‘Child Allowances’ Revive Welfare as We Knew It

Bill Clinton campaigned for president in 1992 on a pledge to “end welfare as we know it,” arguing that a system of government checks for low-income adults with children had become “a way of life.” Millions were trapped on benefits, and one study found the average welfare recipient spent an astonishing 13 years on the rolls. Clinton eventually signed a Republican-authored welfare reform law that took him at his word: It literally ended the former Aid to Families with Dependent Children (AFDC) welfare program, replacing it with a new program of time-limited benefits that expected adult recipients to work or participate in training. But despite the success of that 1996 law in promoting work and reducing poverty, Congress is now considering reviving monthly government checks payable regardless of whether parents are working — effectively reviving welfare as we knew it. 

Of course, no politician would propose literally reviving the failed AFDC program. Instead, key Democrats propose expanding the current child tax credit (CTC) — which is now reserved for workers — so it provides AFDC-like benefits. Here’s how Politico recently described their plan, which calls for ending the CTC’s connection to work and converting it into a “child allowance”:

As part of their latest coronavirus stimulus plan, Democrats are drafting a proposal to expand and transform a long-standing tax credit for children — normally taken once a year at tax time — into a monthly payment. They aim to send $250 each month per child — $300 for kids under the age of six — in what would be the country’s first-ever child allowance.

…They also want a big increase in how much low earners can get out of the credit. It currently maxes out at $2,000 per child. But the poor tend to get a fraction of that because the provision — designed to encourage work — is pegged to how much people make, up to certain limits…. Democrats would increase the maximum credit to $3,000 per child, with an extra $600 for kids under the age of six. They also want to scrap the work requirement so people could receive the entire break even if they have no income.

The core features of the child allowance — significant monthly checks to millions of low-income parents, no requirement they work to qualify, and no time limits on how long benefits are paid — sound oddly familiar. That’s because those features also characterized the former AFDC program, which the legislation Clinton signed replaced with pro-work reforms.  

In fact, the child allowance would be even bigger than former AFDC checks in many states. The table below compares the maximum inflation-adjusted AFDC payment for a single mother and two children in 1996 with the proposed $600 per month child allowance for such a household with two children under age six. It shows that in 21 states the child allowance would be greater than former maximum AFDC checks.

Comparison of Maximum AFDC Payment and Proposed Child Allowance for a Household with Two Children under Age 6

Source: House Ways and Means Committee, 1996 Green Book.

¹ In these States part of the AFDC payment was designated as energy aid and disregarded in calculating food stamp benefits. Illinois disregarded $30, Kansas $96, Maryland $73, New Jersey $42, New York $89, Ohio $24, Oregon $199, Rhode Island $216, and Washington $145 (all in 2020 dollars).

² Reflects value for Wayne County.

³ Reflects value for New York City.

The relative cost and de facto “caseload” of the child allowance would far exceed AFDC levels, too. The Tax Policy Center estimates a third of the proposal’s projected $120 billion annual cost would flow to the lowest-income households, including those in which parents don’t work. That’s almost double the inflation-adjusted $22 billion in federal AFDC funds spent in 1996. Similarly, an estimated 23 million children currently qualify for no or a partial CTC because their parents don’t work or earn too little to claim the full credit. All would qualify for the full child allowance, since eligibility would be unconnected to parents’ work — also well more than double the 9.6 million children on AFDC at its peak. Their households also would qualify for food, health, housing, and other benefits already available when parents don’t work.

Advocates of the child allowance, including most Democrats and even some Republicans, argue it would reduce child poverty, as any proposal that directs more checks to low-income families will appear to do. But if making families less poor on paper were the sole goal of social policy, lawmakers a generation ago could have simply kept the AFDC program and increased its checks and number of recipients. They didn’t, opting instead for reforms that encouraged and rewarded work — including the creation of the work-connected CTC in 1997 — so families can better support themselves in the long run. Those reforms increased work and earnings and reduced child poverty and welfare dependence. Yet proponents of the child allowance now are gambling that effectively reviving AFDC under a new name won’t also revive the rejection of work and acceptance of government benefits as a way of life that Bill Clinton said characterized the failed AFDC program — and ultimately led to its repeal.