Child Poverty and COVID

The tragic cost borne by these invisible Americans.

By Jeff Madrick

Tagged child tax creditCOVID-19EconomicsPoverty

The current economic recession is fast stripping away any illusions that the American social safety is close to being adequate. Without the new aid being distributed by the Congressional CARES package passed in late March, the number of individuals considered officially poor may have risen by 50 percent, according to Columbia University researchers. Access to these new programs has been limited, so actual poverty could be significantly higher than best estimates. Potentially more damaging, the rebates of $1,200 an adult are so far only one-time payments, and the unemployment expansions will run out this summer or by end of the year.

As millions more working Americans have fallen into poverty, they have learned—for the first time in their lives—what it is like to depend on insufficient food stamps, temporary unemployment insurance, food banks that run out of supplies, Medicaid and housing subsidies, school lunches for the children that they had to pick up because the actual schools are closed, along with charities like the Salvation Army and Goodwill for their clothing and furniture.

The first line of defense in the breakdown that followed the pandemic is the unemployment insurance system (UI), the cherished legacy of the New Deal. The system was never ideal, run by states with different, sometimes cruel ideologies that now keep wage reimbursements as low as $275 a month in Florida and Alabama versus about $500 in New York and California and up to more than $800 in Massachusetts. Since the Great Recession , it’s hardly been noticed that many states have been making it more difficult to collect benefits. During the spring peak of the virus, only half of those who qualified for unemployment insurance could get their benefits, or simply stopped applying because the process was so complex.

If Americans have not paid attention to the deterioration of unemployment insurance, even less attention has been paid to the nation’s child poverty. Poor children are being clobbered by the current recession. According to one study, the rate of child poverty is likely to rise substantially over time, but the rate will depend on how many families have access to the new aid provided for by the CARES Act and whether aid is extended by Congress. Although most of us don’t know it, children are already America’s poorest people and have been for decades. The Census Bureau publishes an unofficial measure called the Supplemental Poverty Measure, which places our current child poverty level at 13.7 percent, or 10 million; it’s 12.2 percent for adults. The gap between adults and children has been as wide or wider for decades. The U.S. child poverty rate in America is the highest among large rich industrial democracies in the world, sometimes double the rate of comparable nations, when measured as a proportion of median family incomes, as Europe does.

On top of that, my own analysis provided in my book, Invisible Americans, as well as that of others, including Shawn Fremstad of the Center for Economic Policy Research and Cara Baldari of First Focus on Children, conclude that the way the United States officially measures poverty seriously understates the real rate. The newer supplemental rate is only moderately better than the old method. The reasonable child poverty rate is almost surely more like one out of four children, not the one out of seven federal poverty rate widely cited.

We shouldn’t get lost in the weeds of poverty measurement, however. What’s important to note is the effect the official or supplemental poverty rates have had on children. A mountain of strong evidence has been developed over a generation by researchers unambiguously showing that poor children develop serious and often lasting cognitive disadvantages, emotional instability, poor health, and in very young children, perhaps most frightening, damaged brain architecture. As they grow into adulthood, these once-poor children earn considerably less on average than their peers, a small minority go to college, and they are incarcerated at higher rates than non-poor children.

And right now, they are also hungrier than at any time in the past 20 years, according to recent surveys by the Brookings Institution. The proportion of those who don’t get enough to eat may be rising by 50 percent in this recession, up to one in five. A large proportion of children also live with other hardships associated with poverty such as inadequate access to health care, seriously overcrowded housing, and scandalously poor K-12 education. With school closings during the pandemic, they now get far less personal attention from trained counselors, nurses, and of course teachers than they did even in their poorly financed schools.

As I wrote in my book, it also became clear to me that poor children live in shame. They view themselves as irredeemable outsiders. They see ads for movies they cannot afford to attend, clothes they cannot afford to buy. They become deep-seated pessimists at an early age. Some blame these attitudes, particularly for black Americans, on a subculture of laziness and an inability to delay gratification, but it is a man-made concoction created by minimal education, family stress, poor-paying jobs, a lack of hopeful opportunity, and for blacks racial prejudice. Middle-class Americans often scoff at poor kids wearing name-brand sneakers, unaware the children demand these not to show off but simply to belong. Condescension and disparagement toward the poor is far more pervasive in America, according to surveys, than in other rich countries.

The American West, Southwest, and South have the highest number of poor children per capita, along with Appalachia. But if you reside in any major city in America, very poor children live not more than a couple of miles away.

We don’t seem to see them empathically. One reason is condescending American views toward blacks, including their children. Black American children are almost expected to be poor by virtue of their skin color. In one survey, Americans were asked what proportion of the poor are black. They answered 50 percent.

