The United States has a vast array of government programs that are meant to alleviate poverty, from food stamps to the Low Income Home Energy Assistance Program. Yet these efforts don’t actually solve the problem they address. In terms of poverty, the United States ranks at or near the worst among developed countries.
One reason for that failure is that we keep avoiding the obvious solution: If people are poor, give them money. But Sen. Mitt Romney, R-Utah, is not avoiding that solution any longer.
He has unveiled a major proposal to provide $350 per month ($4,200 per year) to every child in America up to the age of 6, as well as $250 per month ($3,000 per year) to every child age 6 to 17. Each family would be limited to a maximum of $1,250 per month ($15,000 per year). The program would be a model of simplicity, with the Social Security Administration mailing out checks every month. That’s a big difference from the Earned Income Tax Credit, which typically provides cash only in one lump sum after the tax year ends.
“This plan,” Romney says, “would immediately lift nearly three million children out of poverty, while providing a bridge to the middle class.” There is also an unexpected bonus: Because it would trim other programs and repeal the federal deduction for state and local taxes, it would have a net budgetary cost of zero.
To hardline conservatives, this proposal may sound like a left-wing dream, vastly expanding dependence on federal handouts. But to anyone who thinks we have a collective responsibility to prevent serious hardship among innocent people, particularly those too young to fend for themselves, it represents a giant step toward a more humane social welfare system that also advances sound conservative principles.
The idea of fighting poverty with direct cash has an intellectual pedigree that notably includes Nobel laureate economist Milton Friedman, who advised Republican presidents and was revered on the right. He proposed payments through a “negative income tax.”
Romney’s plan has the same virtue. It mirrors a proposal by Democratic Sens. Michael Bennet of Colorado and Sherrod Brown of Ohio that enjoys broad support among congressional Democrats. A report from the centrist Niskanen Center in Washington, “The Conservative Case for a Child Allowance,” concluded that Romney’s plan would reduce child poverty by one-third. Ernie Tedeschi, a Treasury economist in the Obama administration, told the Washington Post it would be “among the most pro-family, anti-poverty policies in a generation.”
How would it help families? It would avoid the penalty for marriage that some programs impose. The child allowance would give parents more freedom to decide whether to pay for child care or keep one parent at home. It would replace the current Child and Dependent Care Tax Credit, which does little or nothing for parents with low incomes but a lot for those with high incomes.
Direct payments also get around another problem with welfare programs — that beneficiaries lose benefits when they get jobs, paying a penalty for working. A child allowance that goes to everyone would remove that disincentive.
By helping parents afford whatever child care arrangements they prefer, it would ease a painful trade-off that falls disproportionately on mothers. It would make it easier for both parents to work outside the home if they want — or for either parent to do the unpaid work of childrearing full time. When Canada established a similar program, the Niskanen report notes, “single and married moms alike worked more.”