Opinion: The US may have stumbled onto the cure for child poverty

Leah Hamilton; Appalachian State University

By: Leah Hamilton

See original post here.

In early 2021, Congress temporarily expanded the existing child tax credit to nearly every American child, and issued it monthly from July to December. While the monthly credit was
designed to be only temporary, some have argued that America might have stumbled into the

simplest solution to ending childhood poverty.

My colleagues and I surveyed more than 1,200 parents and a comparison group before the monthly payments went into effect, and again after the payments ended. Our results found that the monthly credit had profound benefits for the families receiving them. Further, it did so more effectively and efficiently than other federal benefits designed to reduce hardship.

We found that families used the credit to cover routine expenses, make long-term investments in their children’s education through tutoring, extracurricular activities and college savings, improve their family’s nutrition, and build emergency savings, without reducing their employment.

The monthly child tax credit helped families cover these expenses while improving their financial security. Child tax credit recipients reduced their credit card debt and usage of riskier financial services, like predatory payday loans and selling blood plasma, because of the added support from monthly child tax credit payments.

Child tax credit-eligible households also experienced significant declines in evictions, with some parents telling us that the child tax credit helped them avoid financial ruin and homelessness.

Moreover, nearly two-thirds of parents in our survey said they preferred the monthly payment over a lump sum at tax time. This is consistent with our previous survey of monthly child tax credit recipients that shows similar support for the more consistent payments, and it makes sense. After all, families don’t pay for groceries, rent or credit card bills annually.
The routine costs that households encounter in life are primarily monthly.

Even before the pandemic, economists estimated that refundable credits like the child tax credit and the earned income tax credit had greater anti-poverty effects than other means- tested benefits like the Supplemental Nutrition Assistance Program, Supplemental Security Income and Temporary Assistance to Needy Families. In the long run, this credit would have a 10-to-1 return on investment via future earnings and tax contributions, decreased infant mortality and other negative health outcomes, and reductions in child protection and law enforcement involvement.

In terms of efficiently using taxpayer dollars to fight poverty, the monthly child tax credit is remarkable policy.

The monthly child tax credit is important to me as a mother and a researcher. I spent the early months of the pandemic bouncing a baby, quasi-participating in Zoom meetings, homeschooling my preschooler and squeezing in real work after bedtime. My patience was thin, my productivity nearly nonexistent and my functional capacity rapidly declining in every area of life. Somehow, I was still one of the privileged few to get through the past two years with my family’s physical and financial health more or less intact.

Millions of mothers left the workforce, either because they were employed in sectors that were more vulnerable to layoffs (like the service industry) or because of increased caregiving responsibilities (ill family members, day care closures, remote schooling, etc). Parent and child mental health declined and domestic violence increased. For those who have struggled through the pandemic, the monthly support of the child tax credit has been a lifeline.

Some have expressed concerns about how the monthly child tax credit payments might be spent, but we found in two different national surveys that families mostly used the funds on groceries, rent/mortgage, utilities and clothes for their children.

Research has consistently found that cash support to families actually decreases stress and expenditures on vices like drugs, tobacco and alcohol. As a mother in West Virginia explained to us, the child tax credit “made things a whole lot easier. I didn’t have to worry about how I was gonna pay bills or buy food.”

While some families like mine are slowly returning to some sense of normalcy after two years of a pandemic, for many others, the end of the credit means a return to economic precarity and choosing whether to pay bills or buy food. In just the first six months of the credit, childhood poverty declined by an incredible 30% but rose again by 41% immediately after the last monthly payment in December.

This policy has proven itself to be an effective method of reducing family hardship and poverty. We have the tools to correct course. The only remaining question is whether we have the political will to do so.


About the Author: Leah Hamilton is an associate professor at Appalachian State University and the lead co- investigator of a Brookings Institution study on the effects of the expanded child tax credit. She recently presented her findings to several organizations in West Virginia.

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