Economy & Business

Will Tens of Millions of New Monthly Benefit Checks Be Joe Biden’s Legacy?

President Joe Biden signs the American Rescue Plan in Oval Office at the White House in Washington, D.C., March 11, 2021. (Tom Brenner/Reuters)
If so, prepare for even more calls for expanded welfare.

Joe Biden seems to be enamored with enacting FDR-like changes in the U.S., and for good reason. FDR’s shadow is both long and enduring. Take, for example, the Social Security program that he helped create: Since its passage, it has fundamentally altered American life — affecting how long we work, when we retire, and how many of us wind up in poverty. Today, that program pays monthly checks to 55 million retirees, survivors, and their dependents. (The disability benefits that were created in the 1950s support millions more.) But while it took decades for Social Security to reach this scale, President Biden has already exceeded that level by sending new monthly benefits to an estimated 65 million children across 39 million families — amounting to 30 percent of all households in America.

That massive check-writing operation is one result of the American Rescue Plan, the Democrats’ $1.9 trillion pandemic-relief law that President Biden signed in March. That law included three major expansions of the long-standing child-tax-credit program, the costs of which added to the deficit.

First, it increased annual payments per child — from $2,000 to $3,600 for children under age six, or $3,000 for older children. Second, it severed the connection between receipt of benefit and work by parents. Previously, only parents who worked could qualify — and full payments were reserved for those who worked enough to owe federal income taxes. Now, increased payments flow even to parents without any employment, earnings, or federal tax liabilities at all. Third, the new law pays checks in monthly installments, rather than in a single benefit at tax time.

Biden has suggested that these changes were needed to address the pandemic. In March, for example, he said that the American Rescue Plan “directly addressed the emergency in this country because it focuses on what people need most.” Yet in truth, these checks have nothing to do with the pandemic. (Just take a look at the now-dusty white papers proposing similar measures, long before anyone had even heard of COVID-19.) Supporters, including the president, have repeatedly called for making the enlarged payments permanent, further undermining any such connection.

The president also argues that the new checks amount to a substantial “tax cut.” On July 15, he called the benefit “one of the largest-ever single tax cuts for families with children.” Not so. Official estimates from the nonpartisan Congressional Budget Office (CBO) show that over 80 percent of the current expansion reflects new benefit spending directed at parents who do not owe federal income taxes; under 20 percent constitutes tax relief. Taxes will have to rise significantly to cover the $1.6 trillion cost in just the first decade if these benefits are made permanent.

The Biden administration seems to be taking the advice of former White House chief of staff Rahm Emanuel who, during the Great Recession, said: “You never want a serious crisis to go to waste. . . . It’s an opportunity to do things that you think you could not do before.” Recall the prior consequences of that approach: a $900 billion temporary stimulus law and Obamacare. Today’s lawmakers are again capitalizing on a crisis, seeking an even greater $5 trillion in benefit expansions and a continuation of these checks.

The significant number and costs of today’s checks obviously ought to be of concern. But it is not the only one. So, too, is the precedent they create for later, more-expansive measures. That very real consequence is already taking hold. Consider that Representative Ilhan Omar (D., Minn.) recently introduced legislation to permanently provide larger monthly checks to all but the very richest U.S. residents. Her plan would double federal spending — and taxes, if policy-makers tried to cover the staggering cost. Don’t be surprised if demands for such massive benefit expansions grow if monthly checks to one-third of all households are made permanent.

Democrats also suggest that these checks reduce child poverty, but they are poorly targeted to that effort. In addition to offering expanded benefits to millions of families earning over $100,000 per year, they also overturn the successful, bipartisan and pro-work welfare reforms of the ’90s by eliminating work requirements for recipients. More broadly, they will make tens of millions of families — nearly all in their prime working years — newly dependent on monthly government payouts.

One of the key questions facing Congress this month is whether to continue this deluge of government checks. President Biden and other Democrats who support making them permanent are already resorting to budget gimmicks to minimize the apparent cost, leaving it to future lawmakers to raise the taxes needed to pay them permanently. That’s no surprise given recent polling, which suggests support can quickly evaporate in the face of the broad tax hikes required to cover their full cost. Congress’s decision will ultimately determine whether this massive federal check-writing operation will be cemented in Joe Biden’s legacy — an initiative that’s already made FDR look like a government-check-writing piker by comparison.

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