“The $1.9 trillion Covid stimulus that the House is expected to pass Wednesday includes roughly $100 billion in aid to families with dependent children.
If that phrase rings a bell, it’s because “Aid to Families with Dependent Children” was the name of the New Deal-era welfare program eliminated by President Bill Clinton’s 1996 welfare reform bill. Back then, Democrats worried (with some reason) that AFDC enabled, for some families, long-term dependency on welfare. To limit time spent collecting welfare and to move low-income mothers off the dole, Congress passed the Personal Responsibility and Work Opportunity Act.
Now, a quarter-century later, in the midst of a Covid recession, the Democrats are reviving no-strings financial assistance to families with children. The bill nearly doubles the Treasury’s expenditure on the child tax credit, and extends eligibility to nearly everyone. The Covid bill would increase the maximum child tax credit from $2,000 per child to $3,600 per child. It would also, for the first time, extend the benefit to nonworking Americans—a significant departure from the program’s origins in 1997 as a tax break for middle- and upper-income families.”
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“the pendulum hasn’t just swung back for Democrats. While the Covid bill was under consideration in the Senate, Republican Sen. Mitt Romney proposed his own expansion of the child tax credit, one that would raise the maximum benefit even higher, to $4,200 per child (though Romney would offset that with cuts to other income-support programs). Romney’s plan was attacked immediately as “welfare assistance” by Republican Sens. Marco Rubio and Mike Lee, and in the end, Republicans voted as a bloc against the Covid bill that contained President Joe Biden’s version. But Rubio and Lee favor raising the maximum child tax credit, too; indeed, they want to raise it even higher than Romney, to $4,500. (Their difference with both Romney and Biden is that they would not extend the child tax credit to nonworking families.)”
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“Does increasing the value of the child tax credit risk building the work disincentive back up? It does, but to a much smaller extent. The expansions that Biden and Romney put forth largely mooted these worries by making eligibility virtually universal. If there’s no income level at which you lose your child tax credit, then the marginal tax a jobless person pays on jumping back into the workforce is zero. And if the eligibility cutoff is very high—under the Covid bill, many families earning in the six figures still get the full $3,600—then reducing or eliminating the credit isn’t going to pinch very hard.
The catch is that the closer you get to making a government benefit universally available, the more expensive it gets.”