How Biden Transformed the Republican Debate Over Poverty
(Bloomberg Opinion) -- The American Rescue Plan, which President Joe Biden signed into law today, contains a provision that represents a qualitative break from the welfare-to-work policies that have been in place since the 1990s. The change is also scrambling party politics — especially on the Republican side — in a way that could have lasting implications.
The new law contains a temporary expansion of the child tax credit, which sounds like a small change but isn’t. Under the provision, a single parent with two school-age children would be guaranteed $500 a month in unrestricted cash assistance even if he or she had no job and no intention of obtaining one. This kind of aid hasn’t been available since 1996, when President Bill Clinton ended the Depression-era Aid to Families With Dependent Children program.
The policy has reignited the debate over cash assistance, upending traditional political positions and alliances. Some conservative critics of the policy have found themselves defending traditional mean-tested programs. Meanwhile, a few progressive analysts have voiced concern about the side effects of free money.
For now, partisanship has been strong enough to hold the internal discord at bay. Still, it’s worth breaking down the various ideological camps, which don’t always map neatly on to the traditional conservative-liberal divide.
The biggest fans of the temporary child tax credit expansion are usually also supporters of universal basic income, and see the expansion as a kind of pilot program to prove the viability of more universal cash programs. Democratic politicians such as Andrew Yang support UBI, but so do some Republican economists, such as former White House economic adviser Greg Mankiw.
Conservative economists tend to see UBI as a way both to simplify the current maze of assistance programs and to eliminate the high effective tax rates that overlapping programs can introduce. And while support for UBI is common among progressive intellectuals, some worry that cash payments would undercut traditional means of worker empowerment, such as unions and the minimum wage. (Of course, for many conservatives this is a feature, not a bug.)
Then there are conservatives who see cash assistance as part of a larger pro-children policy. Republican Senator Mitt Romney’s proposal is perhaps the clearest example of this: All parents making less than $200,000 per year ($400,000 per couple) would get up to $350 a month per child starting in the 5th month of pregnancy.
The plan is administered by Social Security Administration rather than the IRS, so parents do not even have to file taxes to be eligible. This dovetails with traditional progressive goals of easing the burden on poor families. In fact, the Romney plan is actually slightly more generous than the child tax credit included in the $1.9 trillion Biden stimulus.
The provision about the IRS also makes it clear that parental incentives are at best a secondary consideration: The overriding goal of the Romney proposal is to support children. Thus it has won accolades from social conservatives, who see it as a way to reduce abortions. Some nationalists have even argued that it could help prevent the U.S. from slipping behind as global superpower by boosting the national fertility rate.
Finally, there is a subtle distinction between what might be called pro-children policy and pro-family policy. Republican Senators Mike Lee and Marco Rubio fought for a doubling of the child tax credit as part of 2017’s Tax Cuts and Jobs Act — yet both oppose Romney’s plan because they say it devalues work.
Oren Cass at American Compass, a conservative economic think tank, offers an alternative plan that, like Romney’s, begins by supporting parents even before their children are born. The crucial difference is that support in any given year is capped by the amount the family earned in the previous year. In essence, under Cass’s plan the government would be willing to double the income of poor families — so long as the parents work.
This approach has been pilloried by commentators across the political spectrum for penalizing poor children whose parents don’t work. But the proposal deserves to be taken seriously.
Its central points are that unconditional cash payments treat children as if they were distinct from the family, and the family as if it were distinct from a larger society that values work. Families that don’t buy into the values of a work-centric society would not only undermine popular support for cash payments, according to Cass, but they would also leave their children ill-prepared join that society.
Yet it is important to note that neither the one-year expansion in Biden’s American Rescue Plan nor the more permanent approach in Romney’s proposal make cash payments conditional on not working or not getting married. Families lose nothing by trying to get a job, and married couples are at no disadvantage relative to singles. The binary choice between dependency and sufficiency is removed.
That’s enough to change the dynamics of cash assistance — and, over time, its politics. Right now, Democrats are largely united in their support for the temporary program in the American Rescue Plan. Republicans, while far from unified, are increasingly interested in broad-based government support for families. If Biden’s short-term experiment goes well, it could create a fundamental shift in ideology.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Karl W. Smith is a Bloomberg Opinion columnist. He was formerly vice president for federal policy at the Tax Foundation and assistant professor of economics at the University of North Carolina. He is also co-founder of the economics blog Modeled Behavior.
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