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A permanent CTC expansion with a sharper means-test would protect poor kids better and be more popular.
A strategy for saving Biden's anti-poverty agenda
Democrats’ $3.5 trillion reconciliation proposal is almost certainly going to shrink — and possibly shrink a lot — to meet the demands of Joe Manchin, Kyrsten Sinema, and a handful of tax-averse centrist House Democrats.
That means some worthy ideas will end up on the chopping block, and it’s important to be smart and strategic about where those changes are made.
One strategy Democrats have already used to squeeze their ambitions into the available 10-year budget window is to schedule programs to expire within a few years (or begin with a multiyear delay). The most prominent example of this is probably the expanded Child Tax Credit, originally implemented (on a one-year basis) as part of the American Rescue Plan.
The CTC expansion is one of the best progressive policies in a very long time. By giving direct financial assistance to families with little or no income, it has already lifted millions of children out of poverty. And yet, in the reconciliation proposal, it’s scheduled to expire after just four years — at which point, if it’s not extended, millions of its beneficiaries will be thrown back into poverty. That’s not because Democrats think it should expire; it’s simply a budget gimmick and a bet that once the program exists, it will be easy to preserve it, even when Republicans return to power in D.C.
That’s a risky bet. It’s true that, as we saw during the ACA repeal fight of 2017, even programs that were very controversial when they were enacted can be difficult to repeal. But given the many veto points in the American political system, passively allowing something to expire is much easier than affirmatively voting to repeal it. If Democrats want to fight child poverty while cutting the headline cost of this provision, there is a better way: subject the program to more stringent means-testing.
Means-testing has become unfashionable on the progressive internet, and for good reasons. Most notably, means-tested programs necessarily create administrative burdens that end up excluding people (usually poor people) who should be eligible. But note that the expanded CTC Democrats are proposing is already means-tested, just with a very high threshold. That kind of means-test saves relatively little money — hence the pressure to set the program to expire — while still subjecting needy families to the full administrative burden.
If you’re not avoiding administrative burdens, what is the case against sharper means-testing? The motive appears in part to be a misperception that further means-testing the CTC would be unpopular. But the results of a large-scale issue polling experiment we recently conducted demonstrate that contrary to the conventional wisdom, the more sharply you means-test the CTC, the more popular it becomes. A higher threshold does win you the support of more parents with young children who would directly benefit from the program. But parents of young children are a distinct minority of the electorate, and phasing the benefit out sooner gains the support of more voters than it loses.
Given the current electoral landscape, this choice matters
Currently, betting markets give Democrats a 53% chance of keeping the presidency in 2024. If a Democrat is not elected president, it’s highly likely Republicans will control the Senate, given the large structural biases in that chamber. And any incoming Republican president would have a good shot at having a House majority as well.
This means there is a sizable chance — it’s difficult to put a number on it, but probably in the range of 30-40% — that when the expanded Child Tax Credit expires in 2025, Republicans have unified control of the government.
What might a Republican-led government do about the expiring Child Tax Credit in 2025? Here’s a quick survey of Republican rhetoric around the topic:
“Why Biden's 'Child Allowance' Will Harm the Economy,” by Marco Rubio
“Keep the Child Credit Tied to Work,” by Oren Cass
In an open letter to Gene Sperling, Republicans on the House Ways and Means committee write that expanding the CTC risks “the loss of billions of taxpayer dollars in fraudulent and improper payments.”
This rhetoric suggests that the party that is near-universally opposed to giving what they consider “welfare” to poor families is highly unlikely to renew the expanded Child Tax Credit if they have full control of the government in 2025. The expanded CTC’s disappearance would be disastrous for the millions of people who have been and will be helped by the benefit. By putting the Child Tax Credit on track to expire when Republicans have a good chance of controlling both Congress and the White House, Democrats are essentially placing a massive gamble with the lives of millions of poor children and hoping it works out.
