Earlier this year, President Joe Biden and his Congressional allies included a provision in the American Rescue Plan Act that, in effect, reversed 25 years of policy created by welfare reform legislation passed - in August, 1996. New York Times reporter Jason DeParle described it as a “break with a quarter century of policy.”[1] It provided a one-year tax credit of between $250 and $300 per child, paid monthly to families with children; the tax credit is refundable for poor families that don’t have any federal tax liability. The provision was the result of wanting to reach families most impacted by Covid-19, recognition that TANF has proven woefully inadequate in helping poor families and children during the pandemic, and growing bipartisan support for the idea of child tax credits.
In 1996, President Bill Clinton signed legislation, the Personal Responsibility and Work Opportunity Act (PRWOA), which ended the entitlement of mostly poor moms and children to cash assistance and converted it to a block grant to states, calling it Temporary Assistance to Needy Families (TANF). But the legislation went even further then ending the entitlement. It largely limited assistance to those who were working at least a certain number of hours a week and said that an individual couldn’t receive more than 60 months of assistance in a lifetime. Ohio placed even greater limits on people’s ability to obtain assistance, limiting people to 36 months of assistance in their lifetime.
Ohio placed even greater limits on people’s ability to obtain assistance, limiting people to 36 months of assistance in their lifetime.
In 2016, my former colleague Rose Frech and I interviewed key players in Ohio’s welfare reform debate. None of them imagined the Temporary Assistance for Needy Families (TANF) caseload would plummet as much as it had. Jack Frech, a former county welfare director, said, “I couldn’t imagine the counties and state could be so heartless” to dismantle a “system designed to protect vulnerable families with children from financial ruin.”
Time and again, the program has proven ineffective in helping families and children in times of need, even during the economic calamity caused by Covid-19. By June 2020--three months after Ohio shut down, hundreds of thousands lost their jobs and thousands were lining up every week for free food--Ohio had only added 5,522 adults and 8,910 children to the TANF program. Thirty-four Ohio counties had 10 or fewer adults on the program in June 2020[2].
Thirty-four Ohio counties had 10 or fewer adults on the program in June 2020.
Clinton had run for president in 1992, in part, on a platform of “ending welfare as we know it.” It is still contested whether this pledge was driven by a political calculation or a more noble idea of trying to reframe anti-poverty programs as work supports. But with a re-election campaign looming and little to show for fulfilling his “ending welfare” promise, Clinton cut a deal with then-House Speaker Newt Gingrich and supported welfare legislation that had been a cornerstone of the 1994 Republican Contract with America. It passed with overwhelming Republican and Democratic support. As an aside, when Ohio passed its implementing legislation, it had both Republican and Democratic sponsors and ultimately passed the legislature unanimously.
It seemed “welfare” had become political poison to both parties. It was the victim of years of attacks that had only increased in the 1970s as the number of Black welfare recipients increased. Sanford Schram, author and political science professor, argues that "Public assistance was not as demonized until African Americans began to exercise their right to use it -- that's when welfare started to be seen as this inferior program for nonwhite people who didn't play by the white middle-class rules of work and family."[3] President Ronald Reagan’s campaign stump speech famously featured the character of the “welfare queen.” “She used 80 names, 30 addresses, 15 telephone numbers to collect food stamps, Social Security, veterans’ benefits for four nonexistent, deceased veteran husbands, as well as welfare. Her tax-free cash income alone has been running $150,000 a year.”[4] In his first term, Reagan would push through welfare cuts for working mothers that sent them and their children deeper into poverty.[5]
Public assistance was not as demonized until African Americans began to exercise their right to use it.
The United States has a long history of incorporating racist policies into social welfare and other programs. For example, during the Great Depression when the Social Security program was created in 1935, it excluded agricultural and domestic workers. Approximately 65 percent of Black workers were engaged in these two occupations in 1930.[6] Over and over we see programs designed in ways that have the effect of harming Black people or treating them unfairly. For example, welfare funding was converted into a block grant that allowed states to set their own benefit levels. States were free to supplant state spending with the new federal welfare dollars, freeing up those state dollars for other priorities like tax cuts. So, what was the effect of this? Just like under the Aid to Families with Dependent Children (AFC) program, states with high Black populations kept benefits low and diverted those funds to other uses. Fifty-five percent of Black children live in states with TANF benefit levels set at less than 20 percent of the federal poverty level.[7] Prior to the passage of tax credit reforms in the American Rescue Plan, only half of America’s Black and Hispanic children qualified for the child tax credit.[8]
Growing awareness of this history, and the fact that the TANF program had proven ineffective in helping American families experiencing tremendous hardship, led President Biden and his Congressional allies to include provisions in the American Rescue Plan Act that could get aid to these families quickly and that would benefit Black and Brown women and their children who were so often left behind in the past and had been disproportionally harmed by the Covid-19 pandemic. This brings us to the child care tax credit (CTC) included in the American Rescue Plan.
