Democrats’ New Plan for Poor Parents: Give Them $300 a Month

As a recent community college graduate, Sarah Rosenberger spends much of her time applying for interior decorating jobs, picking up impromptu babysitting gigs and taking care of her 23-month-old son, Carson.

Finances are never far from her mind. The Colorado resident recently had to pour $3,000 into her car for a series of much-needed repairs that had piled up while she was in school. Almost everything else she has goes towards diapers, clothes and shoes for Carson.

“The things I need to provide for my child are always kind of hit-or-miss,” Rosenberger said. “Most of what I do make goes to buying him new clothes. Especially at the age he is now, he just grows and grows.”

Rosenberger isn’t alone in finding it hard to be a working-class parent. Four in 10 Americans can’t afford an unexpected expense of $400, according to a 2018 report by the Federal Reserve. Having children definitely contributes to that burden: the average cost of raising a child from birth to age 17 is $233,610, according to a 2017 report by the U.S. Department of Agriculture. In 33 states, daycare for young children costs more than college tuition.

Over the years, politicians have introduced various programs to help offset that cost. In 1972, the Women, Infants and Children program was created to help needy moms and children buy food. In 1996, Congress created the Temporary Assistance to Needy Families program to give states block grants for job preparation, childcare and other programs. And in 1997, the Children’s Health Insurance Program was started to ensure kids whose parents didn’t qualify for Medicaid could still see a doctor.

While these programs offer help, they are hard to apply for and are often accompanied by lists of rules and exceptions longer than a CVS receipt. Now, some Democratic lawmakers say they’ve got a simpler solution for needy parents: Give them cash.

Introduced by Colorado Sen. Michael Bennet in 2017, the American Family Act would do that by revising and expanding the existing Child Tax Credit to provide most parents, including low-income ones, at least $3,000 every year. He says it’s an adjustment that’s long overdue.

“We have had decade after decade after decade of economic growth in this country, with almost all of the benefit of that growth falling to the top 10% of Americans,” he told TIME in a sit-down interview. “That lack of economic mobility, that income inequality, it’s very, very hard on a democracy.”

The bill isn’t likely to pass in the current session of Congress, but with the 2020 election heating up, it could soon become a talking point for the Democratic presidential candidates, giving its backers hope that it may pass in the next few years.

Why cash-based programs face skepticism

The public has long been skeptical of programs that give cash to the poor. They cost a lot of money — TANF, for example, costs $16.5 billion every year — and their benefits are concentrated to low-income families who don’t pay much in taxes.

But the American Family Act is notably different than other benefit programs. It would essentially just expand the current credit by giving more money to more people. It wouldn’t phase out until single-filers exceeded at least $75,000 per year and joint-filers exceeded $110,000 per year — the same cutoffs that were in place prior to President Donald Trump’s 2017 tax cuts. A source familiar with the matter told TIME a new version with higher phaseout thresholds could be introduced soon, making upper-middle class families eligible for the cash too.

It’s an idea that other countries have tried. If Rosenberger lived in Canada, Australia or almost any country in the European Union, she’d benefit from a child allowance: periodic payments made out to parents so they can offset how expensive it is to raise children. In Canada, Rosenberger and her son would qualify for roughly $5,000 per year. In Australia, they’d get about $4,000. In the United States, however, based off her practically nonexistent income, Rosenberger currently doesn’t get anything.

Christopher Faricy, a political science professor at Syracuse and an expert on income inequality, tells TIME that tax-based benefits are typically more popular than other cash assistance programs. Subsidized nutrition and health-care programs for poor people have long been associated with the Democratic Party, he says. Tax-based policies aren’t.

“In a politically polarized environment, voters fall into their camps. Democrats support these programs and want them expanded. Republicans don’t support these programs and want them cut,” Faricy says. But tax-based incentives help middle- and upper-class families too. “Generally, people find workers and taxpayers to be deserving of government benefits.”

The bill would also revise the tax credit to allocate more money to parents with younger children. Parents with a child under six would be eligible for $3,600 a year, and parents with a child over six would be eligible for $3,000.

Elaine Maag, a senior research associate at the Urban Institute’s Tax Policy Center, where she studies income support programs for low-income families, says the age differential is a good improvement. “There’s a fair amount of research out there that says if we provide children money very early in life, it leads to this lifetime benefit — they have better health outcomes, they attend school longer and they even are more likely to have jobs and greater economic stability later on. So those early investments are very critical,” she says. “This Bennet bill would try to focus more money at that really critical time.”

One problem with most tax credits, however, is that they only come once a year. Bennet’s plan would change that.

The American Family Act would require the Treasury Department establish a fund to make advance payments in monthly installments, since your car doesn’t break down on the IRS’s schedule and your babysitter won’t wait to get paid until next year. “I think that if we could actually allow people to have the benefit spread over time rather than just having it at one time during the year when the taxes are filed, that it would better enable them to to use the money when they need the money,” Bennet says.

Another problem with the current Child Tax Credit, he says, is that a lot of children are left out. Trump’s 2017 tax cuts slightly expanded the pool of low-income families who are eligible to receive the tax credit, but according to the Center on Budget and Policy Priorities, roughly 27 million children in America live in households that don’t earn enough to qualify for the benefits in full. The poorest families in America, whose incomes equate to less than $2,500 per year, don’t qualify at all.

Right now, families who earn more than $2,500 per year can see their taxes reduced by $2,000 for each child they have under the age of 17. For families who have zero income-tax liability, the credit is partially refundable up to $1,400. Bennet wants to make the credit fully refundable and open it up to the millions of families who don’t make enough to receive it in full.

