Expanding the Child Tax Credit Makes Economic Sense
Spending $100 billion over the next two years to bring 2.1 million children out of poverty and to grow the US economy by as much as $325 billion annually is an incredible deal.
We can do better for our children.
Photographer: Francois Picard/AFP via Getty Images
While US lawmakers have a tentative agreement to avert a US government shutdown on Jan. 20, Congressional leaders are reported to be close to a separate deal that would restore President Joe Biden’s 2021 expansion of the child tax credit in exchange for bringing back a pair of deductions for business investment. Although such an agreement would be expected to add at least $100 billion to the budget deficit over the next two years, both sides say they're confident they can limit the cost to $70 billion.
I am less confident, but the core elements of this deal are good and the House and Senate should pass it even if the hit to the budget is $100 billion. That might sound strange given the dire fiscal straits the US is in, but not all deficit increases are created equal. The two halves of this deal provide the biggest bang for the buck - in terms of reducing poverty and growing the economy - on offer in the world of tax policy. Biden’s child tax credit expansion was in place for just one year, but in that one year it helped slash child poverty to a record low 5.2%.