By Karl Polzer | Washington Examiner
With a major battle over federal debt, taxes, and spending expected next year, Congress also needs to address a more fundamental problem: how to revive the nation’s anemic birth rate and prevent a population decline. The United States needs more future workers for many practical reasons, including sustaining economic growth, keeping the Social Security program solvent, and maintaining the nation’s military capacity.
U.S. residents are dying at a faster rate than they are being born. A major reason almost half of adults say they are unlikely to ever have a child is the cost of raising one. Low-income and working-class women have the highest childbirth rates in the U.S. With fewer financial resources, they also face perhaps the greatest stresses in splitting their time between work and taking care of their children.
After decades of widening economic inequality, political campaigns are showing much more interest in wooing working-class votes. Here are four low-cost policy ideas that could help these families raise children.
First, expand the child tax credit to help more working-class parents and grandparents raise children.
After stumbling in the Senate in a pre-election vote, a bipartisan push to expand the child tax credit to help more low-income families will resurface during next year’s tax and spending debate. The CTC is regressive. Under current law, many working families with low incomes who need day care receive a smaller CTC than families making $400,000 with one parent working and the other staying at home with children. Low-income families should receive at least as much help raising children as higher-income families.
Republicans remain concerned that providing the CTC to unemployed parents would undermine their incentive to work. Given the cost of living and day care, the tax credit, which tops out at $2,000 per child annually, is too small to change parents’ decisions about working outside the home. A compromise might give low-income families the full child tax credit if a parent is seeking work or working at least part-time. Ideally, the CTC would be progressive and targeted to families who need financial help the most.
Policymakers could exempt older residents raising grandchildren from CTC work requirements. U.S. census numbers show that 2.3 million grandparents are responsible for raising their grandchildren, with about a third of the children younger than 6 years old. About half of the grandparents responsible for their grandchildren are 60 years or older.
Second, policymakers could provide Social Security credit for unpaid work raising young children.
By following Canada’s example, Congress could remove a disincentive in America’s Social Security program to having and raising children while providing parents with great old age security.
Because of how Social Security benefits are calculated, staying home to raise children can reduce monthly payments and, in rare cases, result in none after retirement. Social Security averages the highest 35 years of a person’s earnings in its records to determine a benefit amount. Years of zeros resulting from unpaid childcare can lower the benefit. U.S. workers must be employed for at least 10 years to have enough work credits to qualify for Social Security.
Canada, which calculates its pension benefits similarly, recently began allowing parents to subtract up to seven years of zero or low earnings from their lifetime income average for raising children under 7 years of age. Canada also adds in pension credits for child-rearing years with low or no earnings based on a parent’s pension contributions in the five years before becoming the primary caregiver.
Social Security actuaries have analyzed proposals to begin providing credit for child-rearing/child care, often combined with other reforms requested by members of Congress from both parties. Making changes like Canada’s would be particularly helpful to single parents and families with low and modest incomes.
On the other side of the coin, removing barriers to having children could help Congress finance Social Security in the future. The declining U.S. birth rate is a major factor in the program’s deteriorating ability to pay promised benefits.
Third, Congress should act quickly to update extremely outdated income and asset limits that prevent more disabled people from qualifying for Supplemental Security Income while working. SSI is the backup program for old and disabled people who are not eligible for Social Security. Its rules have made it harder to qualify and prevent disabled people from working and building assets to take care of themselves.
Not only are maximum SSI benefits well below the poverty level, SSI imposes asset limits of $2,000 ($3,000 for a couple) — limits initially imposed in 1972. Today’s much higher cost of living justifies raising the limit to at least $10,000 ($20,000 for couples). Congress should also make sure that SSI recipients’ 401(k) and other retirement savings are exempt from asset limits.
SSI income limits are overly complex and strict. They have not been raised for decades. Though there are about eight times more people getting Social Security benefits than SSI, the complexity of the smaller program makes it almost as costly to administer.
SSI’s “in-kind support and maintenance” provisions are particularly onerous. Groceries and other assistance from family and friends now count as in-kind income. Rules such as these not only create a paperwork burden but also can jeopardize eligibility, decrease payment amounts, and discourage families from providing help.
Even in its decaying condition, SSI is of vital importance to the country’s most vulnerable people. An SSA study found that SSI reduced the poverty rate among recipients to 42% from what would have been 63% without the payments. Recipients include children with intellectual disabilities, severe mental illness, and physical handicaps.
Parents of children and young adults with schizophrenia, autism, and other disabilities know about SSI. When it is clear that these young adults cannot survive on their own, many parents will help them apply for SSI. They then encounter a lengthy application process, a 65% rejection rate, and yearslong waiting lists for affordable housing. Many end up on the streets, adding to the nation’s homeless problem.
Congress has created and indexed hundreds of programs and tax breaks benefiting middle-income and wealthy people, but it has failed to do this for SSI’s income and asset limits. A 2014 law, for example, allows contributions of up to $15,000 a year to tax-advantaged accounts covering expenses for some people with disabilities. The new ABLE accounts can give well-off families of people with disabilities a big advantage. They can save up to $100,000 in ABLE funds while also receiving SSI. But disabled people whose families lack such funds are left facing the $2,000 resource limit.
Lastly, if taxes must go up, give the working poor a break. If the next Congress decides to let some of the Trump tax cuts expire to deal with the record federal debt, it should leave its modest benefits to the bottom 40% in place. The 2017 tax cut legislation was heavily regressive. High-income households got the biggest tax benefit, averaging $61,000 for the top 1% and $13,000 for households in the 95-99th percentiles. In contrast, households making less than $27,300 (the bottom fifth) saw their tax bill drop by an average of only $70. The second-to-the-bottom fifth got a $390 tax break.
Congress should not make it harder for these families to pay their bills, especially those juggling work and taking care of their children.
