Can the expanded child tax credit come back from the dead?

Originally published in Vox on April 28, 2022.
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Advocates for an expanded child tax credit (CTC) did not expect to be in this situation.

A year ago, when Congress passed an expanded version of the policy that’s been around with bipartisan backing since 1997, some 35 million parents across the US began to see hundreds of dollars land in their bank accounts every month — money that they could spend however they saw fit.

Economists and policy experts hailed the program, which, passed as part of Biden’s pandemic relief package, gave families the resources to buy household essentials like food, gas, and educational supplies. Researchers found little evidence that the new payments had discouraged parents from working, a perennial concern from opponents of welfare assistance. Within just six months, researchers estimated the expanded CTC payments had reduced the child poverty rate by 30 percent.

The new policy wasn’t perfect — even the expanded program wasn’t reaching America’s poorest parents, and about 1 million people opted out to avoid a smaller refund or higher tax bill come April. But the more robust CTC nevertheless led to a stunning drop in poverty, a long-term crisis that leaders often describe as intractable.

Yet, as Senate Democrats debated President Joe Biden’s $1.8 trillion spending package, the Build Back Better Act, December came and went, and with it the deadline to extend the expanded CTC. By January, the monthly payments expired, just as inflation was inching up. Though the CTC was only funded for one year, Democrats had been optimistic that if they could just seed the generous program, then they would amass the kind of political support that makes a popular subsidy hard to repeal.

“We were shocked,” said Otis Rolley, a senior vice president at the Rockefeller Foundation, who has been leading a coalition of groups to support the policy. “We really did think as American families were getting this credit, we really thought that December would come around and, based on the desire of their constituents, this would be made permanent.”

Democratic leadership could not reach a compromise with Sen. Joe Manchin (D-WV) that would address his concerns about the child tax credit. Moreover, Democrats weren’t willing to separate the CTC from Build Back Better to negotiate it independently, seeing it as important leverage to the broader package. BBB talks collapsed in December; the White House’s disconnect with Manchin overextending the CTC played a major role.

Now, four months later, the window to save the expanded CTC has narrowed. Manchin seems to be souring on a Democrats-only bill passed through the budget reconciliation process. And there are competing priorities on the congressional to-do list — including more Ukraine assistance and a China competition bill — to get through before summer recess and the midterm elections.

Among CTC advocates both outside and within Congress, there’s a quiet, almost paralyzing crisis playing out these days behind the scenes: Should they keep pushing for an expansion that meets all their top criteria, and fight for every child, or do they make clear what they’d be willing to compromise on and hopefully get something through reconciliation or on a bipartisan basis?

In the fall and winter, advocates took a hard line — there was no appetite to negotiate over a less ambitious CTC. One leader involved in a large coalition of groups mobilizing for the CTC, who requested anonymity for fear of getting his organization booted from the coalition, told Vox their fellow activists erred, making “a giant miscalculation that we had nothing to lose if we held out for more.”

“Because we couldn’t help everybody at once, we’re helping nobody,” they added.

In addition to the practical time constraints, congressional leaders, Biden, and even CTC advocates are now struggling to act, or even grapple with how political conditions have changed since December. Republicans, for their part, have little interest in helping Democrats ahead of the midterms, and as much as Democrats and activists say the expiration of the CTC payments presents an urgent political crisis, they also face incentives that encourage them to do nothing.

To insist their hands are tied and it’s all Manchin’s fault, it turns out, is the path of least resistance.

Can CTC advocates pivot?

It’s worth understanding how negotiations over the important program broke down last year because many of the dynamics haven’t changed.

In November 2021, the House of Representatives passed Biden’s $1.8 trillion BBB package, which included a one-year expansion of the CTC. But in the Senate, Manchin raised three main objections that held up the legislation.

The first: The West Virginia senator opposed the number of affluent families who could claim the credit (an upper income limit of $400,000 set originally by Republicans). He also disliked the one-year extension proposal, rightfully suspecting many of its backers wanted to make the CTC permanent down the road, and he worried about that cost. Perhaps most significantly, Manchin made clear that he wanted to reinstate a work requirement for the CTC, something hotly opposed by many Democrats who recognized this would once again exclude some of the poorest households from claiming the credit’s full value.

