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Dispelling Myths About The Child Tax Credit

Washington Examiner

October 25, 2023

Every culture has its famous myths, such as Bigfoot and the Loch Ness monster, and the world of politics is no different. Take, for example, President Joe Biden’s claims that he is a unifier or that ” Bidenomics” is working .

The president offered another mythical claim last month when he said that “we cut child poverty by nearly half … largely by expanding the Child Tax Credit.” He then blamed rising poverty on “congressional Republicans’ refusal to extend the enhanced Child Tax Credit.” Ultimately, Biden’s finger-pointing only shows his weakness and need to blame others for his own policy failures.

The president’s argument focuses on the expanded child tax credit , which was in place for one year as a result of Democrats’ March 2021 American Rescue Plan. That partisan legislation sharply increased the value of the CTC, provided it in monthly installments in the second half of 2021, and paid it for the first time to parents who don’t work , effectively reviving work-free federal welfare checks that ended a generation ago on a bipartisan basis .

It shouldn’t be surprising that temporarily issuing bigger government checks to tens of millions of families increased their income and thus reduced child poverty. But the massive deficit spending in the ARP and other trillion-dollar bills also contributed to higher inflation , which disproportionately hurts lower-income families . Economist Mark Zandi found the typical household today pays on average $709 more per month due to inflation than two years ago — far exceeding the maximum CTC for two children of $600 per month temporarily paid then.

Even ignoring inflation, the president significantly overstates the case that the CTC expansion was “largely” responsible for temporary declines in poverty. Child poverty fell sharply from 12.6% in 2019 to 9.7% in 2020 , the year before the CTC was expanded, due to other pandemic benefits. Child poverty fell further to 5.2% in 2021, but that was more due to a third round of stimulus checks (which alone lifted 2.3 million children out of poverty) than the expanded CTC (which nominally lifted 2.1 million children out of poverty). Even that figure is overstated because the Census Bureau assigned all of the expansion to 2021 instead of also to 2022 when many benefits were actually paid .

Expanded EITC and unemployment checks and bigger food stamp benefits also helped reduce child poverty in 2021, further confirming that reductions in poverty were not “largely” due to the CTC alone.

Then, after the expanded CTC and other pandemic benefits expired, child poverty returned to 12.4% , leaving most families back where they started before the pandemic.

Why was the expanded CTC paid on only a temporary basis, even though Biden and other leading Democrats said they wanted it to be permanent?

The president blames Republicans, but the American Rescue Plan his party crafted and he signed into law authorized the expansion for just one year. A Wall Street Journal article explained the reason: supporters were limited by “political constraints on its cost.” With a permanent expansion costing well over $1 trillion , supporters opted for a cheap budget gimmick : enact a temporary policy and immediately call for its extension. As the Wall Street Journal noted , even before the bill was signed, supporters were cynically “warning of consequences of allowing it to expire at the end of 2021 — as scheduled in their bill.”

The extension never happened, as President Joe Biden failed to convince Democratic majorities in Congress to back his trillion-dollar “ Build Back Better ” plan.

That now leaves the president with a twofold political challenge.

The first is trying to avoid blame for rising poverty, which is a tough sell for any president, but especially when even Democrats have grown skeptical of Bidenomics . That explains the finger-pointing at Republicans for a “refusal to extend” a gimmicky temporary policy that Democrats crafted and Biden couldn’t convince his own party to continue.

The second challenge is to promote another effort to revive 2021’s expensive CTC expansion, or at least convince his liberal base that doing so remains his goal. This will be even harder now that Republicans control the House and deficits are rising again.

And in making his case, the president continues to oversell the CTC expansion, just as he did when it was enacted. In his remarks after signing the ARP in March 2021, President Joe Biden congratulated supporters of the new policy, saying flatly, “it’s going to cut child poverty in half.” It didn’t, and since then child poverty has returned to prior levels — exactly as that temporary legislation provided.

But just like Bigfoot and the Loch Ness monster, the myth lives on.