When The CTC Hits

Hey all. Let’s hop to it.

Politics

It’s been a major week for Democrats in Washington. On Tuesday, Senate Majority Leader Chuck Schumer and the Democrats of the Senate Budget Committee announced a preliminary agreement on a topline number for the party’s reconciliation package: $3.5 trillion. That’s less than Sanders’ proposed $6 trillion, but it’s still enough to encompass an awful lot, including an expansion of Medicare to cover dental, vision, and hearing care, universal pre-K, two years of free community college, a civilian climate corps and a clean energy standard, components of immigration reform and components of the PRO Act. All of this is good. Much of it ⁠— particularly the immigration reform and the PRO Act parts ⁠— will likely be challenged on Byrd Rule grounds by the Senate Parliamentarian. And moderates are already trying to bargain down the package’s size and scope. Predictably, Manchin has said he’s ‘disturbed’ by suggestions that the package’s climate provisions might take us towards the elimination of fossil fuels; privately and anonymously, moderates in the House are already whining about its overall cost, despite plans to finance it with stepped up tax enforcement and tax hikes on the wealthy and corporations. All that said, the final package is still likely to be one of the most significant Democratic bills in generations.

One of its most transformative policies is, in a sense, already in progress. The package also extends the American Rescue Plan’s one-year expansion of the Child Tax Credit. I wrote about the CTC when the Rescue Plan passed back in March:

Under existing policy, CTC benefits are gradually phased in and out by income, which limits or eliminates the credit for the country’s poorest families—the fruit, in wonky policy design, of delirious, racist propaganda about welfare and work. This year, under the Rescue Plan, the CTC will have no phase-in, be distributed monthly, and have its maximum benefit expanded by up to 80 percent, from $2,000 per child to $3,600 for children under six or $3,000 for older children. Those changes are expected to cut child poverty by nearly half—and that’s before a separate expansion of the Earned Income Tax Credit, the unemployment supplement, and the stimulus checks are factored in.

This week, the first CTC payments started rolling out. The Washington Post’s Jeff Stein ⁠— always a must-follow and must-read⁠— on Thursday:

Alexis Figueroa, 36, of Philadelphia said she received the benefit on Wednesday, a day earlier than expected, after a local community tax support group helped her fill out her application. Figueroa is a single mother with no income support, aside from the occasional help of her children’s father, after she was cut off from Social Security disability payments.

She is planning to use the money to take her two children to the zoo. One of them, age 1, loves polar bears; the other, age 3, is particularly excited about seeing a tiger. It will be one of the few activities the family has been able to afford since the beginning of the pandemic.

“Emotionally, it was a relief,” Figueroa said about receiving the money. “It would be nice to take them to see the animals.”

It was hoped when the Rescue Plan passed that the expansion might be extended permanently in a future bill. The reconciliation package reportedly extends it until 2024. Astute readers will note that this is an election year. The Democrats are setting up a fuse to blow up a welfare program, confident either that the public’s desire for it will prevail in a contest that Republicans are structurally favored to win or that Republicans might be cajoled into preserving it even in the event of a Democratic loss. As risky as this particular strategy might be, there’s nothing wrong with buying votes with material policy change in principle, as New York’s Eric Levitz ⁠— another must-follow and must-read ⁠— wrote on Friday:

Electoral incentives surely pose genuine challenges for sound public policy. Advancing the general welfare does sometimes require policymakers to privilege long-term outcomes over short-term ones. And the imperative to win reelection every two or four or six years can make that task difficult, as our nation’s woefully insufficient response to climate change well illustrates.

Nevertheless, allowing technocrats to override popular passions, and manage the economy as economic elites see fit, tends to go poorly for non-elites. The era of central bank independence was one of stagnant wages, mediocre growth, and meteoric inequality. Today, few economists will defend the elite consensus in favor of deficit reduction circa 2011, a policy that would have further weakened the tepid post-2008 recovery (and which was contemporaneously justified by research findings that derived from an Excel error). Congress’s response to the COVID recession — to enact large, popular relief measures (a.k.a. to “buy votes”) — proved to be much more macroeconomically sound than anything “brave” entitlement reformers wished to do a decade earlier.

More macroeconomically sound, more popular, and more impactful. Let’s be clear: like the Rescue Plan, the reconciliation agreement represents several real steps forward for the Democratic Party and is another sign that Biden may be leaving behind a better and larger lasting legacy than his Democratic predecessor. If passed, millions of lives would be affected and even fundamentally changed for the better. But none of this puts the package beyond critique.

For starters, implementation matters. An estimated four million eligible children live in households the IRS doesn’t have information on file for, and the website co-built by tax filing near-monopoly Intuit for CTC sign-ups is a joke.

Ideally, as Matt Bruenig and Paul E. Williams wrote at the People’s Policy Project earlier this year, the program would be administered by the Social Security Administration, which both pays out monthly benefits already and keeps a registry of all American children, whether their parents owe and file taxes to the IRS or not. But there’s some path dependency at work here ⁠— beyond allowing for the utilization of the CTC’s existing infrastructure, keeping the program in the IRS’ hands also ties in with the administration’s case that the payments, which amount to a new progressive child allowance scheme, are actually, in Kamala Harris’ words this week, “the largest middle-class tax cut in generations.” This might seem like silly throwaway rhetoric, but as I wrote in my piece on the Rescue Plan, making the Democratic policy shift stick might partially depend on convincing the public that a policy shift has actually occurred. Framing a popular new welfare program as a tax cut only sustains the hold tax cuts and tax mechanisms have on the public’s policy imagination, and that’s a set of shackles progressive policymakers could do without.

It also shouldn’t be forgotten that the reconciliation package is a product of the party’s failure to move forward on another front. Despite a direct appeal from Texas Democrats this week, Manchin remains as obstinate as ever on the elimination or modification of the Senate filibuster, and Biden’s major address on voting rights Tuesday came without a call for changing the Senate’s rules. As such, the reconciliation bill may well be the party’s last major legislative swing until next year’s midterms; it’s certainly being freighted as though Senate Democrats themselves believe that’s the case.

In sum: the package is good, our situation is not. The lackluster response to the last recession, Bernie Sanders’ activation of a progressive primary electorate over the last 5-6 years, and the extraordinary mass death event we’re still working our way through have changed Democratic policymaking considerably. But the country’s problems still loom larger than the solutions on offer, and the constraints progressive policy faces aren’t limited to legislative procedure. As I predicted in March, an inflation panic is now underway, and we can probably expect some of the centrist voices the administration has been elbowing off to the side to get louder in the months ahead.

Reasons to Be Cheerful

That’s all for this week. Good night.