Disbursing money monthly to parents is novel in the U.S., but other nations have successfully piloted similar programs. The majority of OECD nations offer modest, means-tested cash benefits to parents. Critics of the program have raised objections that payments create a disincentive to work, but studies of these other nations’ programs, such as a recent study of the Canada Child Benefit, found no reduction in labor force participation.

The new system of child tax credits will function like Social Security for parents.

The bill contains other provisions that fight poverty. Children and adult dependents are eligible for the full value of the one-time $1,400 economic impact payments. Health insurance subsidies were enlarged, expanded nutrition benefits were continued through the end of 2021, and lower-wage workers without children will receive a larger Earned Income Tax Credit.

Analyses by the Urban Institute and Columbia University each concluded that in total, the provisions of the Rescue Plan Act will increase incomes enough to halve the number of households below the poverty line. The Urban Institute found the new child tax credit alone would reduce the child poverty rate from 13.7% to 11.3%, lifting 1.7 million children out of poverty in one year. At a cost of $135 billion for the 2021 benefit (7% of the Rescue Plan’s cost), the investment will generate a considerable return. The combination of one-time payments, child tax incentives, expanded unemployment and nutrition assistance pack a powerful punch. 

The premise of a bill reducing child poverty by half might make one wonder if there could be a policy that eliminates child poverty. Programs of such size would be a bridge too far for most legislators, and the cash infusion could spur excessive inflation. But targeted measures to help children and support family formation can find an ongoing role; programs like Social Security and Medicare once sounded generous, but are now part of the economic fabric. 

The revised tax credit can be regarded as a pilot program scheduled to expire after one year.  When advance payments start to arrive over the summer, parents may find themselves pleasantly surprised; if payments stop in 2022, legislators may face difficult questions.

A nation facing demographic challenges and needing to enhance its human capital should consider all remedies that can support child-raising. This experimental policy could prove to be the most beneficial legacy of the nation’s Covid response.

Free World?
During the past year, governments around the globe have invoked executive powers, restrictions on liberty and surveillance to deal with the pandemic. Every type of regime took some measures, from authoritarian states like Jordan to traditional democracies like the U.K. While extraordinary times call for extraordinary measures, there is a growing concern some governments will continue to rely on these powers even after the pandemic is over.