Coming back from the winter holiday, leading Senate supporters of the expanded child tax credit vowed to keep fighting, insisting a path through reconciliation was still there. Yet it was clear the fight, at the very least, had changed. Manchin previously indicated he was open to a deal on BBB between $1.5 trillion and $1.8 trillion, but since he opposed including temporary provisions, Democrats had to wrestle with the fact that a decade expansion of the CTC could eat up at least $1.4 trillion of their wiggle room.

Biden began signaling that his hopes had dimmed on Congress passing a CTC extension through reconciliation, which would require all 50 Democrats to pass. In a January press conference, the president said he was confident “we can get pieces — big chunks — of the Build Back Better” package signed into law, but conspicuously omitted mention of the CTC as one of those pieces.

Yet Biden resisted declaring his CTC vision dead. This has allowed many advocates to cling to the belief that it’s in fact alive. In some ways it’s a shrewd tactic from the president; if Biden did come out and say what most experts believe at this point to be true, he could face intense criticism from his base for giving up or failing.

Indeed, there have been dozens of state, local, and national groups organizing for the expanded child tax credit — some through coalitions like the aforementioned Rockefeller-led one, and through another called the ABC Coalition, led by the national Children’s Defense Fund. For the last year these umbrella groups have largely adopted the same strategy: Hold the line on maximal inclusion for poor and non-working families, spread awareness about the research studies showing the CTC reforms made a meaningful difference in 2021, and ramp up pressure tactics on Manchin, like highlighting how many children — including some 50,000 from West Virginia — could slip into poverty without the extension.

Plus, new polls were coming out that showed not reinstating the payments could hurt Democrats politically. One Morning Consult/Politico poll, released in February, found that 75 percent of voters who received the expanded credit said the halted payments affected their financial security. Another survey released by the left-leaning Data for Progress and Groundwork Collaborative found that likely voters had lost trust in Democrats to support families with children when they heard the expanded CTC had expired.

Armed with all this data, advocates maintained, Manchin would surely come around. But as April nears its end, negotiations over a new reconciliation bill have yet to even start. Within the advocacy coalitions, some have started to quietly grumble that maybe it’s time to rethink their strategy for the first time in over a year.

But groups that break from the consensus position do so at their own risk. In early February, Patrick Gaspard, the president of the liberal think tank Center for American Progress, published a memo where he dared to say the quiet part out loud: “It is abundantly clear that the Build Back Better Act that passed the House has no path to becoming law,” he wrote. Still, Gaspard argued, it’s not too late to get something meaningful through, and he outlined three areas — lowering health care costs, tackling the climate crisis, and lowering child care expenses through investments like universal pre-K — as places where lawmakers could likely agree to a deal. The CTC was notably not listed. “Let’s be disciplined, pass a package where there is a way forward,” Gaspard wrote.

While the Center for American Progress had been an active member of the ABC Coalition for the last year, following Gaspard’s memo, the coalition voted to boot the think tank from their group. In a March email reviewed by Vox, their steering committee wrote “while members are free to advocate for outside priorities and even alternative child allowance proposals, we determined that CAP’s decision to put their full weight behind a legislative plan that forecloses the possibility of extending the CTC violated this coalition’s working agreement.”

The ABC Coalition did not return requests for comment, but Seth Hanlon, a senior fellow at the Center for American Progress, told me they didn’t mean to say they should stop fighting for a child tax credit. “The purpose of the memo was the sharpen Democrats’ focus and essentially say don’t fumble this opportunity that exists,” he said.

Chuck Marr, the vice president for Federal Tax Policy at the Center on Budget and Policy Priorities, another liberal think tank, told me advocates like him should stay focused on a potential Senate reconciliation bill to pass some type of expanded CTC. “Making laws is always uncertain,” Marr said. “You want to explore any possible path to provide this crucial support that will help low-income families … [and] first, you should pursue the immediate path as aggressively as you can. If you don’t get it then look at other strategies.”

It’s ultimately about elected leadership, not activists

If advocates really want to pass reforms to the child tax credit, some within the CTC coalitions have quietly suggested their groups clarify what compromises they’d be willing to accept, and make clear to lawmakers that they’d publicly support those who fought for such compromises.

