2023-09-21 08:58:08
By Paul Krugman, Nobel Prize winner in Economics. Half of the increase in child poverty could have been avoided by extending tax breaks.
I have been writing about economics and politics for many years, and I have learned not to lose my temper. Politicians and legislators often make decisions that are downright cruel; They also often make stupid decisions, harming the national interest for no good reason. And too often they make decisions that are both cruel and stupid. Getting angry every time that happens would be exhausting.
But the latest census report on income and poverty has pissed me off. It showed that child poverty has more than doubled between 2021 and 2022. That means 5.1 million children pushed into misery, because being poor in America is truly miserable.
And the thing is, this didn’t have to happen. The spike in child poverty has not been caused by inflation or other macroeconomic problems. It has been more of a political choice. The story is actually quite simple: Republicans and a handful of conservative Democrats blocked the expansion of federal programs that had dramatically reduced child poverty in the previous two years, and nearly all the improvements were lost as a result.
The cruelty of this decision should be evident. Perhaps they believe (mistakenly) that poor American adults are responsible for their own poverty; But, even if they think that way, you can’t blame poor children. Or perhaps they worry that helping low-income families will reduce their motivation to work and improve their lives. These concerns are hugely overblown, but even if they worry about the consequences of the incentives, are they big enough to justify keeping children poor?
Why do I say that this political decision was stupid and cruel? For two reasons. Preventing much of this human catastrophe would have cost very little money in the first place. Second, childhood poverty is, in the long run, very expensive for the nation as a whole: Americans who live in poverty as children grow up to be less healthy and productive adults than they should be. Even in purely fiscal terms, refusing to help poor children can, over time, increase the budget deficit.
As for the immediate budget costs: The thing about aid to poor Americans is that, precisely because their starting incomes are so low, relatively modest amounts of aid can make a huge difference to their well-being.
More than half of the increase in child poverty could have been avoided by extending the increase in child tax credits enacted in 2021. That extension would likely have had a direct budget cost of about $105 billion a year.
The figure may seem large to those unfamiliar with the size of the U.S. economy and other important social programs. But it is actually a modest sum. It is less than half a percentage point of the country’s gross domestic product. It represents a small fraction of what we spend on Social Security ($1.3 trillion) and Medicare ($800 billion). And it represents only a little more than half of the annual income loss from Trump’s 2017 tax cut. What’s more, we could have significantly slowed the rise in child poverty by keeping only part of the increase in tax relief. children. The estimated cost would be about $12 billion a year, pocket change in the context of the federal budget.
But we did none of these things, I insist, because of the conservative opposition. And the nation as a whole will pay a high price.
The premise that helping poor children turns them into healthier, more productive adults is not hypothetical. On the contrary, it is supported by solid evidence, better than the evidence that spending on physical infrastructure is good for the economy (although I believe that too) and infinitely better than the evidence that tax cuts promote growth, which is non-existent.
And how is that? Historically, anti-poverty programs, such as food stamps and Medicaid, were not introduced uniformly across the country. Instead, they were gradually implemented across regions, so we can compare the life trajectories of Americans who had access to these programs as children with those of Americans who did not. The results are clear: helping low-income children is a “highly profitable investment.” Those who received this aid ended up being healthier, more educated, and more financially self-sufficient than those who did not receive it.
Since adults who are not productive or healthy pose, among other things, a fiscal burden, this could mean that, even from a strictly budgetary point of view, cutting aid to poor children is self-destructive.
And yet here we are
Unfortunately, children can’t vote and poor adults tend not to either. So politicians can continue to implement policies that harm poor children. But not all politicians are cynical through and through; some of them even worry about Americans who don’t vote or send them money. Nor are all voters completely selfish. After all, we have made great progress against child poverty, even if they were ephemeral. And at least now we know that fighting child poverty is possible.
Realistically, today there is no political will necessary to correct our terrible mistake. But there is always hope that we end up doing the right thing.
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