As Democrats negotiate a multitrillion-dollar budget proposal that would fulfill President Biden’s domestic agenda and remake the country’s social safety net, new data shows that COVID-19 relief programs helped cut the nation’s poverty rate even amid the pandemic-related economic downturn.
On Tuesday, the U.S. Census Bureau reported that the poverty rate fell nearly 3 percent from 2019 to 2020 after accounting for government aid, which came in the form of pandemic relief bills passed by Congress. Per the bureau, expanded unemployment payments prevented 5.5 million people from falling into poverty, while direct stimulus payments moved 11.7 million people out of poverty. That analysis followed a Department of Agriculture report last week stating that the payments helped keep Americans from slipping into food insecurity.
The new data comes as Democrats in Congress debate how expansive a budget deal should be. It’s especially noteworthy because Biden’s initial proposal would constitute a complete overhaul of the country’s social safety net, funding an expansion in care work and pre-K education, while raising taxes on the wealthiest Americans and corporations.
Progressives in the party initially proposed a $6 trillion budget plan, but it was negotiated down to $3.5 trillion in the Senate Budget Committee, which is chaired by the nation’s leading progressive, Sen. Bernie Sanders, I-Vt. Moderate Democrats balked at the $3.5 trillion price tag, with one of the criticisms being that child tax credit eligibility is too wide. Without all 50 Democratic senators in sync, the budget deal cannot pass because of united GOP opposition.
One tool the government has to help fight poverty is the child tax credit, which allows recipients to subtract thousands of dollars from the income taxes they owe the federal government. As part of the American Rescue Plan, which was passed in March, the taxes are fully refundable, meaning that parents will be paid fully even if their tax bill reaches zero, which will help the lowest-income families. Only about $1,400 was refundable under the old regulations.
The American Rescue Plan also expanded the tax credit to parents, who will receive $3,600 for each child age 6 and under and $3,000 per child ages 6 to 17. (Previously, the tax credit was $2,000 for ages 16 and under and $500 for age 17.) The increases would begin to phase out for heads of households making $112,500 and married couples making $150,000. The plan also raises tax credits to cover the care of children and dependents.
While this policy didn’t go into effect until July and did not affect the new Census Bureau analysis, there are already reports that its implementation has cut into childhood poverty.
Last month, the Center on Poverty & Social Policy at Columbia University found that the addition of the child tax credit payments in July pulled 3 million children out of poverty, compared with June. Because not everyone who is eligible for the credit is receiving it — an issue the Internal Revenue Service and local groups are working to address — the analysis estimated the credit would reduce child poverty by 40 percent, adding that “the greatest gains [would] be realized for Black and Latino children."
But if the credit is not extended in the Democrats’ budget deal, the size of payments, how they're delivered and eligibility will all revert. As Democrats hammer out the details with an eye on pushing the benefits through 2025, the moderate Sen. Joe Manchin, D-W.Va., has said he wants to add a work or education requirement to the credits.
“I support child tax credits. I sure am trying to help the children,” Manchin said in an interview with CNN on Sunday. “There’s no work requirements whatsoever. There’s no education requirements whatsoever for better skill sets. Don’t you think, if we’re going to help the children, that the people should make some effort?”
Manchin’s comments, which he reiterated on Tuesday in an interview with Business Insider, echo those of Republicans who are against the program. Advocates for the expanded child tax credits argue that the process of raising children itself is work and that increasing the amount of paperwork required to access benefits results in cutting them off from many who need them the most.
The Washington Post reported Wednesday morning that Biden was set to meet separately with both Manchin and Sen. Kyrsten Sinema, D-Ariz., another moderate who has said she would not vote for the full $3.5 trillion package. Biden needs both their votes, as well as the votes of progressives like Sanders, for the plan to have a chance at passing.
If the budget deal falls apart, it could also potentially endanger a bipartisan infrastructure plan passed by the Senate last month, as a number of progressive House Democrats have said they will not vote for the smaller bipartisan deal unless the budget deal has also passed.
While Manchin has called for a “strategic pause” on the multitrillion-dollar reconciliation bill, Senate Majority Leader Chuck Schumer said the package was “full speed ahead” last week. The pressure is now on party leadership — including Biden, Schumer and House Speaker Nancy Pelosi — to keep as many of the original proposals in the law without losing the votes needed to pass it with the margin thin in the House and nonexistent in the Senate.
“Where would you cut?” Pelosi said at a press conference last week. “Childcare? Family medical leave paid for? Universal pre-K? Home health care? So important.”
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