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Child allowance would boost GDP

Child allowance would boost GDP
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I became a teacher because I thought education could be used as a tool for economic mobility. Like Horace Mann, I believed that education was “the great equalizer” that could lead children out of poverty. Now, after several years teaching in Title I classrooms, I see it in reverse — fighting child poverty comes first, and the educational benefits come after.

Evidence backs my intuition: researchers have demonstrated that increasing a family's income leads to higher test scores for their children. Other studies have shown that reducing child poverty can decrease crime, improve health outcomes and add up to $1 trillion to our GDP. 

So how do we do it? New research from my colleagues and me at the UBI Center shows that a child allowance (a policy that gives cash directly to parents) would work. Nationally, a $300 monthly child allowance would cut child poverty by more than half — from 13.9 percent to 6.7 percent. The share of Black children living in poverty would fall from about 1 in 4 to about 1 in 10.

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Beyond reducing poverty, child allowances would push our country toward economic equality. A federal child allowance (funded by a flat tax on taxable income) of $300 per month would reduce economic inequality by 5 percent, as measured by the Gini coefficient. The same plan would boost the average annual income of families in the bottom decile by a third while lowering incomes by the top decile by only 4 percent.

And while the future prospects of a national child allowance may hang in the hands of Georgia, states do not have to wait on Congress to start helping kids. Our simulation also showed that state-level child allowances would be effective. In California, the state with the highest child poverty rate in the country, a $200 monthly child allowance would drop the child poverty rate from 19.6 percent to 12.8 percent. The plan could be funded by a 2 percent income tax.

These findings show that state legislatures should make child allowances a top priority. In many states, Democrats can enact this policy without a single Republican vote. Following the 2020 election, Democrats are expected to have a trifecta in 15 states plus Washington, D.C.  Together these states have over 26 million children, of whom 15.5 percent are in poverty. If each state passed a $300 monthly child allowance, that would fall to 7.9 percent, lifting more than 2 million children out of poverty.

As it stands, America is one of the only rich nations that does not guarantee money for parents. Instead of a universal allowance, the United States uses the Child Tax Credit to subsidize parenting. But due to the credit’s phase-ins over one-third of children, and over half of Black and Hispanic children, are ineligible for the full credit because their families do not earn enough to qualify.

All of this has consequences: children living in poverty have higher stress levels, achieve less in school and are more likely to live in poverty as adults. As a teacher, I have seen far too many children carrying the trauma that growing up in poverty inflicts. It is heartbreaking.

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I wish that I could do more, but I also recognize that many factors are out of my control. I do my best to ensure that every student receives a high quality math education, but I cannot guarantee that they all have food on the table or a roof over their heads — only policy-makers can do that.

It is time for legislators at every level to address child poverty with the urgency it requires. Perhaps the simplest and most effective solution is to just send parents money. 

Nate Golden is a research associate at the UBI Center and a math teacher in D.C. Public Schools. He has worked as a policy advisor for State Representative Leslie Herod of Colorado and a researcher for The Colorado League of Charter Schools through the Urban Leaders Fellowship summer program. Follow him on Twitter @ngpsu22.