These were lessons learned by environmental and health care advocates who came close to passing universal health coverage under President Bill Clinton and cap-and-trade under President Barack Obama, only for it to end in a massive defeat. One CTC advocate, speaking on the condition of anonymity, observed that since the broad “care coalition” that has mobilized over the last few years for policies including the CTC, universal home care, universal pre-K, and paid family leave has never really experienced a comparable legislative defeat, they’ve never had to critically reflect on their strategy.

“Defeat sharpens the mind,” they said. “Rather than figure out how to do a work requirement that was tiny enough that you could get the most amount of families covered, they’ve instead insisted on doing pressure tactics that we’ve seen do not work with Manchin.” The advocate said this dynamic speaks to progressives’ “obsession with getting the language perfect rather than getting the policy changed.” Allowing Manchin to tell his largely conservative constituents that he was restoring a work requirement, for example, could give Democrats room to then craft the tiniest work requirement possible.

Most organizations say it’s simply not their job to advocate a compromise — that they should push for the most inclusive policy for as long as they can. And to an extent, it certainly makes sense why predominantly progressive groups would not be willing to entertain, let alone craft, a settlement deal.

While most compromise proposals would keep the new monthly payments for at least 80 percent of beneficiaries, the families with the lowest incomes that likely would have been hit are largely represented by these advocacy organizations.

Activists are completely right that it’s the job of elected officials to negotiate an agreement, though the reality is that Democrats will face less backlash from advocacy groups if they don’t reach a deal with Manchin than if they do. Any pared-down deal will inevitably be blasted by allies, and the message senators are hearing from activists is to hold the line.

One of the few advocacy groups that have been pushing for a compromise has been Humanity Forward, founded as an offshoot of Andrew Yang’s presidential campaign.

Greg Nasif, the group’s political director, told me he thinks that while lawmakers who negotiate a compromise would at first “face resistance” from activists and members within their party, “in the long term they would be celebrated for finding a way to get this program restarted.”

It’s also possible that it’s too late for a deal to be struck through reconciliation. Though Samantha Runyon, a spokesperson for Manchin, told me her boss “continues to support policies that reward hard-working families as the effects of costly inflation taxes strain their budgets,” she also said Manchin believes “any change to our social safety nets should move through regular order.” On Monday, Manchin met with Republicans to discuss a bipartisan energy package, raising new questions of whether a Democratic social spending bill remains on the table at all.

I asked four of the leading Democratic CTC champions in the Senate — Michael Bennet of Colorado, Ron Wyden of Oregon, Raphael Warnock of Georgia, and Sherrod Brown of Ohio — if they were prepared to push for compromises with Manchin to reach a deal, and what such compromises might look like if so.

Wyden was the clearest in saying yes, though he declined to get into details, citing sensitivities of the negotiations. “I’ve said since December that I would be willing to make changes to get Senator Manchin on board,” he told me. “We need his vote. There’s no way around it. There have been many conversations along those lines in an effort to make progress.”

Brown reiterated to me the importance of extending the CTC expansion to cope with rising costs. “I’ll keep working with all of my colleagues until an extension of the expanded CTC is signed into law,” he said.

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Warnock’s office didn’t return a request for comment, though the senator had publicly refused the notion of a work requirement for a CTC deal back in February.

Bennet’s position — if you read between the lines — was the most revealing. While he has indicated multiple times that he’s open to lowering the CTC’s upper income threshold (one of Manchin’s priorities, and one that would mean an effective tax increase on the wealthiest beneficiaries), Bennet has continued to distance himself from Manchin’s top demand for a work requirement, and cast the West Virginia senator as the sole obstacle to an extension.

“Nothing would make me happier than doing the right thing and passing a reconciliation bill that lifts millions of children out of poverty, ” he told me. “There is an opportunity in reconciliation, but whether there are 50 votes is a real question. It is likely given that recalcitrance of some people in the caucus — or maybe one person in the caucus — that the path for a permanent solution is going to have to be bipartisan, and I’ve been having good discussions about that over many months.”

Yet a work requirement is a top condition for virtually the entire Republican caucus.

How realistic is a bipartisan deal?

