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Wednesday, July 14, 2021

ANALYSIS/OPINION:

The Biden administration is proposing a massive expansion of the welfare state dubbed the “child allowance.” This policy seeks to revolutionize a large but little-known program called the child credit. According to the administration, the policy’s focus would be “tax cuts for America’s families and workers.”

In reality, the plan would offer zero long-term tax relief to working families with children. Even in the short term, some 74% of aid would go for cash grants to families who owe no income tax; only 26% would go for tax relief. But even this limited tax relief would be temporary, ending in 2025.


Rather than providing tax relief, most of the short-term and permanent provisions of the plan would give cash grants to families who do not work or work comparatively little. The plan would also disproportionately assist nonmarried, rather than married, families. About one-quarter of all children live in nonmarried families, but under the plan, nearly 60% of the permanent new assistance would go to those families.

Contrary to the administration’s rhetoric, the primary focus and sole permanent feature of the child allowance policy would not be tax relief, but the elimination of all work requirements and work incentives from the current child credit program. In pursuing this change, the administration explicitly seeks to overturn the foundations of welfare reform established during the Clinton presidency.

The Clinton-era welfare reform understood that paying able-bodied people not to work was good for neither society nor recipients. Such payments tend to push individuals out of the labor force and toward the margins of society, impeding social participation and upward mobility for both adults and children.

Welfare reform was rooted in the concept that welfare should not be a one-way handout: Instead, assistance should be based on reciprocal obligation. Society should support those who need assistance, but able-bodied recipients of aid should in turn be required to work — or at least prepare for work — in exchange for the aid given. Nearly 9 out of 10 Americans support this approach to welfare.

Based on this common-sense principle, the 1996 welfare reform eliminated the Aid to Families with Dependent Children (AFDC) program which provided unconditional cash aid primarily to single parents who worked very little, if at all. AFDC was replaced by a new program called Temporary Assistance to Needy Families (TANF), which continued to provide cash support but, for the first time, required parents to work or prepare for work as a condition of receiving that aid.

The results of this change were dramatic. Welfare dependence plummeted; employment surged. The child poverty rate, which had been frozen for nearly a quarter century, dropped dramatically. Today, poverty among single-parent families is roughly 60% lower than it was before reform.

Other major programs such as the child credit and the earned income tax credit have followed this pro-work strategy by requiring and incentivizing work for aid recipients. For example, under the current child credit program, a family must earn at least $2,500 during the year to be eligible for cash grants. To promote further work, the program increases the cash grants sharply as work and earnings increase.

The Biden child allowance policy seeks to rip out these work requirements and incentives from the child credit, explicitly overturning the principles of welfare reform. Under the Biden plan, the federal government would, for the first time in a quarter-century, provide unconditional cash grants to families who choose not to work during the year.

The Biden plan is a classic “bait and switch” maneuver, promising tax cuts but actually reshaping the foundations of the welfare state. While President Clinton sought to end welfare as we know it; the Biden administration seeks to “restore welfare as we knew it,” reinstalling the worst features of the pre-reform system.

— Robert Rector is a senior research fellow in the Heritage Foundation’s Institute for Family, Community and Opportunity. A Heritage research fellow, Jamie Hall specializes in quantitative analysis.


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