Democrats used to be the party of working people. Now, they sneer at people who work hard. Democrats pushing to pass the “Build Back Better” bill want a single parent with two kids to be able to take home well over $31,000 in cash and noncash federal benefits a year, tax-free, without having to work. The handouts are even higher in states that offer generous benefits. So why get a job?
Nonworking adults are already eligible for food stamps, housing vouchers, and health care. Now, Democrats want to send them monthly checks if they have kids – up to $300 per kid. The checks, nicknamed “Biden Bucks,” originated earlier this year to help tide over families who lost their jobs because of COVID. President Joe Biden’s team wants to convert them into a permanent entitlement. House Republicans mock it as “cash-for-kids.”
Everyone wants to help kids, but Republicans and one lone Democratic senator, Joe Manchin (D-WV), oppose handing out cash to able-bodied parents without requiring them to work or train for a job. Democrats and their media allies bash that as cruelty. Washington Post columnist Paul Waldman attacks work requirements as a “time tax and ritual humiliation” on poor people. Really? The rest of us have to work, and there’s nothing humiliating about it.
The political battle over “Biden Bucks” is key to where we as a nation are headed.
In 1996, President Bill Clinton and a bipartisan majority in Congress passed welfare reform, eliminating cash welfare without work or job preparation. It worked. Child poverty dropped from 13 percent to less than 4 percent, and teen pregnancies and welfare dependence plummeted. Democrats want to undo these reforms. Biden himself supported the work requirement then, but he says he’s adamantly against it now. So much for his blue-collar cred.
New York Times columnist Paul Krugman admits eliminating the work requirement “represents a philosophical break with the past few decades” and “the obsessive fear that poor people might take advantage of government aid by choosing not to work.” A fear borne out by social science and common sense.
University of Chicago economists calculate that the monthly cash payments will encourage 1.5 million parents to quit working. Perhaps they’ll spend the next year on the couch, making more babies to up their income from Uncle Sam.
This week’s headlines are about Democrats trimming the “Build Back Better” bill to reduce the price tag and win the votes of holdouts Manchin and Sen. Kyrsten Sinema (D-AZ). All 50 Democratic senators need to be on board to pass the bill. But don’t be misled by proposals to sunset the monthly checks after one year, or five, instead of making them permanent. That reduces the official cost. But once created, entitlements are almost never allowed to sunset. Their funding will be renewed in succeeding years. America will fast become starkly divided between the hardworking people who foot the bills and the millions on welfare, cheering on politicians to increase the dole. The burden on working people will become intolerable.
The New York Times has been featuring opinion columns deriding Americans’ work ethic. In “8 Hours a Day, Five Days a Week Is Not Working for Us,” Bryce Covert argues that a “reduction in work doesn’t have to mean a reduction in anyone’s living standards.” That’s la-la-land economics.
When fewer people work, fewer goods are produced, and they cost more. Inflation.
Americans are shell-shocked already by rising food and fuel prices. They’re recalculating how much they can afford and how it will impact their life plans. Yet the Biden team is telling them they have to support able-bodied adults who don’t want to work. The reaction should be pure rage.
The “CTC” — Child Tax Credit
Good intentions cannot be the measure of a policy’s merit. The case for expanding the child tax credit (CTC) has always been disarmingly simple: Giving parents money will reduce hardship among children. The American Rescue Plan Act (ARPA) temporarily made the CTC more generous for all but the richest families – especially to those with little to no earnings. Unlike the old CTC, the newly expanded version – which Democrats are trying to extend via the budget reconciliation bill – provides the full credit amount to families even if they owe no income tax or have no earnings. Estimates of the effect of the expansion have ranged from a drop in poverty of one-third to 46 percent. These estimates simply add the new CTC benefits to families’ incomes and re-calculate whether they are poor. Unsurprisingly, when poverty is defined as having too little income, giving more income to more families means that fewer fall below the poverty threshold.
Critics of the CTC expansion have offered a number of objections, including its $1.6 trillion cost over a decade. Of course, that prediction “might” prove true “if” the bill is passed and signed into law and “if” its time to exist remains as in the bill. But, as mentioned above, “Once created, entitlements are almost never allowed to sunset.” That means the cost of the CTC as outlined in this bill would multiply exponentially as would the employment downside that would certainly dramatically expand.
Getting paid to sit on the couch and make babies instead of working will mean two things: more babies and a much-reduced workforce.
A group of economists from the University of Chicago’s Becker Friedman Institute (CMSW) CMSW finds that the work disincentives created by the expanded CTC are larger than previous researchers have claimed — perhaps sizable enough to reverse the employment gains caused by welfare reform and the EITC in the 1990s — and primarily impact single-parent families. As a result, existing studies have overstated the short-term poverty-reduction impact of the policy by a third.
Summary
The CMSW study should give policymakers pause as they contemplate extending the newly expanded CTC. It identifies significant short-term effects on employment, even without looking at how the expanded CTC might cause some workers to reduce their hours while still remaining employed. Nor does it look at the effect on non-workers’ likelihood of choosing to enter work. So it only partly gets at the labor supply response to an expanded CTC.
The negative effects on work that the study does estimate would be heavily concentrated among low-earning families, who are disproportionately headed by a single parent. Roughly half of the families leaving employment in the CMSW modeling would come from families earning under $30,000. Over 80 percent of families leaving employment in their model switch from one worker to no workers (rather than from two workers to no workers — their model does not allow for two-worker-to-one-worker switches). In other words, the paper’s results are not driven by married mothers (or fathers) leaving the workforce to have a single-breadwinner family.
In truth, almost everyone involved in anti-poverty debates has good intentions. No one favors increasing child poverty as a policy goal. We should all rely on evidence as best we can to guide our policy positions, but the evidence is almost always more ambiguous than the staunchest advocates of safety net expansions believe. Ambiguity calls for caution and for the kind of experimentation that informed welfare reform. Jumping hastily into a dramatic transformation of the safety net without worrying about unintended consequences may be soft-hearted, but researchers and policymakers must take care to be hard-headed as well — because we are trying to help today’s and tomorrow’s children.
Let’s just dumb this conversation down a bit and make a commonsense statement: “ALL people who plan to enter the workforce should guarantee their education will facilitate their getting into the workforce when they complete their education.” Why? Even if the CTC and the “Build Back Better” plans become law, there is NO guarantee of either’s perpetuity. And, by the way, doesn’t one receive buckets full of personal gratification for receiving financial returns based on something(s) that THEY do rather than THEY receive from someone else’s checking account?
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