An important new study of the distribution of benefits from a major new policy from President Biden and Democrats — the expanded child tax credit — illuminates the repulsiveness of this scam with unusual clarity.
The new analysis from the Niskanen Center finds that the expanded child allowance — which has started delivering up to $300 per child per month to most U.S. households with children — will shower outsize benefits on residents of rural and less populous states and will deliver a disproportionately large relative boost to their local economies.
Every congressional Republican voted against the covid-19 rescue bill, which created the current child allowance by temporarily expanding the previously existing child tax credit to poorer and working-class families, making it much more like a universal program.
And every Republican will likely oppose extending the expanded child allowance. It’s now set to expire next year, and Democrats hope to extend it until 2025 in the $3.5 trillion “human infrastructure” bill they want to pass through the Senate via reconciliation.
While just about all Republicans supported the previous version of the child tax credit, and the policy has a bipartisan history, the rub here is that the expansion of it to poorer families — which Republicans oppose — will itself have an outsize impact on rural residents and red states.
The study quantifies this in a useful way. It analyzed the new policy’s state-by-state impact by looking at the net amount added by the expansion to the total each state gains under the previous policy.
Its key finding: Although more populous states with more families with children stand to get more in total overall funding than smaller and sparser states do, the latter states still stand to get more in new benefits per capita.
That’s because the smaller and less populous states tend to have more poor residents as a percentage of overall population, and have larger average family sizes, Niskanen finds. The result: The total amount added by the expansion, relative to population size, is higher in those states.
As it is, the fact that more populous states will get more overall money also benefits red America: Niskanen finds that two of the three states that will get the most in funds are Texas and Florida (along with California).
This gets even more interesting when you break the funding down per capita in each state. The study finds that the first nine states that will gain the most per capita from the expanded child allowance are all red states.
And, because red states tend to have lower economic output, they will receive a larger injection of funds as a share of their GDP as well:
As the report concludes: “The CTC provides the largest relative benefit to rural states with lower economic output.”
This dynamic is also starkly illustrated by the study’s breakdown of benefits received in metropolitan vs. non-metropolitan regions, as a share of their GDP:
Because poor and working-class families will use much of the money to “increase household consumption on goods and services,” it will crank money into non-metro economies at a higher percentage of overall GDP in them, the report concludes.
“This suggests the CTC expansion will deliver a substantial boost to rural economies across the country,” the report says.
Samuel Hammond, a Niskanen policy analyst, illustrates the point with a thought experiment. Because the GOP base is made up of so many older voters, he notes, Social Security is a government program that provides a huge boost to rural and red America.
“If Social Security were abolished, no one doubts that rural America’s economy would collapse,” Hammond told me. “The expanded child tax credit runs that thought experiment in reverse.”
That has big implications for our perennial debate over the divergence between metropolitan and non-metro America. Conservative populist senators love to valorize non-metro America as the “great American middle” while bashing “cosmopolitan elites,” and Republicans denounce Democrats as elitists for pointing out that non-metro regions are stagnating economically.
Meanwhile, Republicans are busily rebranding themselves as the “party of the working class” by contrasting Trump’s supposed “economic populism” with the Democratic Party’s alleged “cultural and economic elitism," all to keep Trump voters engaged.
In this, Republicans are reverting to a decades-old approach — pushing canards about the safety net that appear designed to play on fear and loathing of the urban underclass to help advance a plutocratic agenda. Whatever happened to Trump’s “working-class” GOP makeover?
“The perception that these programs mostly benefit the urban poor is very outdated,” Hammond told me. “The modern Republican coalition has a lot of working-class voters and families in rural America.”
“The child tax credit expansion is going to be huge for rural working-class communities,” Hammond continued. “It’s strange to see Republicans oppose spending money even when it goes to their own constituents.”