Analysis

Child Benefits Could Outlive Biden’s COVID-19 Stimulus

A new allowance could cut child poverty in half and encourage Americans to have more kids.

Joe Biden
Former American vice president Joe Biden campaigns in Des Moines, Iowa, July 4, 2019 (Gage Skidmore)

The United States Senate has approved President Joe Biden’s $1.9 trillion coronavirus recovery plan, more than twice the size of Barack Obama’s 2009 stimulus.

With the exception of a $15 hourly minimum wage, the soon-to-be-law includes nearly all the provisions Biden had called for, including additional spending on health care, extended unemployment insurance (if cut by $100 per week from the original version) and rental assistance. For detail, check out my post about the bill from January.

The part I want to focus on here is a child allowance that ranges from $250 to $300 per month per child.

Why child benefits are important

Child care was one of the four areas I highlighted when I argued that America should become more like social democratic Europe, and it was one of the five areas I argued Biden should prioritize in his first term.

For two reasons:

  1. At 14 percent, American child poverty is high by Western standards. Biden’s program could cut that rate in half.
  2. One in four Americans cite the high cost of childrearing as a reason to have fewer kids, or no kids at all.

Under current law, American parents can deduct the cost of child care from their taxes. But a third of families don’t pay enough — or any — income tax, and those are the families who need help the most.

Parents commonly spend between $15,000 and $26,000 per year on child care. The median household income in the United States is around $63,000.

What will change

Noah Smith explains what will change under Biden’s plan:

Families will get monthly checks for $300 for each child under the age of six, and $250 for each child between the age of six and seventeen. If you have two kids, that’s between $6,000 and $7,200 a year! Officially this is a temporary program, but many people expect it to become permanent.

Essentially this is a pilot universal basic income program for families. It would be phased out at higher income levels, but that’s not really that much different than a tax-supported UBI. The key here is that there’s no work requirement or time limit — all you have to do is have kids.

Universal is better

That’s better than the system here in the Netherlands, where regulatory requirements ensnarled some 26,000 parents, who were falsely accused of fraud for often simple administrative errors, like incorrectly filling out a form or forgetting to report changes in their income. Many were financially ruined by demands to pay back tens of thousands of euros in benefits. Nearly all political parties want to overhaul the system.

They could do worse than copy Biden’s program and merge child-care benefits with universal child benefits, which range from €74 per month for children under the age of six to €106 per month for teenagers.

Universal benefits have two advantages over means-tested benefits:

  1. They’re popular. High earners don’t feel they’re paying tax for somebody else’s benefit.
  2. They require less bureaucracy.

The downside is that they cost more. Under current law, a low-income, working parent in the Netherlands qualifies for almost €1,900 in child-care benefits per child per month.

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