This is a mistake. Instead of setting the expanded CTC to expire, Democrats should achieve the same cost-savings by making the CTC permanent but more sharply means-testing the program. This change would help protect the huge reductions in child poverty achieved in the last year, while also setting the stage for further CTC expansion in the longer term. Because of the structure of congressional veto points, a CTC that's made permanent now would be much more likely to survive Republican-controlled government than a CTC that's set to automatically expire.
Also, given that Republican objections to the CTC center on the supposedly undeserved benefits it gives to the poorest families, a bipartisan deal to expand the CTC for upper-middle-class families may still be possible in the future. Unlike on many policy issues, working with Republicans is actually plausible here. Republican Senators Marco Rubio, Mitt Romney, and Mike Lee all support increasing the Child Tax Credit for working-class and middle-class families — just not for the poor. Indeed, the last time Republicans controlled Congress, they used that power to pass a substantial expansion of the Child Tax Credit for middle-class families as part of the Tax Cuts and Jobs Act.
Means-testing also makes the CTC more popular
Over the last year, Blue Rose Research — where both of us work — has conducted issue polling on nearly 200 issues, including the Child Tax Credit. Oftentimes, advocacy groups publish what amount to push polls, designed to show that every progressive issue position under the sun enjoys overwhelming support. Our polling is designed differently — it puts ideas through something resembling a real-world test to see which are genuinely compelling. That means using partisan frames: each question is structured as “Some Democrats in Congress have proposed Policy X, which would do Y and Z.”
Issue polling is also plagued by what’s known as acquiescence bias. This is the term for the tendency of survey respondents to just answer “yes” to any question, leading to overestimates of support for any given issue. Our polling mitigates this by providing a Democratic argument for a policy, and a Republican criticism. Our respondents are then asked “which party do you agree with more,” rather than “do you support this issue.”
Given how much Democrats talk publicly about the Child Tax Credit expansion, you might assume that it’s one of their most popular issues (their actual most popular idea, also in the mix in reconciliation, is having Medicare negotiate prescription drug prices). But our recent polling shows that this isn’t true. When tested with its current income eligibility threshold of $150,000, the CTC is underwater politically.
However, as the income threshold declines, it becomes more and more popular, eventually ending up with net support of roughly 9%.
Overall, the difference between 48.9% support and 54.4% support may not seem that large. But in the context of our polling, where support for issues tends to cluster around underlying partisanship, it’s actually fairly significant.
The CTC with no income threshold — meaning it’s not means-tested at all — ranks in the 21st percentile of the nearly 200 issues Blue Rose Research has polled. Targeting the expanded CTC only to households making less than $50,000, however, ranks in the 60th percentile. That’s the difference between an issue Democrats will face attacks on and one they can feel comfortable talking about.
In general, voters like to receive benefits themselves. But when thinking about benefits for other people, they often prefer that social spending be targeted to those who need it most. Our data shows that among parents, losing eligibility for the child benefit decreases support by 5.3% on average, a major shift. However, as we polled the CTC with lower and lower income thresholds, the drop-off in support among affected parents was more than outweighed by the views of the broader electorate, which was more supportive of the Child Tax Credit the more targeted it was to the poor. It’s not that appeals to parents’ material interests don’t change their views — it’s that there aren’t enough parents of young children for their preferences to carry the day in terms of public opinion.
This is a hard choice, but means-testing is the best path forward
Policy-wise, means-testing the CTC creates substantial administrative burdens and limits the efficacy of the underlying program. A truly universal child benefit would be better policy, and in a world with no political constraints, both of us would support that. But, again, Democrats are already proposing a means-tested program that has this feature. Making it more narrowly targeted doesn’t make the administrative burden any worse, but it does make the policy both more popular and considerably cheaper — potentially making a permanent CTC expansion legislatively viable.
Given a choice between a more targeted benefit that is guaranteed to be around for poor families for years to come, versus a broader benefit with a significant chance of disappearing in just four years, it makes more policy sense to focus on protecting the poorest children.
And as the data above shows, it makes more political sense as well. Democrats should reduce the income threshold for the Child Tax Credit and make it permanent, rather than setting up the policy to expire under the faulty assumption that they’ll have the power to preserve it in the future.