The real reason Biden's child poverty gambit failed. By Matthew Yglesias

Popular programs are durable, but the CTC didn’t stand a chance

The biggest disappointment of the Biden administration has been the failure of the Enhanced Refundable Child Tax Credit.

This policy, like all policies, had some design flaws as implemented, but it did tremendous good for America’s children and families during its year-long existence. And I think it had the potential to lead to some broader reforms of the welfare state, reforms that could make the safety net more efficient but also more generous, address the country’s lingering child poverty problems, tackle child care in a way that doesn’t founder on the rocks of the culture war, and advance racial justice through a broad program of universal solidarity.

Instead, we got a one-year program that contributed to inflation and expired with nothing left to show for it.

That was a big blow, and I think it’s important to try to understand exactly what went wrong, in part because every administration’s decisions are heavily influenced by their understanding of what went wrong the last time their party was in power.

I know that during the transition, Chuck Schumer was convinced Obama had erred by not delivering enough highly transparent help to people — that’s why he was so enthusiastic about pandemic economic impact payments and one of the reasons he was optimistic about the CTC gambit. Conversely, Obama’s stimulus was heavily shaped by a conviction that Bill Clinton hadn’t left enough of a tangible legacy, and he wanted his American Rescue and Reinvestment Plan to emphasize long-lasting projects, not the mere dispersal of cash.

So far, from what I can tell, the dominant takeaway on the left from the CTC is that effective programs are not actually politically self-sustaining.

I agree with this on some level. Obviously the CTC did not create an overwhelming groundswell of popularity. But the idea that a one-year CTC would be too popular to allow to expire was not grounded in the literature on welfare state durability. What that literature says is that once a program exists, it’s hard to repeal. But the ERCTC was never created as a permanent program, so nobody had to repeal it. The question to ask about this phase of the Biden administration is how Democrats managed to spend so much money without creating a new signature program — and that comes down to a reluctance to set priorities.

Safety net programs are highly durable

Twenty years ago, in a college class on the history of American social policy, I learned about a debate among scholars over how to understand the unpopularity of Aid to Families with Dependent Children (AFDC) and its basic elimination in the Clinton-era welfare reform initiative. One theory was that AFDC proved politically non-durable compared to Medicare or Social Security because it was means-tested rather than universal. A catchphrase often invoked in that space is “programs for the poor become poor programs.” Another theory was that AFDC’s non-durability related more to specific features of its design — proponents of this view noted that means-tested Medicaid had fared quite well politically.

As originally created by Lyndon B. Johnson, Medicaid was a very small program. But over the years, it has been expanded considerably — mostly through autonomous state action but also through multiple small rounds of expansion under Ronald Reagan, and one bigger one under Bill Clinton — even as per-person costs rose due to rising health care costs.

And I would say that in the time since I took that class, Medicaid has proven to be the more typical American safety net case. SNAP (food stamps) was expanded under George W. Bush and then again by Barack Obama. Trump trimmed it back (but not below pre-Obama levels), and the Biden administration made it more generous with little attention or controversy. The Earned Income Tax Credit was created in 1975 and expanded in 1990, 1993, 2001, and 2009. Despite the failure of the ERCTC, the overall Child Tax Credit has grown over the years in its generosity. And of course the Affordable Care Act created new means-tested health insurance programs that proved politically durable in 2017–2018 and whose state-level Medicaid expansions have generally had a ratchet-like effect.

Robert Greenstein finds that, in reality, means-tested programs have grown more rapidly since 1979 than untargeted ones.

For today’s purposes, though, I’m less interested in that specific debate than in the general phenomenon of durability. Social Security was a modest program in its early days. But over the course of the 1940s and 1950s, multiple rounds of expansion covered more people and also made the program more generous. Under Joe Biden, Medicare will for the first time negotiate down the price of prescription drugs, saving money for the government and senior citizens alike. But as recently as 20 years ago, Medicare didn’t cover prescription drug costs at all. That happened as a result of a Bush administration effort to preempt Democrats’ plans to create a more generous prescription drug benefit. And then the ACA (though almost nobody talks about this part) made the Bush-era prescription drug benefit more generous.

So it is, in fact, true that if you give people stuff, it’s hard to take it away. Adding to programs is also hard, but time and again it has proven easier to add to programs than to subtract from them.

