Last week, the next chapter in the great American experiment with guaranteed income continued. Nearly every parent with a child in this country had a check deposited in their bank accounts, again. Don’t let the name deceive you, the Child Tax Credit is not just a simple tax credit. It is a no-strings-attached monthly allowance, a form of guaranteed income — just one that is targeted at our most undeniably deserving demographic, our kids.
And it has the potential to change the way Americans think about who deserves access to money and how we get back to work.
The CTC is also groundbreaking in its sheer scale and the speed of its effectiveness. It is expected to cut child poverty by nearly half this year — even as it helps middle class families save for college and pay for summer camp. And it will make a much-needed and disproportionate impact for those living in deep poverty, as well as Black, Hispanic, and Native American kids as a whole.
It’s an anti-poverty program that is wildly effective, and a middle class tax cut, all at once. As the recent analysis from the Urban Institute underscored, programs like stimulus checks and the CTC can dramatically slash poverty in a remarkably short period of time.
The first round of CTC payments made a huge difference to individual house households and to the economy overall. Retail sales in July grew to 10.9 percent, nearly quadruple the average growth in the month of July.
And since the CTC is a nearly universal benefit, it helps people in every community in this country: urban, rural, suburban, and everything in between. In a recent analysis the Niskanen Center found that when looking at states’ gross domestic product, rural states received the greatest relative benefit from the benefit.
The radical commonsense of these direct cash programs have a lot to teach us about how we can rebuild our economy. The organization I co-founded, the Economic Security Project has been in the business of uplifting these lessons. We’ve invested and partnered with local organizations and cities to learn from guaranteed income pilot programs.
But not everyone is so sure that all this direct cash is a good thing. Under the unfounded fear that cash on hand discourages people from taking jobs that help our economy run well, 26 states have rushed to end federal unemployment benefits this summer, ahead of their scheduled September expiration.
As we’re seeing, these actions haven’t spurred job searches and instead are likely just reducing household spending. Further, the most recent jobs report indicated strong gains in hiring, particularly in the leisure and hospitality sector, countering the notion of a labor shortage.
The last time the United States had a vested interest in getting women into the workforce, it invested in a version of federal universal child care. It was a short-lived effort that ended as men reentered after the conclusion of the Second World War but the women, who benefited from that program, who were given choice and flexibility from its implementation, protested. They demanded permanency.
As Eleanor Roosevelt wrote in its aftermath, “Many thought they were purely a war emergency measure. A few of us had an inkling that perhaps they were a need which was constantly with us, but one that we had neglected to face in the past.”
As American families continue to receive these payments and use them to help pay for essential needs or to save for their children’s college education, it is incumbent on Congress to not let the CTC expire.
The CTC found political will in a moment of a global crisis. Let’s make sure we learn some important lessons from COVID-19 and be better prepared for what comes next.
Natalie Foster is the co-chair and co-founder of the Economic Security Project, a network to support exploration and experimentation of a guaranteed income, and a senior fellow at the The Aspen Institute Future of Work Initiative.