The Conservative Case for Welfare

In the third COVID-19 stimulus package — the American Rescue Plan Act (ARPA) — which was passed in the U.S. Congress without a single Republican vote, the Child Tax Credit (CTC) for tax year 2020 was increased from $2,000 per child, with $1,400 of this being refundable, to a fully refundable $3,000 per qualifying child (aged 6-17) or $3,600 per qualifying child (younger than 6). Additionally, eligible parents will receive advance payments of the credit for the last six months of this year. Then, as part of his American Families Plan, President Biden proposed extending the $3,000 CTC 2025 and making it permanently fully refundable.

These plans are supposed to lift millions of American children out of poverty. The White House and researchers at Columbia University claim that the ARPA will cut the child poverty rate in half. Yet, it is hard to imagine that millions of American children live in poverty when their parents have access to food stamps, free school breakfasts and lunches, Temporary Assistance to Needy Families (TANF), Women, Infants, and Children (WIC), Medicaid, Head Start, the Low Income Home Energy Assistance Program (LIHEAP), the Children’s Health Insurance Program (CHIP), and Section 8 rent subsidies.

Not to be outdone by the Democrats, Republican senator Mitt Romney has proposed the Family Security Act. It would “provide a monthly cash benefit for families, amounting to $350 a month for each young child, and $250 a month for each school-aged child.” It will supposedly cut “child poverty by up to one-third in America.” Parents would be eligible to apply to receive the benefit four months prior to a child’s due date. The maximum monthly payment available to parents would be $1,250 per family. This is accomplished by reducing the benefit by $50 for every $1,000 above the current CTC income phaseout thresholds of $200,000 for single-filers and $400,000 for joint-filers. The monthly payments would be administered by the Social Security Administration (SSA). The benefit would be “paid for” by consolidating “overlapping and often duplicative federal policies into direct support for families” and by eliminating the State and Local Tax Deduction (SALT).

Two conservatives at the Niskanen Center like both President Biden’s advance payments of the CTC and Sen. Romney’s plan because they favor the federal government giving out a monthly child allowance.

Samuel Hammond is the Director of Poverty and Welfare Policy at the Niskanen Center. His research focuses on the effectiveness of cash transfers in alleviating poverty and on how free markets can be complemented by robust systems of social insurance.

Robert Orr is a poverty and welfare policy associate at the Niskanen Center. His research focuses on welfare, health care, and economic development.

Named after William A. Niskanen (1933-2011), an economist who studied under Milton Friedman at the University of Chicago and worked in government, industry, and academia before settling at the Cato Institute (a D.C. libertarian think tank), the Niskanen Center’s stated mission is:

The Niskanen Center’s approach to markets and the social safety net blends ideas from political traditions that are often seen as antagonistic. From classical liberalism we take the idea that a commercial, cosmopolitan social order is unrivaled at promoting tolerance, innovation, cooperation, and prosperity. Accordingly, we believe a “presumption of liberty” ought to apply to basic economic activity. At the same time, modern liberal thought has established that justice requires robust social insurance systems that guarantee to all the dignity and autonomy of broadly shared prosperity. Our view is that these two traditions were never in tension, and indeed combine to form a more coherent theory of a free and just society.

Hammond and Orr have recently authored a 30-page report titled “The Conservative Case for a Child Allowance.” They say in their introduction:

This paper is called “The Conservative Case for a Child Allowance” for a reason. We believe a child allowance checks all the boxes of genuinely conservative public policy, particularly if designed with conservative values like marriage, life, religious pluralism, and fiscal rectitude front-of-mind. Those who instead define “conservatism” to mean dogmatic opposition to anything that resembles an “entitlement,” even when fully paid for, are by definition beyond the reach of our argument. While we share the fundamentally conservative commitment to limited government, we see that as better embodied by a concern for the qualitative rather than quantitative aspects of the modern, democratic welfare state.

The authors lament the growth of child poverty in the United States and the concomitant family instability:

The United States has the highest post-tax-and-transfer child poverty rate of any country in the developed world.

At the same time, the institution of American family has never looked weaker. Family formation and marriage rates have declined substantially over the last four decade.

In their report they “argue that the U.S. should enact a universal child allowance as the appropriate and philosophically conservative policy response to these twin crises.” A child allowance is “long overdue,” and “with careful design” it “would also create the conditions necessary to consolidate a variety of less effective policies and programs, including those known to encourage dependency and penalize marriage.”

Hammond and Orr explain that:

The United States has never had a universal cash transfer for children or families. Instead, we have historically relied on a two-tiered approach: means-tested social assistance for the poorest families and children, and a simple, per-child tax credit for just about everyone else.

The United States spends only 0.7 percent of GDP on family social expenditures, of which the share devoted to cash benefits, 0.1 percent of GDP, is the lowest of any country in the Organization for Economic Cooperation and Development.

But then they acknowledge that “tax credits are not counted in the OECD’s measure of family social expenditures, and as such America’s effective spending on children and families is likely understated.”

The authors begin their report with a glowing endorsement and analysis of Sen. Romney’s Family Security Act. His “proposal is precisely the sort of ‘child allowance with conservative characteristics’ that we have in mind.” Hammond and Orr envision a child allowance that replaces other welfare programs, including TANF and WIC, and eliminates the CTC and the Child and Dependent Care Tax Credit (CDCTC). Funny, though, they never get around to telling us just how much of a child allowance they propose. Along the way, though, they do manage to skewer libertarians:

Conservatives are often portrayed in the media as unsympathetic to the poor, or ideologically committed to shrinking the size of government for its own sake. While there are clearly some libertarians for whom this description is apt, it is a grossly unfair caricature of conservatives’ concerns with the welfare state as a whole.

On this charge, see my article “Do Libertarians Hate the Poor?”

So, what are we to make of Hammond and Orr’s child allowance?

Conservatives aren’t libertarians, not by a long shot. But conservatives generally claim to believe in the Constitution, limited government, federalism, low taxes, free markets, free enterprise, the private sector, and family values. The federal government’s handing out cash to families is anathema to all of these things.

Hammond and Orr’s child allowance is simply another income transfer program done for the sake of “the children.” Just don’t call it that, as the authors’ explain: “The proper way to think of a child allowance is not as a vertical transfer from rich to poor, but as a horizontal transfer, first from the childless to those with children, and second from families at their peak earning potential to families that are just starting out.”

There is nothing “conservative” about a child allowance or any other welfare program. Low-income parents already receive a child allowance in the form of welfare, food stamps, refundable tax credits, Medicaid, rent and energy subsidies, and free public education.

Welfare programs don’t need to be consolidated into a child allowance welfare program, they need to be eliminated.

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