But this doesn’t really speak to the particulars of the ERCTC.

The CTC’s strange career

Donald Trump’s presidency was a fascinating time in progressive policy development. The fact that he won when people thought he was going to lose unsettled preconceived notions about the possible. The fact that Bernie Sanders’ 2016 campaign did better than expected created a sense that the energy was on the left. And the fact that Trump wasn’t talking about cutting Social Security and Medicare meant that if Democrats wanted to talk about economic issues, they needed to propose something more ambitious than “don’t cut Social Security and Medicare.”

The prolonged spell of low interest rates from 2007 onward led people to slowly relax their traditional concerns about budgeting. Lots of ideas were flying around, including things that — though clearly workable — were ungodly expensive, like Medicare for All. We also had enthusiasm for things like codetermination that would overturn the basic structure of American capitalism and a jobs guarantee that barely seemed workable at all.

In that context, the American Family Act proposed by Michael Bennet and Sherrod Brown in the Senate and by Rosa DeLauro and Suzan DelBene in the House played as relatively modest. AFA was, essentially, what became the ERCTC — it would take the existing Child Tax Credit, make it more generous, make it fully refundable, and make it pay out monthly rather than once a year. It’s true that AFA was expensive, but it was cheap enough that it could be financed by taxing the rich. And while it would be a big deal in the sense of dramatically cutting poverty, it pointedly wouldn’t actually alter anything about the typical American’s life or the basic nature of American capitalism.

1

AFA ended up getting lots of cosponsors but, as of January 2020, still seemed fatally weak as a short-term agenda item:

Most Democrats in Congress were on board, but crucial moderates — notably including Joe Biden — were not.

Progressives liked but did not love the idea — neither Bernie Sanders nor Elizabeth Warren adopted it as a signature idea.

Democrats had a bunch of ideas competing for space on the policy agenda, including proposals for subsidized child care and preschool that operated in very much the same conceptual space.

A handful of conservatives were sympathetic to the idea of a child cash benefit, but AFA was not structured so as to have their support in terms of program design or how it was paid for.

Then the death blow was that Biden won the Democratic Party nomination.

Nobody knew what was going to happen in the 2020 election, but obviously you can’t pass an ambitious progressive program if the Democratic Party president isn’t on board. The idea of a cash benefit for kids was either going to need to wait to get on the next agenda or else was going to have to be significantly restructured to work as a bipartisan project.

But then things got weird because in mid-September 2020, Biden endorsed the idea — as a pandemic emergency measure.

From ARP to BBB

The morning after Election Day, it seemed more likely than not that Biden would find himself dealing with a Republican-controlled Senate and that the transition would need to start planning accordingly. But then somewhat unexpectedly, Democrats won two simultaneous Senate runoffs in Georgia and secured themselves a narrow majority. That naturally raised Biden’s legislative ambitions.

In his new book about the Biden administration, Frank Foer reports that Biden and Ron Klain initially floated a $1.3 trillion stimulus package to Chuck Schumer, who said that he thought his caucus wanted something bigger.

Biden was on board for that and came in with a roughly $1.8 trillion ask. The administration briefly considered a smaller counteroffer from a group of Republican senators, but rejected it as inadequate. According to Foer’s reporting, Democrats’ main objection to the counter was that Republicans didn’t want to do any state/local fiscal aid. It seems at least possible that if they’d be willing to come in with a higher number for that, the deal would have been sealed and there would have been no ERCTC. It also seems very possible that if Joe Manchin had just said to Chuck Schumer “look, I didn’t cosponsor the American Family Act, I don’t really agree with this vision, Biden won the primary while opposing this idea, and he barely even mentioned it during the campaign against Trump — I don’t think it belongs in the stimulus bill” that everyone would have settled on something more like the initial $1.3 trillion plan.

But Republicans didn’t make an offer on state and local, Biden didn’t want to get dragged into an extended negotiation with them, and Manchin did not voice a strong objection to the ERCTC at the time.

So we ended up with an idea that, in the Bennet/Brown/DeLauro/DelBene vision, was supposed to be a revolution in American social policy implemented as a pandemic emergency relief measure. Once that happened there was an intense flurry of discussion in the White House, in the media (including Slow Boring), on Twitter, and on the Hill about the dramatic reduction in child poverty that this would generate. And an idea that Biden hadn’t endorsed in either the primary or the general election — a permanent ERCTC — became a signature Biden initiative, part of what he hoped would be an “FDR-sized presidency.”