The new expanded CTC is $3,600 per year per child ages 0-5 and $3,000 a year for children ages 6-17.
The American Rescue Plan temporarily increases the child tax credit available to families. The new expanded CTC is $3,600 per year per child ages 0-5 and $3,000 a year for children ages 6-17. Parents who are eligible for the credit began getting the payments in monthly installments in mid-July; payments will continue through December 2021. It’s estimated that 80 percent of families will receive their payments by direct deposit; the remainder will receive their deposits by mail. When families file their taxes in 2022, they’ll get the remaining benefit they didn’t get through the monthly installments. Importantly, receiving the child tax credits won’t impact eligibility for Medicaid, Supplemental Nutrition Assistance Program (SNAP) or Supplemental Security Income (SSI).
According to the U.S. Census Bureau, economic hardship declined in households with children as the child tax credit payments arrived. Food was the most common use of the CTC payment. Other essentials like utilities, phone and internet bills, rent, mortgage and childcare were also popular uses of the payment. The share of households with children whose household didn’t get enough to eat dropped significantly to 10.2 percent from 13.7 percent in the previous data, collected June 23-July 5 of this year.[9] But the tax credit is also having an impact on Ohio’s economy. The Niskanen Center estimated that the tax credit will produce over a billion dollars in new consumer spending in Ohio, result in state and local tax revenue climbing by over $71 million and create over 19,000 jobs.[10]
The U.S. Senate has now passed a budget blueprint that would extend the child tax credit. The U.S. House has yet to act on it. If the CTC were made permanent, it would be the most significant anti-poverty measure the U.S. has taken since President Lyndon Johnson launched his “war on poverty.” Ohio Senator Sherrod Brown joined a group of other U.S. senators this month to endorse making the tax credit permanent, saying “No recovery will be complete unless our tax code provides a sustained pathway to economic prosperity.”
Many have observed that the Covid-19 crisis shed light on America’s hidden pandemic of poverty and racism.
Many have observed that the Covid-19 crisis shed light on America’s hidden pandemic of poverty and racism. While passage of legislation making the child tax credit permanent won’t entirely undo poverty and racism in this country, it will go a long way toward alleviating the pain and suffering that too many poor children in our country, particularly Black and Hispanic children, experience every day. If we don’t do this, we will see increasing racial and economic disparities, and we will miss a once-in-a-generation opportunity to put today’s children on a path to a more equitable and prosperous future.
[1] DeParle, Jason, Monthly Payments to Families With Children to Begin, The New York Times, July 21, 2021
[2] Ohio Department of Job and Family Services, Public Assistance Monthly Statistics (PAMS) Report, June 2020
[3] Ward, Marguerite, How decades of US welfare policies lifted up the white middle class and largely excluded Black Americans, Business Insider, August 11, 2020
[4] Brockell, Gillian, She was stereotyped as ‘the welfare queen.’ The truth was more disturbing, a new book says, The Washington Post, May 21, 2019
[5] Rich, Spencer, Reagan Welfare Cuts Found to Worsen Families' Poverty, Washington Post, July 29, 1994
[6] Kilolo Kijakazi, Karen Smith, and Charmaine Runes, African American Economic Security and the Role of Social Security, Urban Institute, July 2019
[7] Safawi, Ali and Floyd, Ife, TANF Benefits Still Too Low to Help Families, Especially Black Families, Avoid Increased Hardship, Center on Budget and Policy Priorities, October 8, 2020
[8] Goldin, Jacob, Michelmore, Katherine, Who Benefits From the Child Tax Credit, National Bureau of Economic Research, October 2020
[9] Perez-Lopez, Daniel, Economic Hardship Declined in Households with Children as Child Tax Credit Payments Arrives, U.S. Census Bureau, August 11, 2021
[10] Hammond, Samuel, Orr, Robert, Measuring the Child Tax Credit’s Economic and Community Impact, Niskanen Center, August 2021
