If you’re a parent, the government likely sent you a cash payment every month in the latter half of 2021. Washington cut families monthly checks worth $250 for each school-age child (slightly more for younger children). Many working- and middle-class families regarded this as “free money” from the government. They believed their income was being boosted by the value of the check. This was not true.
The superficial value of this “checks for children” program was $3,000 per child per year (12 months times $250). But in creating the new program, the Biden administration replaced the existing Child Tax Credit, which had a value of $2,000 per child per year for most working- and middle-class families.
Replacing the older CTC meant that nearly all middle-class families faced income tax increases that offset much of the gain from the “free money in the mail” scheme. Free stuff from the government is rarely free.
For most families, every $100 in government cash was offset by $66.67 in higher income taxes. After counting the higher taxes, the real payout from the “checks in the mail” program was not $250 per child per month but only $83.33.
Advocates might argue that the “checks in the mail” plan put money in parents’ hands more quickly, but most families already benefited from the original CTC immediately, through a reduction in income tax withholding from their weekly paychecks. The real difference was that with decreased tax withholding, parents understood they were keeping their own earnings, but with the “checks in the mail” scheme, many may have been hoodwinked into thinking they were getting a monthly gift of $250 per child in free cash from a beneficent government.
Moreover, President Biden’s heavily publicized support for “middle-class families” was never intended to be permanent. His original “American Families Plan” actually dropped the per child support back to its original value in 2026. Nancy Pelosi’s “Build Back Better” bill would have cut support back to $2,000 in 2023 and ended the monthly checks.
The real goal of Mr. Biden’s “families plan” was not middle-class support but expansion of the welfare state.
Under the existing, pre-Biden law, the CTC has a welfare component that sends cash grants to lower-income families with children that owe no income tax. But critically, these payments are linked to a work requirement. Families that perform no work in the year receive no cash. And, to encourage work and marriage, the existing cash payments start low and increase steadily as annual family earnings increase.
Mr. Biden and Mrs. Pelosi sought to abolish the work requirement and earnings incentives. Unlike the alleged support for the middle class, this welfare change was to be permanent.
By eliminating the work requirement, they sought to overturn the principles of former President Bill Clinton’s welfare reform enacted in the 1990s. For the first time in a quarter-century, the government would resume paying cash to families who chose not to work. While Mr. Clinton sought to “end welfare as we know it,” Mr. Biden and Mrs. Pelosi sought to reinstate welfare as we knew it.
But the work-based welfare reform, enacted under Mr. Clinton, was extremely successful. After the reform, the child poverty rate, which had remained static for decades, was cut in half, and continues to fall today. Teen pregnancies and births, which had quadrupled before the reform, plummeted. The decades long, free-fall collapse of two-parent families immediately came to a near-dead halt. If pre-reform trends in family disintegration had continued, an additional 9 million children would live in single-parent or parentless homes today.
Middle- and working-class families need good jobs, higher wages and lower inflation, not more government handouts. Lower-income families need a welfare system that encourages, not discourages, work and marriage. The Biden plan failed on both counts.
This piece originally appeared in The Washington Times