Doing so comes at a price. Researchers at Columbia University estimate the program could cost $91 to $108 billion per year, making it a target for critics of government spending. Rachel Greszler, a research fellow in economics at the conservative-leaning Heritage Foundation think-tank, says Bennet’s plan is federal overreach.

“It has appeal in helping families and providing them with more resources to take care of children, but I do think it reaches too far into the government,” she says. “If you’re actually going to pay for it instead of just add to the deficit, it ends up costing people a lot more than they think.” Instead, she suggests lowering taxes to make it easier for families to take home larger shares of their paychecks from the start. “It would give them greater certainty about what their income is going to be every month and not make it dependent on government programs.”

By her estimates, if the increase in taxes necessary to pay for the program were levied only on people making at least $200,000 a year, their annual taxes would increase by roughly $14,500 each. “That’s a big cost,” she says.

But a program of this nature could also create an economic stimulus of roughly 0.80% GDP growth over eight years, according to researchers at the Roosevelt Institute, who were studying a very similar child allowance plan.

Some experts say the costs are well worth it. As Vox noted in December, Columbia’s researchers predict Bennet’s bill would cut the rate of childhood poverty by nearly half, drastically narrowing the gap between the U.S. and other developed nations. For example, they suggest the policy would lower the frequency of children living off of less than $2 per day from 1.7% percent to 0.2%. In total, it is estimated to lift 2.7 million Americans out of deep poverty.

Bennet notes the project’s estimated costs are substantial, but also points out it’s far cheaper than other spending approved in recent administrations. “We have spent $5 trillion since 2001 on tax cuts that have largely accrued to the wealthiest people in America. In addition to that, we have spent $5.6 trillion fighting the wars in the Middle East. We now have the largest deficit, as a result of Donald Trump’s presidency, than we have ever had in a period of economic growth,” he said. “I think we should pay for this. I think we should find a way to pay for this and I’m open to ideas about how to pay for it,” he continued.

And though the cost is high, Faricy, the Syracuse professor, predicts it’s one Americans from both sides of the political aisle might get behind. “Usually people are supportive of giving children money,” he says.

Before Rosenberger graduated, she and her son scraped by on roughly $1,000 a month. An extra $300 in her pocket would have changed her life. “There were some days where I had $8 in my bank account,” she said. “I tried to donate plasma when I could.” In a follow-up conversation, Rosenberger told TIME her hard work and sacrifices paid off: she just received a full-time job offer. But that money could still come in handy, she says.

“Now, I’m in the process of setting up daycare and figuring out how I can afford that for the first month.”

Angiie Ramlakan, a full-time student and 20-year-old single mom, said the money would help her stay in school to provide a better life for her two-year-old daughter, Althea.

“I’m not going to work at McDonald’s for the rest of my life,” Ramlakan said. “I want to be able to have a career where I’m not living paycheck-to-paycheck. I don’t want to live like that. I don’t want my daughter to live like that.”

The 2020 election could boost the proposal

Reforming the Child Tax Credit is an issue that is almost certain to come up ahead of the 2020 elections. In addition to rumors suggesting Bennet himself might run for President, the bill was co-sponsored by Ohio Sen. Sherrod Brown when it was first introduced. In the months that followed, other potential and confirmed 2020 candidates such as Sens. Kamala Harris, Cory Booker, Kirsten Gillibrand, Amy Klobuchar and Elizabeth Warren have all signed on.

In some ways, it’s also the mirror image of how Trump reformed taxes in 2017.

His Tax Cuts and Jobs Act expanded who was eligible for the Child Tax Credit, but mostly for top-earners. Rather than making it available to extremely low-income parents, Trump’s plan more than doubled the income threshold for phase-outs. Instead of $75,000 for single-filers and $110,000 for joint-filers, parents are now eligible until their incomes exceed $200,000 and $400,000, respectively. The Trump Administration also reduced the top individual income tax rate by more than 2% and floated eliminating the federal estate tax — both of which disproportionately affect top-earners.

Sen. Sherrod Brown told TIME that he thinks the metrics are moving in the wrong direction. “The Trump plan was written for wealthier families,” he said. “Not for only wealthier families, but their plan doesn’t address what Michael and I are doing with the lowest income families,” he continued. “All the incentives are built wrong by this Administration.”

Brown and Bennet both say they want to fix the tax code to make it work for everybody, but especially for hard-working Americans who are just trying to do their jobs. “People are leaving their jobs because they have to contend with something that they can’t afford,” Bennet says. “What this would enable is for people to be able to receive the money as they need it, as they are living their lives. And I think what you’ll find is that many more people are going to be able to stay at work as a result.”

He argues it shouldn’t be so hard, for so many people, to afford the bare minimum.

“Everywhere I go, I meet people who are working really hard and can’t afford some combination of housing, health care, higher education and child care,” Bennet says. “To me, those four things are necessary for a person’s ability to live a middle class life. They aren’t nice-to-haves, they’re must haves.”

Angiie Ramlakan is one of those hard-working people who just can’t seem to make ends meet.

“If I was to get $200 to $300 extra, I wouldn’t have to be in the predicament I’m in now, where in the first week of the month, I have to decide: do I pay my bills or do I go buy my daughter diapers?” she said. “I wouldn’t have to pick and choose the things that I need.”

Correction, Jan. 31

The original version of this story misstated Angiie Ramlakan’s last name. It is Ramlakan, not Martinez.