The Bourgeois Equality of a Universal Child Allowance

Editor's Note: In the following essay, which is the second in our symposium on family policy, Samuel Hammond of the Niskanen Center presents his case for a universal child allowance. 

The United States has the highest post-tax and transfer child poverty rate of any country in the developed world, and for a rather straightforward reason: our relative lack of spending on children and families. Despite being the norm internationally, the U.S. has never had a universal cash transfer for children or families, also known as a child allowance. Instead, we have historically relied on a two-tiered approach involving means-tested public assistance for the poorest families and children, and a simple, per-child tax credit for just about everyone else. 

Conservatives resist viewing poverty as simply the lack of income, and rightly so. Self-sufficiency is an important goal, and being poor and merely being “broke” are clearly quite different phenomena. Nevertheless, just because poverty is not solely defined by a lack of income does not mean it isn’t about that as well. That is particularly true of child poverty, given the basic arithmetic of trying to support one or more dependents on a wage set by the market rather than on the basis of need. As a result, having children is itself a risk factor for falling into poverty—and not just in terms of income.

At 22.9% of all “poverty spells,” the introduction of a new child to the family is the third leading reason women report turning to traditional welfare programs. Divorced and never-married mothers are particularly vulnerable in this respect, including those who may have otherwise considered terminating their pregnancy, giving rise to the so-called “feminization of poverty.” In lieu of a simple child allowance, many cash-strapped moms are thus forced to turn to more bureaucratic alternatives. Navigating the morass of Great Society-era anti-poverty programs can itself become a full-time job. As a result, a family that starts off as merely income poor risks becoming socialized into “poverty” in the richer sense of the term, putting children at a much higher risk of becoming dependent as adults.

Vigilant to the moral hazards of government intervention, conservatives have long suspected that the growth of the welfare state is itself to blame for the rise in single motherhood. Yet this is a bit like inferring hospitals are the cause of sickness because they’re full of sick people. The provision of health insurance encourages individuals to take risks they otherwise wouldn’t, to be sure, but that does not mean moral hazards are always the dominant effect. Similarly, the rise in non-marital childbirth in the second half of the 20th century was observed worldwide. Whatever effect welfare spending has had on the margin, the decline in marriage and the rise in illegitimacy reflects deeper cultural and socioeconomic trends, including rising female educational and labor market opportunities, that resist simple just-so stories.

Conservatives should nonetheless insist that the social safety net be designed to lean against dependency and family breakdown to the maximum extent possible. The old Aid to Families with Dependent Children (AFDC) program, for example, trapped many single mothers into poverty by rapidly clawing back benefits with earnings, in some cases creating an implied marginal tax rate of 100 percent. The 1996 welfare reform successfully reduced these work disincentives by imposing work requirements and time-limiting benefits. 

A child allowance simply takes this a step further. As a universal benefit, a child allowance is the canonical way to eliminate the work disincentives created by means-test programs outright. Indeed, far from disincentivizing work, after Canada introduced its child allowance in 2006, single and married moms alike worked more.

Leave Paternalism to Parents

Supporting low income and middle-class families through a common program can also help combat poverty in the longer run. Universal benefits engender greater social trust in the recipient, helping to instill a kind of bourgeois equality, or equal dignity, between the poor and not-poor. Conversely, our current approach of a child tax credit for middle-class families and highly means-tested and in-kind programs for poor families not only creates benefit cliffs, but also gives rise to an entirely parallel set of social institutions—welfare bureaucracies that poor families must become experts in to navigate, which can thus take on a life of their own. It is not a stretch to think that this bifurcated approach to social protection has contributed to the differential strife facing working-class families, in particular. 

A child allowance by nature avoids the bureaucracy and paternalism of the U.S. regulatory state, maximizing parental choice and minimizing the risk of special interest capture. With the right calibration, a child allowance would even enable the elimination of many well-known marriage penalties, including in programs like the Earned Income Tax Credit (EITC). Nominally an earnings subsidy, the credit also doubles as a sizable child benefit for unmarried parents. Were the credit’s per-child variation rolled into a child allowance, the existing EITC could be replaced with a smaller, per-worker wage credit that doesn’t penalize married households for filing their taxes jointly. In fact, a child allowance would be a major step toward allowing the “head of household” tax filing status (a source of many preferences for single or never-married parents) to be abolished altogether.

As in the case of benefit cliffs, the best way to eliminate perverse incentives from welfare programs is often not to spend less, but to spend more and in smarter ways. Thus, while far from a sufficient solution to either child poverty or family instability, a child allowance is at the very least a necessary one—and long overdue at that.

Samuel Hammond (@hamandcheese) is the director of Poverty and Welfare Policy for the Niskanen Center, and the author of The Conservative Case for a Child Allowance.