In fact, the largest proportion of poor in America are white, some 40 percent. African Americans comprise about 20 percent, Hispanics about 25 percent. There are also more white poor children than black poor children, though a higher proportion of poor children are Hispanic. On the other hand, a much higher proportion of black and Hispanic children are poor than are white children.

Child poverty costs all of us. It is estimated to reduce GDP by a striking $1 trillion a year, or 5 percent. The reasons, among others, are that the kids fall behind quickly in school and have lower high school graduation rates. Fewer go to or finish college, and ultimately they are less productive workers on average than their better-off peers. They also have higher health-care costs and are far more often incarcerated.

Child poverty is lower in Europe not because those economies produce fewer poor people, but because they generally have far more generous social policies, including free and low-cost health care, family leave, quality early education and childcare, and cash allowances for parents of poor kids. A recent detailed study by scholars at the National Academy of Sciences has the best new comparison. It analyzed data from the Luxembourg Income Study, to show that the United States spends less than similar Anglophone nations, including the UK, Canada, and Australia, often significantly, on social policies to help children.

Bipartisan efforts to raise incomes in the 1990s, during the era of welfare reform, included the expansion of the Earned Income Tax Credit and the creation of the Child Tax Credit. Both work-based programs were valuable, lifting many children out of poverty. The Earned Income Tax Credit, first introduced in 1975 by Republican Gerald Ford, provided credits against taxes depending on how much money the family made. Partly based on a suggestion by Milton Friedman, it nevertheless appealed to both political parties worried about federal budget deficits and alleged over-spending on social policies. The lost federal tax revenues do not show up as an expenditure. Americans also preferred social programs dependent on work, of course, such as unemployment insurance and Social Security.

In 1997, the Child Tax Credit was passed. Families were entitled to a Child Tax Credit for each child, with the size of the benefit dependent on wages. The more you earned, the greater the benefit, up to a limit.

The EITC and the CTC became the largest federal programs focused on children. Though they lowered child poverty, more than half of recent increases in the programs have gone to those families who earned between 100 percent and 200 percent above the poverty line, with much less going to those in deeper need because benefits are dependent on the amount of income parents earn. The current child tax credit is $2,000 a year for which one third of children do not fully qualify because parents to not make enough money. Thus, poor children have been neglected.

What can we do? Evidence accumulated in the last two decades leads to a practical and efficient solution. Researchers have shown that lack of cash alone may matter more than any other single concern. A variety of pieces of evidence point in this direction. In the 1990s, when benefits from EITC were raised significantly, researchers found that the cognitive performance of kids in such families improved markedly. A widely followed practice of the Cherokee Native American tribe in North Carolina, which started a profitable casino, provided convincing results, concluded researchers earlier in the 2000s. They gave large allowances to families with children and the high school graduation rates of these children improved significantly. These children were also less likely to commit crimes.

Another eye-catching study was a 2016 summary of the children of federal pension recipients from more than a 100 years ago (widows’ pensions). The life spans of these children were significantly longer and they earned higher wages than those whose mothers did not receive pensions. More income mattered measurably.

Many of these studies were adjusted for factors such as parents’ educational attainment to isolate the impact of money alone. A group at the London School of Economics examined hundreds of studies to pare them down to 34, which isolated income alone as a determinant of outcomes. The study concluded that children who have the worst cognitive and emotional outcomes do so simply “because they are poor.”

In the last few years, child poverty scholars have reached a simple consensus, yet one that had eluded them for years. The best first step toward reducing child poverty for the least money is to provide cash without conditions to families with poor children. At my think tank at the Century Foundation, we commissioned a research group at Columbia University to run a simulation comparing a cash allowance to a child tax credit. They found that you got more poverty reduction for your money with a direct cash allowance—and indeed can reduce the proportion of children living in poverty by half at a total cost of $100 billion a year, with the elimination of the child tax exemption. It reduced the rate only by half because, while all children get more money, it is often not enough to raise them above the poverty line.

The study of the National Academy Sciences also concluded that a direct cash allowance reduced child poverty more effectively than any other single program. These cash allowances are common in Europe and Canada, and scholars there find them very effective.

Scholars and advocates have won influential converts in Congress in recent years, leading to the proposed expansion in the CARES bill of the child tax credit to $3,000 a year and $3,600 for those under six years old. No matter parents’ level of income, the credit will go to all children and thus serve effectively as a cash allowance for all.

This marks a serious victory for those seeking adequate aid for poor children. As I write this, the Senate has yet to act. Yet the CTC should eventually be made more generous, even when the coronavirus is contained. It should also be extended beyond 2020. The plight of these children is not their fault. Their suffering is ours.

Read more about child tax creditCOVID-19EconomicsPoverty

Jeff Madrick is a senior fellow at The Century Foundation and director of the Bernard L. Schwartz Rediscovering Government Initiative.

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