Earlier this week, new data on childhood poverty was released, confirming what everyone already suspected: there were far, far more impoverished children in America in 2022 than there were in 2021. In fact, more than twice as many. The rate of child poverty increased from a historic low of 5.2 percent in 2021 to 12.4 percent in 2022, a staggering year-over-year increase of 138 percent. According to UNICEF data, there are some 73.6 million children in the United States, meaning that this past year saw approximately 5.3 million children fall beneath the poverty line. For perspective, 5.3 million people is more than the populations of 28 states. That’s like the entire population of Minnesota going from above the poverty line to below it in twelve months.
To call this anything other than a catastrophic policy failure would be delusional. Following the passage of major stimulus at the beginning of the Biden administration, the Expanded Child Tax Credit saw the number of children living in poverty fall to a historic low. President Biden and congressional Democrats were, rightly, lauded for this accomplishment and efforts to expand the program. However, in large part due to opposition (largely by way of outdated “welfare queen-”esque presumptions) from Senator Joe Manchin, the tax credit was allowed to expire.
Manchin has, deservedly, faced an avalanche of criticism around his blockade of the tax credit, but there has been hardly any blame assigned to the people who ran interference for him: inflation hawk economists. Larry Summers, Jason Furman, and others spent all of 2021 and much of 2022 complaining about excess fiscal stimulus and attributing high inflation to that government spending. Empirical evidence now shows that their story was wrong on nearly every count. There was no wage price spiral. Fiscal stimulus’s impact was dwarfed by a series of exogenous shocks: pandemic, supply chain breakdowns, war in Ukraine. And there’s no evidence that hawkish policy prescriptions such as rate hikes were a primary cause of more recent milding of inflation.
These neoliberal economists gave Manchin cover as he crusaded against the social spending that helped create an America with significantly less poverty and desperation. With Larry Summers going on TV every week and fear mongering about stagflation, limiting government spending was made to seem wise to centrist elites. But what gets lost in macro-level concerns around stable price levels and rate hikes are the real people who experience the fallout of economic policy choices. Hacks fundamentally view unemployment in the abstract, while, for most of us, it represents a concrete harm—one of the largest setbacks we can experience in life. We can’t all be tenured at Harvard after all.
The Child Tax Credit is the same thing. To inflation hawks, the enemy was always federal spending, particularly increased spending on social programs (e.g. there was virtually no discussion of defense spending driving inflation). But when you don’t fund social programs, especially those that were extraordinarily successful like the Expanded Child Tax Credit, people’s lives get harder. And actually, that’s part of the point. To these hacks, the benefits of these social programs increase worker power to an unacceptable degree. Anything that makes it easier for everyday people to demand better pay or conditions is bad, a potential driver of inflation.To them, the solution is obvious: immiseration.
But this is where it becomes important to remember that “the economy” is really just an aggregation of all of our lived conditions. And we need to think long and hard about whether making some top line numbers look better is really worth causing millions of people to suffer. In the ivory tower, child poverty is a data point. In the real world, it’s kids having a hard time getting enough school supplies, watching their parents having to take on extra jobs to make ends meet, feeling the second-hand stress of precarious finances, or even, God forbid, experiencing food or housing insecurity. Thanks to the thinking of Manchin, Summers, and conservatives who all blocked renewing the program, millions of childhoods are harder now than they could have been.(the long run economic implication of more adults who experienced material stress as children is not something that current macro models account for adequately enough to matter to Summers and Furman, apparently)
To be fair, Summers and Furman both offered support of the Build Back Better legislation that would have made the Expanded Child Tax Credit; Furman specifically wrote that the policy should not be shelved by Congress (though he did propose potentially cutting the benefit in half and further means testing the program…). But the fact remains that their ubiquitous claim that fiscal stimulus was driving inflation created a media smokescreen that Manchin hid behind while sinking BBB, sentencing millions of children into poverty. And this is not some unfair post hoc analysis–that excessive focus on deficits will lead Congress to shortchange the social safety net has been an unchanging fact of American political life for the entirety of Summers and Furman’s careers.
The human cost of hawkish policy proscriptions is real, and it will always hit those in the most vulnerable situations the worst. So next time you hear people complaining about how more social spending will drive up prices, think of the children. Because the hacks certainly won’t.