Advocates for the Child Tax Credit (CTC) have highlighted its positive effects on child poverty as a main reason for policymakers to support expanding it. Now that it looks like the CTC expansion will end with 2021, it is worth examining child poverty rates since the monthly payments of $300 per child (or $250 for older children) started flowing in July 2021.

Since the start of the pandemic, a team of researchers at
the University of Chicago and Notre Dame University’s Lab for Economic
Opportunity (LEO) has produced a “real-time” monthly poverty rate. The purpose
behind their effort was to provide information in a timely way to help
understand the financial situation of vulnerable families in the US.

Typically, the US Census Bureau produces a poverty rate one time per year, which is significantly time lagged due to data collection strategies. The Chicago and Notre Dame team uses monthly household survey data to approximate the percentage of people in poverty each month based on their prior 12 months of income. In establishing the monthly poverty rate, they showed that “historically, the real-time poverty estimate from the monthly CPS has been a good predictor of changes in the official poverty rate.”

For November 2021, the researchers
highlight the following key findings:

• The estimated poverty rate for November 2021 was
  11.0 percent, down half of a percentage point from October.
• The decline was most noticeable for children
  (down 1.8 percentage points), those with a high school degree or less (down 1.6
  percentage points), and white individuals (down 1 percentage point).
• While month-to-month changes can be noisy,
  particularly for subgroups, these declines are promising, and suggest some
  short-term benefit of the advance payment of the Child Tax Credit and recent
  increases in employment.
• Nevertheless, we still do not see the sharp
  decline in the poverty rate for children that had been forecasted.

Notably, the Chicago/Notre Dame poverty rate follows the official poverty measure, meaning it does not include in-kind government benefits, such as food assistance. But it should reflect the monthly CTC payments — making the last point above worth emphasizing. Advocates of an expanded Child Tax Credit projected earlier this year that it would reduce child poverty by between 39 percent and 42 percent, and cut deep child poverty in half. The monthly child poverty rate fluctuates during this time according to the chart above, but we do not see a steep and constant decline in the magnitude advocates suggested.

It is possible that the household survey data reflected in the Chicago/Notre Dame chart did not fully capture the CTC payments because people might not report it, understating the poverty reduction caused by the CTC payments. After all, research shows that households vastly underreport the receipt of most government payments.

However, another team of researchers from Columbia University have also created an alternative poverty rate, and they incorporated assumptions about annual income, including estimating payments such as the CTC and food assistance to account for misreporting by survey respondents. Their data show a larger decline in child poverty than the Chicago/Notre Dame data.

Experts have described the expanded CTC as “transformational,” arguing that it “would yield tremendous immediate and long-term benefits for children and their families.” People can judge for themselves. But it appears from the preliminary data that the claims on the effects of the CTC on child poverty might have been oversold.

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