Hello my fellow nerds and amateur wonks. Is it weird I get excited when I open my email and see a Slow Boring post about child allowance?

First... so recap of my life history... stationed in Europe for 12-years. While there, married an English girl, lived in German and had 2-kids. Because she was a EU citizen, we qualified for kindergeld, aka child money. This was in the last 90s early 00s.

It was awesome. I think it was around $200 to 300 a month per child (I am sure one of you nerds will fact check me). As a young Sgt with two kids, I qualified for the EIC. The kindergeld was invaluable in paying for some of the necessities. I had a lot less financial stress than some of my peers with kids who didn't qualify for the money.

At the time, I remember thinking that this is a "progressive" idea that conservatives should totally steal.

After all, I think there has been studies that show parents tend to become more conservative in their views.

In my various pro-kid twitter wars, singles or those who plan to not have children, tend to argue that why should they pay taxes to support children. I always counter with the argument that its my 5 children who will be paying the taxes and providing the services of taking care of the them when they reach an advance age.

Having kids is tough... man, me and my wife talk shit about them every night. They make terrible mistakes. They are terribly naïve. (I'm just glad that I was the exception and was always right when I was that age ;-)

It's probably cliché to say, but humankinds whole purpose is to reproduce. Even if people choose not to have kids (cowards), I think we all like to think we try and make the world a better place, for future generations.

Also, lately I have got interested in the subject of homelessness among families. We talk about living wages, but even at $15 an hour, a family of 2 or 3 is still going to struggle.

Anyway, sorry I'm not smarter... my kids did it to me.

Have a great day!

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When they limited SALT in TCJA, I was pretty upset. My family pays well more than $10,000 in state taxes in New Jersey, and we also pay an awful lot of mortgage interest. Being relatively high income, I figured I was kind of getting screwed.

But we weren't. We aren't even itemizers anymore. The increase in the standard deduction was massive. I think Democratic politicians haven't grappled with the way the increase in the standard deduction really changed the constituencies for various tax deductions--SALT very much included.

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Making Biden's plan permanent WOULD be great... but I struggle to understand why people discuss this possibility without mentioning that it won't happen. If it doesn't happen in this stimulus package, which it won't (since they don't seem to be moving from the 1-year effect), then their only opportunity to make that happen would be via another reconciliation in 2022. To be permanent, it will have to be fully financed -- i.e., it will have to raise taxes, presumably on the wealthy and upper-middle class (in the best case scenario). Will moderate Dems want to pass a bill that raises taxes to fund welfare benefits right before the midterms? I'm skeptical. But even beyond that, the party is going to develop a very, very long list of policy priorities that can only happen via a 2022 reconciliation measure, and many of those will also have to be funded via tax increases in order to be permanent. Does CTC expansion make the cut? The very fact that it's not being made permanent *in this bill* suggests probably not.

Once 2023 rolls around, there's very little chance Dems will still control both houses of Congress, meaning any CTC plan is dead in the water. The Romney plan is ideal because it can be slotted into this reconciliation package and immediately become a permanent feature of the U.S. welfare landscape, giving Biden (and Mitt) a legacy of massive reductions in child poverty.

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Good column. I tip my hat to Romney for paying this through elimination of SALT. In addition to being regressive and disproportionately beneficial to wealthy blue staters like myself, SALT has a profoundly deleterious impact on accountability of local government. One will care less about his/her local government's competence and value delivered, if there is no cost, because of SALT deductions.

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So far in these comments we've had "parents will just quit their jobs and raise 6 kids on $15,000 a year" and "$15,000 a year is so little money that it's just an insidious waste of time".

It's truly wild.

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Could Romney's proposal boil down to: Increase taxes on the rich to pay for something that disproportionately benefits poor children, while simplifying the benefit system overall. Seems great to me. For progressives to oppose it seems like siding with the social-welfare bureaucracy over its intended beneficiaries.

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I'm going to talk my book a little and defend the SALT deduction. On a basic fairness level, the idea of paying taxes on taxes is just unjust. What the SALT does is favor local taxes over federal taxes. This does encourage states to provide better and more services to their citizens. It incentivizes more local control which conservatives should be in favor of if they weren't solely focused on slashing tax burden wherever it occurs.

And while it hits blue states the hardest (in fact it seems specifically designed to punish blue states almost exclusively) it doesn't hit everybody hardest. For one, the $10k cap is per household, not per taxpayer, so it affects married couples the hardest. A divorced couple could get $20k in total deductions on two houses which makes it disguised marriage tax.

Also, since it targets taxes but does not limit mortgage interest deduction, the household living in a paid-off property is hurt more than someone in a lower cost property but with a large mortgage. This affects senior citizens who have lived a long time in areas which have seen massive property appreciation over the course of their ownership to the point it could price them out of the neighborhood on tax burden alone.

All of this can be offset by other policy options but that is just piling complexity on complexity.

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Based on relative fertility rates it seems the child allowance would, on average, disproportionately benefit people in red states compared to people in blue states:


Moreover, it looks like the cost of living (and presumably of raising children) is lower in red states than in blue states, making the allowance -- which is the same nationally -- go a lot further for folks in the former:


Finally, incomes also seem lower in red states compared to blue states, making it more likely that families with children will qualify:


More Republicans should get on board!

