Could the child tax credit model end welfare as we know it?

It’s generally accepted by Americans across the political spectrum that we need to provide an effective safety net to help low-income citizens and families with their basic needs. The trick is to strike the right balance so that benefits are enough to keep a family from abject poverty, but not so much that recipients are incentivized to stay on public assistance.

The best system is simple to understand and easy to administer. What we have today does not meet that standard. We have a byzantine array of services that require immense bureaucracies to administer and produce terrible frustration among people trying to navigate the system and seek benefits.

Thus, I’ve long been a proponent of simplifying the safety net system by implementing a voucher-type program that would simple to understand and easy to administer.

Today, we have something similar to that, the federal child tax credit, and it’s being touted by many experts as the possible “end of welfare as we know it.” It was part of the $1.9 trillion COVID stimulus bill passed by Congress.  

Under the program, low-income and middle-class families in Utah and across the country are receiving $250 or $300 a month for each of their children under the age of 18. All single parents earning less than $75,000 a year, or $150,000 for couples should be receiving the money, distributed by the IRS, usually by direct deposit.

The Atlantic recently published an interesting article with an provocative headline: “Is This the End of Welfare as We Know It?” Said the article: “The overnight success of the new child tax credit has experts and parents taking a hard look at traditional welfare.” An author in Politico wrote: “Congress Ends Welfare Reform as We Know It,” referring to the child tax credit.

The child tax credit has been described as the most “straightforward benefit program as exists in American life.” It is simple, easy and effective. Most parents don’t need to do anything to receive it. Utah Sen. Mitt Romney and other Republicans have praised it, even proposing higher amounts.

By contrast, existing welfare programs require onerous applications and compliance, overseen by an army of caseworkers. They are a morass of state and local programs covering food, training, child care, housing, and other needs.

However, the child tax credit alone isn’t going to end welfare as we know it because it isn’t ending or replacing anything, but only adding another program. Real reform would be to determine the right level of support, means tested in broad categories, to replace all other welfare programs, and administer it using the child tax credit model.  

Recipients would receive about the same level of benefits as the combination of current programs, but it would be in a lump sum. Recipients would use the funds according to their needs. There would be no penalties for working and earning extra money up to the next benefit level.

Discipline would be required on the part of the recipient to use funds wisely. Policymakers would have to be disciplined to stick with the lump sum benefit and not add additional programs.

Given the success and popularity of the current tax credit program, policymakers should consider expanding it to cover all social service benefits. It would simplify and streamline the safety net and reduce bureaucracy.