SYLVIE DOUGLIS, BYLINE: NPR.
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STACEY VANEK SMITH, HOST:
Here is a pretty rough indicator - nearly 20% of children in the U.S. live in poverty. In fact, the U.S. is ranked one of the worst countries in the Western world for child poverty rates. And this, of course, puts children and their families in really terrible situations every day.
DARIAN WOODS, HOST:
Things were only getting worse during the pandemic. And in response, Congress significantly expanded the child tax credit. That expansion was extended under President Biden. And starting next week, millions of parents will get monthly payments throughout the rest of the year.
MICHAEL BENNET: The net result of all of that is we're going to cut childhood poverty in America by almost 50% this year.
WOODS: This is Senator Michael Bennet of Colorado. He's pushing to have the expanded child tax credit made permanent, and he's working with the Biden administration to pass legislation.
VANEK SMITH: How expensive would this be?
BENNET: It's about a $100 billion a year.
VANEK SMITH: That's a lot.
BENNET: It is. Childhood poverty, as I mentioned earlier, costs us $1 trillion a year. So I think this is money very well spent.
WOODS: That trillion dollars that he's talking about is the estimated amount the U.S. spends every year combating child poverty and its effects, like health problems, employment problems later on and housing insecurity.
VANEK SMITH: Here is the thing about this program, though. The child tax credit does not just go to families who live below the poverty line or even near the poverty line. The money also goes to families who make middle- and even upper-middle-class incomes, which seems a little strange, right? Like, if your goal is to reduce child poverty and you only have a certain amount of money to spend, wouldn't you want to target that money to get as much of it as possible exactly to the people who need it the most instead of giving some of the money to people who aren't in great need and, in some cases, are financially pretty well-off?
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VANEK SMITH: This is the INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith.
WOODS: And I'm Darian Woods. Today on the show, why the best way to get money to America's poorest kids might involve making sure wealthier kids get it, too.
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VANEK SMITH: The child tax credit will operate like a monthly payout to parents - $300 a month for small children and $250 a month for children over 6.
WOODS: Colorado Senator Michael Bennet is pushing for the temporary plan to be turned into law. Currently, full benefits are paid out to two-parent families earning up to $150,000 a year. After that, the benefits start to peter out.
VANEK SMITH: Yes, the plan phases out at around $400,000 per family. The senator is proposing this expansion of the child tax credit phases out at around $200,000.
WOODS: $200,000 is a pretty comfortable family income, in my humble opinion. We asked Senator Bennet about that.
VANEK SMITH: Is there a concern that the money might go to families who are not in poverty but might go to kind of middle-class or upper-middle-class families and maybe not be the best way to spend that money?
BENNET: Well, if you look at - I mean, the credit is very broad based. More than 90% of the kids in America are going to benefit from it, which I think is phenomenal and great. I don't know any time that actually there's been more progressive tax legislation ever passed. So I think from the vantage point of those distribution tables, I stand by the progressivity of this. It's little bit like Social Security for kids.
WOODS: Social Security for kids. Social Security for adults got its start during a terrible economic time, the Great Depression. President Franklin Delano Roosevelt developed it to try and help elderly Americans. Half of elderly Americans at the time were living in poverty. Social Security was meant to solve that.
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FRANKLIN D ROOSEVELT: Our responsibility is to all of the people in this country. This is a great national crusade.
VANEK SMITH: At the time this was happening, there were a lot of lawmakers pushing for a version of this program where checks were just going to low-income seniors. Basically, you know, let's not have Warren Buffett getting a Social Security check. He doesn't need it. But President Roosevelt was like, no. He thought a program that just got money to low-income retirees would not survive politically. He said, we should fund this plan with a special tax that almost all working people pay. That way, people will say, hey, I paid into Social Security; I deserve to get Social Security when I retire, and I will vote out of office any politician who tries to take it away from me.
HILARY HOYNES: There's a lot of political science research that argues that the more universal the policy, the less likely it is to fall victim to a group of legislators who want to kind of cut it back.
WOODS: Hilary Hoynes is a professor of economics and public policy at UC Berkeley. And I actually worked for her once upon a time. I was her research assistant back in grad school. And she says, sure, the economically efficient thing to do with all this is probably to get as much money as possible to those who really need it and not give all that extra money to people who might have a lot.
VANEK SMITH: But also, Hilary says, what is economically efficient and what is politically efficient - not always the same thing.
HOYNES: The more universal the credit, the higher up the income distribution it goes, the more likely there's going to be broad enough support so that it stays as a stable policy in our social safety net.
VANEK SMITH: In other words, Warren Buffett might not need Social Security, but Social Security needs Warren Buffett. And in the case of the child tax credit, like, a dentist in Toledo, might not need the extra cash from the child tax credit, but the child tax credit might need his support.
WOODS: Hilary points out that people who need the money the most - low-income people, marginalized people who are truly struggling - these are typically not politically powerful groups, or they might not be in a position to fight for a benefit or support a politician who does. But if middle-class people and upper-middle-class people are benefiting from a program - if they have a stake in it, they're more likely to fight for it and support politicians who will also fight for it.
VANEK SMITH: And that has happened with Social Security. I mean, no politician will touch it. It is politically protected because most people will get it. Most people will eventually benefit from it. They see direct value in it, so they fight to make sure the Social Security checks keep coming.
WOODS: That's not always the case of programs that target the poorest Americans - food stamps, welfare. Hilary points out that those programs have been far more vulnerable to political attack.
HOYNES: Take Medicaid versus Medicare. So Medicare, like Social Security, is universal. When you're 65, you get it - everybody, from Warren Buffett down to someone who's worked a minimum wage job their whole life. But then there's Medicaid, which is the program for the poor. And Medicare is not very politicized. Medicaid is extremely politicized, as we saw through states, to this day, turning down the federal expansion of Medicaid under Obamacare. I, for one, am finding myself wondering whether - even though it costs us more to have programs that are more universal, higher up the income distribution - could it allow us as a country to move forward a little bit? I think that's an argument in favor of the current structure.
VANEK SMITH: In the case of Social Security, Hilary says it's been worth it. Without Social Security, it's estimated about one-third of people over the age of 65 would live in poverty. As it is, fewer than 10% of seniors live below the poverty line.
WOODS: Hilary says that if we could reduce child poverty to that rate, that would be huge and very important progress.
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VANEK SMITH: This episode of THE INDICATOR was produced by Julia Ritchey and Brittany Cronin with help from Gilly Moon. It was fact checked by Michael He. THE INDICATOR's edited by Kate Concannon and is a production of NPR.
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