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One part of these discussions that always annoys me is the failure to distinguish between jobs and useful, socially beneficial activity. If I take a job that pays $40,000 and cut wages to the point that it only pays $20,000, I can hire two people and I've doubled the number of jobs. I'm a jobs creator. But the fact is that shitty jobs keep people from doing things like paying attention to their children, helping out their neighbors, and spending more time advancing their skills. Americans are working more hours than in years past and more by far than folks in other countries and, as a society, we are paying a heavy price. Isabel Sawhill, Richard Reeves and others at Brookings have done a lot of work on the middle class time squeeze. https://www.brookings.edu/wp-content/uploads/2020/08/The-Middle-Class-Time-Squeeze_08.18.2020.pdf

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I've been waiting days for Matt's twitter beef with Scott Winship to finally make Slow Boring. Too much of conservative economic theory is faith based. It's all seen as some sort of ecumenical argument between Keynsians and Austrians or salt water schools versus fresh water schools. It is theology with graphs. Only Winship doesn't even bother with the graphs.

For a soft pseudo-science, economics can get extremely dorky with its profusion of complicated mathematical models. Even having a surface level knowledge of obscure economic jargon is what lets charlatans like Paul Ryan flourish. Ryan managed to parlay an undergrad degree in Econ from Ohio's third most prestigious university into a reputation as a serious wonk. A development I still blame on the credulity of Vox cofounder Ezra Klein. That serious real experts like Nobel-prize winner Paul Krugman have to waste their time refuting the neo-Randian nonsense conservatives spout without a scintilla of evidence is embarrassing.

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I think that liberals and progressives, in their enthusiasm for the principle of Romney’s plan, ignore the incentive effects of having a large number of children in a family eligible for benefits.

Cap it at six children, and you’ll please religious Mormon, Christian, and Orthodox Jewish voters, but you’ll also have created a strong incentive for some parents to effectively live off the government benefits of their children. Given the motivations of parents who would do that, it is likely that many of these children will not be raised with care, and will become a problem to society when they grow up. Poverty will decline on paper, but some of the effects of poverty will be magnified.

I would say: cap it at three. This would make it possible for parents to have more children that they want and can raise with care, without the bad incentives, because you couldn’t live off the benefits of only three children. It will incentivize having kids at greater than the replacement rate, without creating social and religious divisions that would torpedo and stunt the program from the cradle.

It’s a detail that matters. This incentive effect was an issue with the old kind of welfare (going beyond AFDC) which resulted in the Scrooge-like moralistic system that we have today. Ignore this history, and you’ll bring back those very problems that we were trying to solve.

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Interesting segueway to SALT at the end there. One thing I wish wonks discussed more is *state* welfare politics/tax-credit schemes. Like, when you add both federal *and* state support, how much more does a poor California family receive from the gov’t than a poor Texas family? Because I could see an argument that, if you axe SALT, you (likely) reduce progressive-state welfare programs. And so, in turn, when computing the net benefit of the Romney plan you should include the difference between the new increased federal benefit *and* any resulting *decreased* state benefit. (At least in blue states.)

Do you think this kind of reasoning makes sense? Or is the amount of fed money so overwhelming as compared to even the most generous state schemes, that it makes no difference to poor families if the fed hand giveth and the state hand taketh away?

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A great and important feature of this plan: it’s simple and understandable. In this low-trust era, the impact of easy-to-understand is huge. I barely understand the various existing tax programs Matt outlined and I’ve spent time trying. I’d likely get it wrong trying to explain to someone what’s available and what not. This, I could explain on a napkin to anyone in 60 seconds flat.

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Why does no one ever mention the reason for the SALT deduction? Isn't there supposed to be a concept that income taxes are based on net and not gross income. While property taxes reflect individual's decisions about the value of the houses people chose to live in, local income taxes do not.

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Thoughtful article. Using Matt's forecasting principle I am 70 percent if Romney's plan were to get a vote in the Senate, with little or no alterations it would get more Republican votes than Democratic votes. On the left end of the spectrum, eliminating TANF, even though it is less generous than AFDIC, will be anathema. More moderate members of the Democratic Party, especially in states where Dems now rely on high-income suburbanites, will find eliminating the SALT cap to be toxic.

I don't think Romney's plan was just a "own the libs" trolling, but I can't see Dems going near those pay-fors because it is toxic to their constituencies, even if net-net, the distribution is progressive, and not regressive.

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This post depressed me because it's a well-reasoned and well-argued exploration of a vital issue in our national life and it was dropped into the policy desert that is and will continue to be that national life for some time.

The dynamic of that time is: an anti-policy Republican party all of whose energy is directed at -- well, I'm not quite sure what it's directed at; a razor-thin margin between the parties which means that marginal changes in electoral outcomes drive huge swings in political power; a Democratic party bursting with interesting ideas and debates none of which matter except to the extent that Joe Manchin and the Senate parliamentarian agree with them.

I think it's great that Matt is tilling the policy soil for that blessed day when the heavens open up, the rain cascades down, and grasses and flowers flourish on the valley floor. I admire his perseverance. I couldn't do it.

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