Stimulus Update: How History Is Likely to View the End of Enhanced Monthly Child Tax Credits

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KEY POINTS

  • Historians will one day determine how well the U.S. supported families in 2022.
  • Studies show that the expanded Child Tax Credit lifted 3.7 million children out of poverty without damaging the job market.
  • The only way the enhanced Child Tax Credit will be revived is if both parties can come to a compromise.


Children are taught on the playground to compromise. Perhaps it's time for adults in Congress to learn the same lesson.

Talk of a divided America sells newspapers. However, for most of us, our differences are just that -- differences. They're not the beginning of another civil war or a reason to hate our neighbors. Differences stem from filtering information through our own experiences, and no two people experience life precisely the same way.

When historians look back on this era, they'll likely focus on our shared culture and the things Americans have in common. And one thing the majority of American parents had in common in 2021 was the enhanced monthly Child Tax Credit. What will historians write about the enhanced Child Tax Credit and its impact on American families? While there's no way to know for sure, it's a safe bet that historians will investigate the following three things.

1. The impact on the average family

In April, the non-profit bipartisan group Humanity Forward released a study called, "The Impacts of the 2021 Expanded Child Tax Credit on Family Employment, Nutrition, and Financial Well-Being." Not only is the title a mouthful, but the report is filled to the brim with interesting facts. For example, due to the enhanced Child Tax Credit:

  • Fewer parents had to sell their blood plasma to pay bills.
  • Fewer parents were forced to take out payday loans with sky-high interest rates. Child Tax Credit recipients were almost twice as likely to stop taking out predatory loans.
  • Around 70% of Child Tax Credit recipients said that the monthly payments helped them better manage prices affected by inflation.
  • Despite Sen. Joe Manchin's concern that parents would use enhanced Child Tax Credit payments to buy drugs, the study found that Child Tax Credit recipients were almost half as likely to start using illegal drugs. Moreover, a 2014 analysis of 19 studies found drug use decreases when families receive cash assistance.

As Humanity Forward says, "money is protection." For many Americans living on the edge and worried about how they will pay for groceries, even a small amount of extra money can mean the difference between desperation and protection.

Given that enhanced Child Tax Credit payments helped lift 3.7 million children out of poverty, it's tough to view the program as anything but a success.

2. Some states needed more significant aid than others

Treasury Department data found that these 10 states received more Child Tax Credit money than any others:

  • Alaska
  • Idaho
  • Iowa
  • Kansas
  • Montana
  • Nebraska
  • North Dakota
  • South Dakota
  • Utah
  • Wyoming

Not a single Republican voted in favor of the enhanced Child Tax Credit, meaning 19 of the 20 senators representing these 10 states voted against sending enhanced payments. The only exception is Sen. Jon Tester, a Democrat from Montana. Interestingly, all but one of these states also have a Republican governor.

3. Why the enhanced Child Tax Credit ultimately ended

President Joe Biden hoped the enhanced payments would continue through at least 2025, helping families pay for necessities. Republicans fought tooth and nail to put an end to the enhanced Child Tax Credit after six months, plunging 3.7 million children back into poverty. Here are some of the reasons why:

  • The future of the enhanced Child Tax Credit was part of the Biden administration's Build Back Better (BBB) plan. Simply put, neither party wanted to compromise, and the enhanced credit was a victim of political infighting.
  • Republicans expressed concern that the enhanced payments weren't targeted enough. Not only did payments hit the bank accounts of some high-income families, but the enhanced Child Tax Credit allowed parents who do not work to receive payments. Republican lawmakers wanted a more targeted program. For example, Sen. Joe Manchin believes that only working parents should receive the enhanced Child Tax Credit.
  • Manchin's concern echoes that of the GOP -- that sending families money discourages work (although evidence has not borne this theory out).
  • Sen. Mitt Romney would be happy to see a new, more targeted version of the Child Tax Credit. With Romney's plan, low-income households could receive the enhanced Child Tax Credit but would have to give up another safety net benefit. In other words, if the GOP agrees to move forward with the enhanced Child Tax Credit, they would prefer it be their version of the plan.

Hopefully, the subject of the enhanced Child Tax Credit will have a happy ending, although it's going to take compromise in the nation's capital. But, if politicians can learn to compromise in these partisan times, it truly will be historical.

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