Several of our AEI colleagues joined this week with scholars at the left-of-center Brookings Institution in releasing a consensus report that “urges Congress to rebalance federal spending toward children.” The report offers useful background, and for those new to this area of policy, the bottom of this chart might be particularly eye opening: 

The report includes a number of policy prescriptions that involve the safety net, which makes it particularly relevant to us, as scholars who study these programs. It also highlights a very difficult road ahead. We all agree that the federal government could prioritize children more, but spending more money on a broken safety net should not be the consensus answer.

From the report:

The working group supports increasing resources available to low-income families with families with children through changes to the Child Tax Credit and the Supplemental Nutrition Assistance Program (SNAP). Making the tax credit for children available to households with no earnings and increasing SNAP benefits by 20 percent for families with children ages 5 and younger would reduce child poverty and help children to succeed later in life.

This week’s event announcing the report focused heavily on the child tax credit (CTC), despite President Joe Biden’s having abandoned an expansion because he could not gain consensus within his own party. The Democrats’ American Rescue Plan significantly increased that benefit and made it payable for the first time on a monthly basis, including to non-workers. That temporary policy converted the IRS into America’s leading welfare-benefit provider and amounted to unconditional welfare payments similar to the unpopular former Aid to Families with Dependent Children (AFDC) program. Moreover, majorities of the public reject making it permanent.

Nonetheless, while leaving some daylight among its authors on maintaining employment incentives, the report states “the working group supports eliminating the income eligibility threshold so that all low-income households are eligible for the refundable portion of the CTC.” Like much of the debate over the expanded CTC, the report missed key counterpoints. Those of us who argue against this latest policy believe there are better ways to help poor children, especially considering a fully refundable CTC reduces labor supply and disconnects families from social service agencies — which is not a winning strategy to reduce poverty and increase upward mobility in the long term.

Another key point is that nonworking families often receive substantial benefits outside of the CTC, such as Temporary Assistance for Needy Families, Supplemental Security Income, SNAP (formerly food stamps) and Medicaid. The report admits that spending on “income assistance programs aimed at lower-income families . . . has more than doubled over the past 25 years.” Nonetheless, it argues current spending is inadequate. That absolves the current safety net of the need to produce better results. For example, while it is true that the introduction of the food stamp program decades ago improved child health, a bigger problem now is the consumption of unhealthy foods and obesity among children — making proposed SNAP increases without other reforms counterproductive. And while there is evidence that small, intensively resourced preschool programs positively impact children, large-scale programs have been shown to actually harm them, raising questions about federal support for these programs.

Meanwhile, the working group
dismissed proven strategies, such as work requirements, as a “grave mistake.” The
report’s policy priorities — expanding the earned income tax credit, CTC, food
stamps, unemployment benefits, and childcare, plus investing more in schools — can
be summarized in one word: more.

To the group’s credit, they highlight the importance of marriage and school choice, and agree to fund programs “in the context of budget neutrality.” But this highlights another problem. The report notes that “roughly 40 percent of the federal budget goes to Americans over the age of 65, mainly through Medicare, Social Security, and to a lesser extent Medicaid” and implies that cuts to these programs for well-off seniors will fund their spending increases. But AEI’s Andrew Biggs shows that such benefit cuts or tax increases are already needed simply to avoid Social Security insolvency, and James Capretta recently testified that Medicare financing is on a similarly unsustainable path. While claiming such program cuts as offsets for additional spending on children may make policy sense in the abstract, it has almost no chance of being enacted.

Reports like this can and should challenge policymakers to make changes that help more Americans thrive. And its authors deserve praise for their working together, prioritization of children, and suggestions that spending increases be paid for. Others do far less. But simply layering new spending on top of the old, while financing it with offsets to be named later that even Democrats searching for Build Back Better plan funding didn’t venture, means the path to legislative success for these proposals — especially in the cost-neutral fashion the authors propose — is impossibly steep.

The post New consensus report on children spotlights difficult road ahead appeared first on American Enterprise Institute – AEI.