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How to Help Poor Children

... without growing the welfare state.

If this election teaches Republicans one thing, hopefully it’s that they can no longer ignore the plight of the country’s lower and working classes. Safety-net reforms that meaningfully improve life for the poor—and are consistent with conservative principles—should be high on the agenda.

A new proposal from the “bleeding-heart libertarian” Niskanen Center deserves special attention. The report’s authors, Samuel Hammond and Robert Orr, would increase the Child Tax Credit from $1,000 to $2,000 per child and make it fully “refundable” so that poor families can always receive it. Hammond and Orr would also send the money in monthly installments, rather than annually, to help these families balance their budgets on a regular basis.

Crucially, they would pay for the change by “consolidating”—i.e., eliminating—other programs and perks that currently benefit families with children. Some of these disproportionately help the rich, while others provide paternalistic “in-kind” aid rather than cash to the poor.

In 2015, it cost nearly $100 billion to fund the dependent exemption, the dependent care credit, food stamps targeted toward children, and five different school nutrition programs. Wiping all that out would approximately cover the expanded Child Tax Credit, and it would more than cover a smaller expansion, in which the current $1,000 credit is made refundable but the bigger $2,000 checks are reserved for parents with kids under 5.

Why should conservatives see that as a win, and not just a wash? For one thing, it hacks away at federal bureaucracy and paternalism, replacing it with a simple program that allows people the freedom to do what’s best for them. For another, it supports parents, whom many pro-family conservatives see as overtaxed—and it supports all parents equally, rather than targeting assistance to those who choose specific working or daycare arrangements, like child-care subsidies do.

And for yet another, it eliminates some of the bad incentives that welfare programs cause. Most of these programs phase out as the poor earn more money, disincentivizing them from doing so, but the child credit is flat well into the middle class. (It starts phasing out when a married couple hits $110,000 in income.)

Many liberals, joined by Hammond and Orr, would also point to evidence suggesting that giving money to parents is good for kids. “[D]irect cash benefits like the CTC and EITC are highly cost-effective programs for improving child outcomes in areas like health, educational attainment and general well-being—often several times more effective than their in-kind counterparts,” Hammond and Orr write. Indeed, many liberals would like to expand cash aid and see no need to cut back other poverty programs to compensate.

Conservatives and libertarians are more skeptical, worrying that unconditional payments to anyone raising a child could fund laziness or irresponsible childbearing. Their point is not that $2,000 a year covers the entire cost of a child, of course; rather, the money could be an extra incentive for those already inclined toward bad decisions.

Some on the right also see child-centered benefits as a form of social engineering. Michael Tanner of the Cato Institute, another libertarian think tank, laid out some objections in this vein last week, while the Wall Street Journal editorial board has long despised the Child Tax Credit in general.

These worries are not entirely unfounded. The potential for welfare programs, including those dispensing cash, to encourage problematic behavior is well-documented even by liberal scholars, and the extent to which the government should help parents is debatable. The right should remember, though, that under this proposal parents would give up other benefits in exchange for the expanded credit—and that, as noted above, the program actually improves some incentives through its phase-out structure.

It’s also instructive to compare Hammond and Orr’s proposals with those of the major presidential candidates. Trump’s tax perks, for example, would help the rich more than the poor. Clinton has a child-credit plan somewhat similar to Niskanen’s smaller option, but it is not quite fully refundable for the poorest families, it is not funded by cuts to other programs, and she would like to target other subsidies to families that use daycare.

Hammond and Orr are not the first people to outline a change like this. I did so myself in 2014; the sociologist Joshua McCabe did so last year; Patrick Brown, a former government-relations staffer at Catholic Charities, did so earlier this year. Indeed, as the Niskanen authors note, several other countries already have programs along these lines.

What the report does is add an intriguing new libertarian voice to the chorus—the Niskanen Center was founded last year and began working on poverty policy just months ago—and offer a very specific plan for funding the reform. One hopes Republicans will happen upon this report as they grope in the dark for ways to take the pressure off the less fortunate in this country.

Robert VerBruggen is managing editor of The American Conservative.