The key to reducing child poverty? Monthly child allowances

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With the extraordinary of the last month inflation rate of 8.3 percent that is dragging Americans down, the rapidly rising costs of food, fuel, shelter and childcare are putting countless families at financial risk.

Knowing that the nation would continue to face economic strains from the pandemic, the US government approved and implemented an ambitious policy agenda last year that included the expanded Child Tax Credit (CTC) program. In just six months, this historic initiative was significantly reduced child poverty and infused local economies with about 19 billion dollars per month in additional expenses.

A key reason for the success of the child allowance? Checks go to parents’ bank accounts once a month.

This idea is not new. Just look at the nation most effective Anti-poverty program – Social Security – which distributes benefits to recipients throughout the year. We know that Social Security keeps older Americans out of poverty, but—as columnist Bryce Covert recently pointed out in the New York Times — America has chosen not to give children the same priority.

The fact that CTC payments under the American Rescue Plan were paid on a monthly basis goes a long way in understanding why this direct payments program worked so well and why 3.7 million other children live in poverty after congress let the program expire At the end of last year.

New analysis from the Columbia University Center on Poverty and Social Policy proves this point head on by breaking down the anti-poverty benefits of the monthly CTC and showing that monthly payments are more effective than an annual flat rate.

If CTC payments are made once a year at tax time, child poverty falls significantly by about 11 percentage points, or from 22.4 percent to 11 percent. However, anti-poverty benefits often tail off by May. Compare that to monthly payments, which, according to Columbia findings, keep nearly a third more children out of poverty each month.

According to the report, monthly child tax credit payments at any time during the year could save about one in 10 children from falling into poverty, compared to annual payments that often only alleviate poverty for a month or two during tax season.

Monthly checks reduce year-round child poverty by reducing income volatility – thereby destabilizing month-to-month income swings that hit low-income families the most. Monthly payments not only reduce the risk of children being persistently poor, but also the risk of children becoming poor year-round.

The data from Colombia shows what we actually saw in real life when the child tax credit was in place.

When CTC checks began hitting bank accounts in July 2021, the life-changing impact of the loan was immediately clear. In six weeks, the lack of food decreased by about a quarter. Improvements were significant in Black and Hispanic families, who experience the highest rates of food deprivation.

As we navigate this “new normal,” let’s not forget this important lesson from the American Rescue Plan: Monthly cash payments keep children out of poverty. These payments also help families in other valuable ways. Bills come every month, and monthly CTC checks ensure grocery shopping, bills are paid, and rent or mortgage payments are made on time. In a survey of low-income families three quarters of SNAP recipients used their CTC payments for bills to prevent utility shutdowns, evictions, and foreclosures, among other things. Families across the country could get one breath of fresh air and reported feeling less financial stress because of CTC.

Economists are still learning about the long-term impact of the Child Tax Credit on the financial health of American families. However, the preliminary data – as well as the real-life experiences of millions of families – show that not only monthly CTC payments played a role no discernible negative impact on employmentyou supported labor and entrepreneurship among some parents. In addition, monthly CTC payments helped parents lose weight credit card debt and reduce reliance on payday loans, pawn shops, and even selling blood plasma.

Monthly payments have been a key component of the CTC’s success, and this model must be maintained if – and if – Congress brings the program back to life.

Christal Hamilton is a postdoctoral fellow at the Center on Poverty and Social Policy at Columbia University School of Social Work.

Natalie Foster is President and co-founder of the Economic Security Project, a network dedicated to advancing the conversation about cash benefits and basic income in the United States.

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