Convincing just one Democrat to get on board through reconciliation seems easier than striking a deal with at least 10 or 11 Republicans, but calls to look across the aisle have grown louder in recent weeks as negotiations for a social spending bill stall. This case was made most prominently in the New York Times earlier this month by Samuel Hammond, the director of poverty and welfare policy at the Niskanen Center, a centrist think tank. Hammond argued that working on a bipartisan basis was “the most viable path forward” and that there are “plenty of reasons to believe” the bipartisanship demonstrated around the infrastructure bill could be replicated for the CTC.

Any compromise, he wrote, would need to balance Republicans’ commitment to having some connection to work and earnings with Democrats’ commitment to maximal inclusion for low-income people.

Hammond floated the idea of providing an unconditional monthly benefit to parents of young children — those parents with higher poverty rates and upfront expenses — along with a larger credit tied to work for parents of school-age children. “An unconditional child benefit for infants is unlikely to face serious Republican opposition,” he predicted.

Part of the case for bipartisan compromise is rooted in how much movement there’s been within the Republican Party on family policy over the last five years. Back in 2017, Sen. Marco Rubio (R-FL) drew scorn from conservatives when he threatened to vote against the Trump tax bill if his party wouldn’t agree to an amendment he sponsored with Mike Lee to increase the child tax credit.

“I think people really forget the resistance to the CTC expansion in 2017,” said Wells King, the research director at American Compass, a center-right think tank. “Just go back and see what the Wall Street Journal editorial board was posting at the time, all these arguments about why we shouldn’t have specific tax breaks for families.” Wells recalled one WSJ op-ed in particular that mocked the Rubio-Lee proposal derisively, suggesting Republicans instead pursue a canine tax credit to woo millennials. “I can’t fathom that kind of piece being written in today’s political environment,” King said.

Since 2017, two more GOP family policy proposals have been introduced — from Mitt Romney and from Josh Hawley. The Republican Party has also spent much of the last year mobilizing in response to Democrats’ expanded CTC, stressing how their ideas to help families — which link benefits to work — are better than Democrats’.

Even Romney, the one Republican who made waves last year for opposing a work requirement, has changed his tune.

King says Republicans’ positions are backed by public opinion research. American Compass found white, college-educated Democrats were the only demographic that expressed majority support for maintaining the expanded credit with no connection to work. Focus group research of working-class parents in southeastern Ohio, Atlanta, and San Antonio yielded similar results.

Even with this kind of data, many Democrats would be loath to agree to a work requirement that could exclude the poorest, and advocacy groups would no doubt fight against one. As a result, odds are increasing that Democrats will just wait until after the midterms, when they can blame the passage of a work requirement on Republicans taking control of Congress.

The political cost of inaction

Not being able to reach a deal on the child tax credit before the midterms could make an already grim-looking situation for Democrats worse. A survey released in early April found that among parents who received the expanded CTC, 46 percent were more likely to vote for a Republican in November, compared to 43 percent likely to back a Democrat. This divide stands in stark contrast to December, before the payments expired, when Democrats held a 12-point lead among those parents.

Even among those who do think there is room for bipartisan agreement, some experts suspect it’s unlikely to happen before November.

“I know there is an appetite to see if a deal could be struck, but I’m not sure this is the right political environment with the midterms coming up,” said King, of American Compass. Another advocate with knowledge of the CTC negotiations in Congress told me Republicans are unlikely to work on any child tax credit deal until they believe that Democrats’ reconciliation efforts are dead.

Still, Hammond argued, if Biden called a Rose Garden press conference to urge Congress to pursue a bipartisan path forward on the CTC, inviting Romney and Manchin and others to stand beside him, that would certainly add pressure to lawmakers in his party. There are political tactics the president, or congressional leaders, could still try.

For now, the legislative clock is ticking, and the easiest thing for Biden and other Democrats to do might be to insist their hands are tied because of Manchin. That’s certainly the approach Biden took last Friday when, speaking at a press conference in Auburn, Washington, he said of the child tax credit — “We lack one Democrat and 50 Republicans from keeping it from passing this time around.”

This sigh-and-blame-Manchin strategy is unlikely to face blowback from the CTC advocacy community, but families struggling with rising costs may find it aggravating to see Biden and Democrats with congressional majorities effectively giving up.

A spokesperson for the White House pointed me to Biden’s remarks from January: “The president said at his press conference that he would fight for every piece of his agenda, including what may not make it into the bill, for his whole time in office.”

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