Except even as Biden and Schumer came to embrace ERCTC, there was a fundamental problem. This was a big expensive program. And not only did Democrats want to do a major climate change bill, they also had all these other longstanding family policy commitments: a parental and medical leave bill, a universal preschool bill, a subsidized childcare center bill, etc. So the construction of Build Back Better — both as passed by the House and as initially proposed by Democratic leadership in the Senate — squeezed versions of all these programs into the available fiscal headroom by scheduling them to expire. In other words, even if Manchin and Kyrsten Sinema had looked at the Build Back Better proposal that passed the House and said “sounds great, let’s do it,” there still wouldn’t have been a permanent ERCTC or much of anything else on the social policy front. What was proposed to be permanent in BBB was largely energy programs, signaling that was the core priority. This is why after Manchin killed BBB, the main piece of the Biden agenda that got resurrected was energy legislation.

The lesson: Defaults and priorities matter

It was not obvious to me back in 2009 — and it continues to be not obvious to me in retrospect — that prioritizing big-picture health care reform was the right thing for the 111th Congress to do. I got a chance to speak both on and off the record with the main Democratic candidates in the 2008 campaign, and I got the strong impression from then-candidate Barack Obama that he did not want to prioritize this issue. And I thought that was a good reason to support him over Hillary Clinton and John Edwards. But regardless of how I felt about it — or even how Obama felt about it — there was a strong consensus inside the party that the most important thing was to pass major health care legislation, and so they passed major health care legislation.

Everyone understood that the health bill might pass or it might not pass, but there was no chance of passing a preschool bill or some other thing entirely.

For slightly dumb political reasons, the decision was made that it had to be a $900 billion health care bill, and so it was contorted a bit to fit that. But they created a permanent program. They didn’t use expiration as a budget gimmick. And they certainly didn’t parcel out the $900 billion across three different priorities and then set all of them to expire. As their punishment for passing ambitious health care legislation, they became unpopular and a lot of people lost their seats in the 2010 midterms.

But as Nancy Pelosi famously said at the time, “we have to pass the bill so people can find out what’s in it.”

And they did pass the bill. And as it was implemented, people found out what was in it. And when Republicans tried to repeal it in 2017, that was unpopular and repeal failed and Democrats won big in the 2018 midterms. That is the power of permanent policy. Note that the defaults matter: if the ACA had expired in 2017, Republicans could have blocked an extension easily. What was hard for Republicans to do was to affirmatively repeal it. By the same token, had a permanent ERCTC passed in 2021, Republicans wouldn’t have been able to repeal it in 2022 or 2023 or 2024.

Default rules matter a lot. The status quo is powerful in politics, and especially powerful in a system like ours that has multiple veto points.

And because default rules matter a lot, setting priorities matters a lot. Most members of Congress have safe seats, so if you come to them with 17 different program ideas, they’ll say “sure, that sounds good” to each of them. But convincing the marginal members to raise taxes enough to fund 17 different programs is hard. The crucial argument with the safe seat crowd isn’t whether a policy idea sounds good but whether it should be the top priority. And that’s the argument ERCTC proponents never won. They never convinced stakeholders that their idea was more important than climate/energy or that it was more important than other programs targeted at parents and kids, so creating a permanent program was never really on the table.

It’s also, I think, important to be realistic about the fact that this idea played an extremely marginal role in the 2020 campaign. Biden won the primary on the promise to be an electability candidate who’d beat Trump, and he beat Trump on a promise to defeat the virus, revive the economy, and restore a sense of normalcy to American politics. Whatever Biden’s current political struggles, I think he can really say he did that stuff. He didn’t, in the end, cut child poverty in half, but doing that was genuinely not part of his campaign message and it’s not shocking that it couldn’t win a prioritization battle. But that’s where the fight was lost. Nothing about the expiration of a temporary program should blackpill you about the durability of social safety net programs.

1

For better or worse, public perception of Tony Blair as an ultra-moderate was and remains basically unaffected by the fact that he enacted a program along these lines in the U.K. and succeeded in dramatically cutting poverty.