of all the research to date, writing: “The weight of the causal evidence indicates that income poverty itself causes negative child outcomes, especially when

it begins in early childhood and/or persists throughout a large share of a child’s life.”

In other words, the problem is not poor people, the problem is lack of money. There’s just too few seats in the game of musical chairs.

If the rest of the country follows, we’ll be ready with a snap-it-together model for how to do this easily and cost-effectively. Then just maybe, says Madrick, “we’ll catch up in decency at least in this area.”