The credit’s success was simple: It was generous, and it was fully repayable — meaning any family could receive it, whether they were working or owed income taxes or not. The effects will be far-reaching. Poverty undermines children’s education, health and lifetime income, a deadweight loss that cuts off as much as 4% to 5% of U.S. economic output — which is why the calculation of any reduction is positive, even under conservative assumptions.
Unfortunately, the credit’s features also caused its downfall: critics thought it was too expensive and feared it would encourage people to work less. In fact, economists are divided on whether parents would reduce or stop work, and some say the effect would be trivial. But even the theoretical ability to enable laziness was enough to turn a permanent extension into a complete non-starter.
For many parents, especially mothers, politicians’ alleged concerns about work ring hollow. Congress has not provided any of the employment benefits — such as paid family leave, subsidized childcare, sick days, the right to work part-time — that other developed countries do. Such a policy could increase the number of working women by several million. Instead, the US has one of the lowest female employment rates among its peers, stagnating while others make progress.
The mere notion that the child tax cut could discourage work is more an indictment of the US labor market—with its low wages and lack of workspaces—than proof of laziness. If an extra $400 a month is enough to make someone quit, it’s the job that’s bad, not the benefit.
Let’s face it: the US is very capable of reducing child poverty. It chooses not to. Americans like to think they live in a society of endless possibilities, where anyone with enough perseverance and determination can pull themselves up. Yet their elected representatives are unwilling to remove one of the greatest obstacles to prosperity – an obstacle that affects people at a very vulnerable stage of life, when they have no say in it.
A comprehensive child tax credit wouldn’t solve everything, but killing them is false economy. Congress walks out to give nearly three million kids a better chance at the American Dream. That dream has not failed: policymakers simply lack the will to make it succeed.
More from Bloomberg’s opinion:
• Lame-Duck fiscal policy is no way to budget: editorial
• Strengthen child tax relief before expanding it: Ramesh Ponnuru
• Ugly politics create an interplay between poverty and inflation: Eduardo Porter
This column does not necessarily reflect the views of the editors or Bloomberg LP and its owners.
Kathryn Anne Edwards is a labor economist and independent policy advisor.
More stories like this are available at bloomberg.com/opinion
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