34 UnitedStates TheEconomistApril2nd 2022
poverty have been reversed (see chart). In
December 2021, the rate was 12.1%. “By the
end of the six months, in December, we
saw close to 4m children being kept out of
poverty,” says Megan Curran, policy direc
tor at Columbia’s Centre on Poverty and So
cial Policy. By February 2022, it had re
turned to 16.7%—meaning 38% more chil
dren (or 3.4m) were in poverty.
Rather than revel in a rare policy victo
ry, America has instead managed to snatch
defeat from its jaws. “We have had such a
high rate of poverty because we’ve essen
tially treated America’s children like they
are someone else’s children,” says Michael
Bennet, a Democratic senator from Colora
do, a longtime champion of a policy derid
ed as Utopian until the pandemic hit. (Mr
Bennet’s brother works for The Economist;
he was not involved in writing or editing
this article.) Mr Bennet has had a bitter
sweet experience: watching an idea he fos
tered become reality, but only briefly. “We
cut childhood poverty, almost in half. And
then we let it lapse and doubled childhood
poverty,” says Mr Bennet.
Most preexisting federal support pro
grammes for children have means tests,
work requirements or conditions on the
use of cash. The generous child tax bene
fits lacked all of these features, yet seemed
especially successful at reducing poverty.
That is not because the old regime of child
tax credits lacked generosity (offering a
maximum annual benefit of $2,000 com
pared with $3,600 for the enhanced credit)
but because it was poorly designed as an
antipoverty tool. Lowearning families of
ten did not have enough income to justify
receiving the full credit. Absurdly, half of
AfricanAmerican and Hispanic children
were not getting the full benefit because
they were too poor.
The admirably broad scope of the new
policy may have limited its longevity, how
ever. A plan to extend the benefits was one
component of Mr Biden’s Build Back Better
agenda, which floundered in congressio
nal negotiations in December 2021 after
Senator Joe Manchin, a pivotal Democrat ofWest Virginia, announced his opposition.
Mr Manchin voted to create the expanded
policy at the start of the Biden administra
tion; of late, he has become concerned that
it may exacerbate inflation, worsen the na
tional debt and encourage sloth among
working adults.
Efforts by his Democratic colleagues to
convince him otherwise have so far been
unsuccessful. “Senator Manchin has al
ways supported the existing child tax cred
it that is still in place despite the pandemic
emergency enhancement sunsetting at the
end of 2021,” says a spokesperson for the
senator, cautiously. “He continues to support policies that reward hardworking
families as the effects of costly inflation
taxes strain their budgets.”
Observers of the political dynamics in
Washington, dc, seem pessimistic on the
chances of something like the monthly
scheme persisting. But a narrow compro
mise may still be found, correcting the in
adequacies of the old design and assuaging
Mr Manchin’s fears. “I’m happy to pay for
it. I would say let’s extend it for ten years
and let’s pay for it,” says Mr Bennet, the
Colorado senator. “I can’t think ofanything
we could do that would make moreofa re
turn on our investment than this.”nDefeat from the jaws of victory
United States, poverty rate by age group, %Source:CentreonPovertyandSocialPolicy, Columbia University19161310202 2022FJDNOSAJJMUnder 18
All agesMonthly child
tax credit beginsTa x c r e d i t
endsA
giantexerciseingivingawaymon
ey to children is under way. On
March 21st Los Angeles Unified, Amer
ica’s secondlargest school district,
enrolled every firstgrader into a free
collegesavingsaccount programme,
depositing $50 for each child. With
44,000 pupils, Opportunity lais the
biggest collegesavings scheme for chil
dren in the country.
Children’s savings accounts (csas)
typically help towards a specific purpose,
usually college or buying a home. Many
barriers exist to amassing savings, espe
cially for the poor. Foremost is a lack of
funds to put away for later, but bad expe
riences with banks—worries about credit
scores, for example, or fears about over
draft fees—also put people off. An auto
matic programme can encourage fam
ilies to invest.
Opportunity lawill enable families to
use the savings account for college fees
and associated costs, such as tests andsupplies.Thefundscanbeusedforany
two or fouryear programme at an ac
credited institution. If families pay in
extra money and file taxes in the county,
they will receive a matching contribu
tion (up to $25 each year). If a pupil
leaves the district, the funds are forfeited
and any family contribution returned.
Families can opt out of the plan, but few
are expected to do so.
Such efforts elsewhere have had
success. seed for Oklahoma (seed ok)
began 15 years ago. Newborns were ran
domly selected to receive $1,000 for the
state’s collegesavings plan, and com
pared with those not chosen. Families
who got the money experienced long
term benefits. They were more likely to
have opened an additional collegesav
ings account for their children, and they
had greater expectations for their child to
complete graduate school.
seed ok’s beneficiaries have yet to
graduate from high school, but other
studies have found positive outcomes
from college savings, automatic or other
wise. One study found that poor children
who expect to graduate from college and
have up to $499 in their accounts are
three times more likely to graduate.
Since seed ok, other automatic pro
grammes have started. In 2011 San Fran
cisco became the first publicly funded
universal csaproject in America. Two
years later, Maine was the first state to
require parents to opt out if they wished
to avoid automatic enrolment; participa
tion grew from 40% to 100%. Other states
followed. A universal programme is
expected to launch this spring in New
York City, the largest school district, and
California’s governor intends to launch a
statewide programme soon. Seeds are
being scattered across America.CollegebondsSeeds of learning
WASHINGTON, DC
Los Angeles school district provides every first-grader with cash for collegeInvest in me, please