As government policy changes go, it’s hard to find one that helps millions of Americans as rapidly and directly as President Joe Biden’s expanded Child Tax Credit.
Since its temporary enactment in Biden’s $1.9 trillion Covid relief bill in March, it has given the parents of 60 million children up to $300 per child each month, according to the administration. For 90% of them, the money goes directly into their bank accounts from the Treasury.
“A tax cut for middle-class people,” Biden told a CNN town hall on Thursday. And because it’s fully available to households with little or no income, the President boasted in Pennsylvania a day earlier, the expanded credit has cut child poverty in the US by 50%.
Its striking impact makes all the more remarkable what’s happening in the emerging Democratic compromise on Biden’s economic agenda. Within a sprawling bill not clearly identified with any specific policy objective, this undeniably effective provision is getting pared back, just like a myriad of others.
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That partly reflects the breadth of ambition by Biden and congressional Democrats, who in the same bill seek to expand Medicare, add years to public education and implement strategies to fight climate change. But it also shows the challenge for elected officials in cutting through the fog of political information even while putting cash in voters’ pockets.
Advocates cite multiple reasons for the expanded credit’s underwhelming political footprint. They include its link to the pandemic that voters want to leave behind and an intra-party debate on Capitol Hill focused more on the legislation’s price tag than its benefits.
“We’ve done almost nothing to champion this,” complained Sen. Michael Bennet of Colorado, a leading Democratic proponent. Parents who have benefited, he added, “are profoundly grateful. They don’t know who to be grateful to.”
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Neither the Child Tax Credit nor the $1,400 per person Covid-relief checks Biden and congressional Democrats included in the American Rescue Plan have prevented Biden’s approval rating from sagging under the weight of events. Worries about the persistent pandemic, a spike in the price of gasoline and other basics, and the scarcity of high-demand goods have seized public attention even as the economy recovers and unemployment falls.
“For many voters, simply getting more money back from the government isn’t necessarily a cure-all for the challenges they see around them,” explained Republican pollster Kristen Soltis Anderson. Meantime, she added, debate over Biden’s plan “is so confusing. All people know is, it’s infighting in Congress and it’s a lot of money.”
A survey Anderson helped prepare for the advocacy group Marshall Plan for Moms showed the Child Tax Credit enjoying majority support. But other priorities including paid family leave and more affordable health care coverage – both of which are also getting shrunk in the Democratic compromise - were considerably more popular.
That’s not due to limited access. The credit is available in full for households earning up to $150,000, which covers the vast majority of American families. It gradually phases down beyond that level.
Some insist that near-universal availability, rather than broadening the expanded credit’s appeal, actually limits it. Democratic data analyst David Shor argues a narrower program may be more politically sustainable.
“In general, voters like to receive benefits themselves,” Shor and a colleague wrote recently on the SlowBoring website. “But when thinking about benefits for other people, they often prefer that social spending be targeted to those who need it most.”
In that way, recalcitrant Democratic West Virginia Sen. Joe Manchin’s effort to reduce the credit’s cost by restricting its availability to those with lower incomes might help preserve it in future years. Reflecting the cultural resistance to “welfare” even among some potential beneficiaries like his West Virginia constituents, Manchin warns against creating “an entitlement society.”
Biden supports embedding the expanded credit, which costs more than $100 billion annually, permanently into law. To preserve cash for other priorities, however, an initial version of the pending legislation extended it for only four years.
As resistance from moderates shrinks the price tag from $3.5 trillion to around $2 trillion, negotiators have since moved toward a one-year extension. In either case, Democrats hope public support would prevent even a Republican Congress from letting it expire.
“People tend to be loss averse,” reasoned Chuck Marr of the liberal Center on Budget and Policy Priorities. “So they might not give someone as much credit for the gain, but when someone else tries to take it away, then the political benefit would be more apparent.”
Republicans in 2017, for example, couldn’t muster the votes to repeal Obamacare despite its up-and-down political past. Yet there’s a crucial difference: an expiration date would let hostile lawmakers kill the expanded credit without taking any action at all.
As a result, advocates are quietly negotiating a fallback.
The Child Tax Credit that existed before Biden increased it as high as $3,600 let the lowest earning families – those without income tax liability to offset with a credit – claim no more than $1,400 of the $2,000 maximum. Now, Bennet and others are pressing to make the $2,000 maximum for that previous version of the credit fully and permanently available to even those lowest earners.
If they succeed, full “refundability” would endure even if the expanded Biden credit expires. Simply doing that, by Marr’s calculation, would reduce child poverty from its pre-Biden level by 20%.
