News reports indicate that the Biden administration wants to dramatically expand the welfare state, starting with an increase in the refundable “child tax credit,” a program that provides extensive welfare cash grants to families who owe no taxes.
If enacted permanently, the Biden plan would constitute the second-largest expansion of means-tested welfare entitlements in U.S. history. In constant dollars, its annual cost would dwarf the initial costs of the Medicaid, food stamps, and Aid to Families with Dependent Children programs. Only Obamacare would be more expensive.
Biden would increase the refundable credit from $2,000 per child under 17 to $3,000 per child age six to 17, and $3,600 for children under six. Two-thirds of the new benefits provided ($79 billion per year) would be cash grants to families who owe no income tax. The proposal would also remove existing work requirements from the child cash grants, thereby providing extensive new welfare benefits primarily to non-working single parents.
While the administration suggests that these changes would be limited to a single year to help families suffering from the COVID-19 pandemic, the plan itself is modeled after legislation that would create new, permanent entitlements. Indeed, according to off-the-record sources, establishing a permanent expansion of the welfare state appears to be the real goal.
Advocates claim that this proposal will reduce child poverty—an idea linked to the notion that the U.S. welfare system does not spend enough to protect children from poverty. Yet recall that in 2018, well before the COVID-19 recession, the U.S. spent nearly $500 billion on means-tested cash, food, housing, and medical care for poor and low-income families with children. This is seven times the amount needed to eliminate all child poverty in the U.S., according to Census figures.
How can Americans spend so much and still have a problem of deep and widespread child poverty? The answer is that the government counts almost none of the $500 billion in spending as personal income in its widely publicized measures of poverty and economic inequality.
That means, paradoxically, that the Biden proposal to add another $78 billion in cash welfare to children on top of the nearly $500 billion in current spending would have zero impact on the official long-term measure of child poverty because the new cash credits would also not be counted as income in official government poverty reports.
For a half century, the Left and its bureaucratic allies have engaged in a cynical game: They ceaselessly demand more spending to reduce poverty but then hide that spending when poverty is measured. The game is rigged so that only the welfare-industrial complex can win. By the game’s rules, the welfare state can never be big enough, as there will invariably be unmet social needs that need to be funded.
Yet the real problem in welfare is the strong disincentives to work and marriage embedded within the existing $500 billion system. The Biden proposals would make these problems significantly worse. As noted, under current law, the refundable child credit has a work requirement. Families with no earnings are not eligible for benefits; as work increases, however, so too do the family’s benefits. (To be sure, while this important condition mitigates disincentives to work within the overall welfare system, it does not remove them entirely.)
Biden’s plan would eliminate this requirement. Families who don’t work could get up to $3,600 per child in new cash grants on top of any aid they already receive from food stamps, Medicaid, WIC, housing, and Temporary Assistance to Needy Families (where nominal work requirements are frequently not enforced). The primary beneficiaries of eliminating this work requirement would be less-educated single parents, as they currently head the overwhelming bulk of families with children that perform no work during the year.
This proposed change reverses the direction of welfare reform from the 1990s. That bipartisan reform was based on the understanding that the collapse of marriage and prolonged dependence on welfare by non-working families harms adults, children, and society. It sought to transform welfare by establishing work requirements in exchange for benefits received.
The 1990s welfare reform dramatically reduced dependence and increased employment, causing an unprecedented drop in child poverty, especially among black children. Nevertheless, the radical Left has never accepted this reform and has sought to reverse it ever since. Its goal has been to weaken or eliminate welfare work requirements and to maintain or restore welfare aid to non-working persons and families. If enacted as permanent policy, the Biden child cash grants would largely accomplish that reversal.
Rather than expand the welfare state, policy-makers should transform it in ways that help, not harm, vulnerable families. They should start by being transparent about the amount the government spends on benefits today, and ensure that those figures are reflected in official measurements of poverty in the U.S.
Beyond that, once the COVID-19 crisis passes, policy-makers should focus on strengthening work requirements for able-bodied adults, removing fraud, reducing penalties against marriage in the welfare system, and paying for outcomes rather than ineffective services.
This piece originally appeared in the National Review