David Trimmer is a guest contributor to Brief Policy Perspectives and a first-year MPA student
Recently, Senator Joe Manchin announced his opposition to the Build Back Better (BBB) legislation. While Senator Manchin listed several objections preventing him from voting for BBB, his main sticking point is the Child Tax Credit (CTC). Manchin adamantly opposes this provision and recently argued that parents use the money from the CTC to buy drugs. While the evidence does not support this claim, his disapproval of the CTC does not seem to be going anywhere, meaning the CTC provision in BBB is effectively dead. Because BBB has failed to pass, monthly payments of the CTC will stop at the start of 2022, and the CTC’s maximum benefit will be reduced from $3,600 to $2,000 per year. This abrupt change to the CTC could push 9.9 million kids below the poverty line or into deep poverty. Rather than let the CTC revert to its past version for good, Congress should enact a version of Senator Mitt Romney’s child allowance program to bypass Joe Manchin’s objection and permanently cut child poverty.
In February, Senator Romney introduced The Family Security Act, which would permanently streamline the CTC into a monthly cash benefit and cut child poverty by one-third. Families with children under six would receive $350 a month per child, and families with children between the ages of 6 and 17 would receive $250 a month per child. The program would send payments via the Social Security Administration (SSA) and would be deficit-neutral. Under The Family Security Act, families could also apply to receive monthly payments four months before their child’s expected birth. The Family Security Act would create a more cohesive welfare system by consolidating the current set of duplicative programs that attempt to tackle child poverty. While Romney’s plan would do less to cut child poverty than the enhanced CTC, The Family Security Act would provide a higher lifetime benefit to all children than Biden’s proposal that made it into the American Rescue Plan Act of 2021 and is undoubtedly better than the regular CTC that will resume next year. Romney’s plan is more simplistic, universal, and generous than the regular CTC. However, there are some potential downsides to Romney’s plan.
First, the program is not entirely universal since it has an annual cap of $15,000. Additionally, there is a phase-out for high earners, which will create administrative hassles while only saving a relatively small amount of money. However, this can be easily fixed since eliminating the cap and phase-out would only increase the bill’s total cost by around 3%. The Family Security Act also cuts the Earned Income Tax Credit (EITC). The breakdown of the new EITC would limit the plan’s ability to tackle poverty. For example, working parents with two kids making under $40,000 could lose almost $2,000 a year under Romney’s program compared to the enhanced Child Tax Credit. Increasing the payments to $350 a month for all children or making the EITC more generous would fix this problem. Finally, Romney’s plan notably eliminates TANF (Temporary Aid for Needy Families) and the SALT (State and Local Tax) deduction to pay for the bill, which could face political backlash. However, the eliminations are justifiable since TANF has been poorly funded and managed since the 90s, and the SALT deduction overwhelmingly benefits the top 10% of earners.
The Path Forward
While a compromise on BBB is still possible as Manchin proposed his own plan to Biden days before he announced opposition to BBB, tensions are flaring between the senator and the White House, and an agreement is unlikely. The possibility of a child allowance program seems to be the last hope to create a transformative social program during this session of Congress. Romney’s proposed child allowance plan is a permanent solution to child poverty, and there is a chance it can pass through reconciliation if Democrats coalesce around The Family Security Act since Republicans other than Romney are not very fond of his plan.
Getting enough support in Congress for the bill may be a significant hurdle to overcome. The controversial pay-fors may be a sticking point, as many moderate Democrats support the SALT deduction. Additionally, eliminating TANF may be unpalatable to others. However, passing the Family Security Act with revisions may be more of a straightforward challenge than anticipated, as Senator Romney stated in May of this year that he is open to changing some of the ways the bill is paid for. However, Romney recently indicated that he is also open to adding an activities test, which would harm the bill’s ability to reduce child poverty by denying some of the poorest families from receiving the monthly benefit and creating more administrative burdens. Members of Congress who are intent on permanently and effectively cutting child poverty should advocate that no such provision is included in the final version of The Family Security Act.
While it seems that Build Back Better and the one-year extension of the Child Tax Credit will not be signed into law, passing legislation to achieve a lasting reduction in child poverty may still be attainable. If Congress can reach a deal to create the child allowance program established by The Family Security Act, they can prevent millions of children from permanently falling back into poverty.