Congress, the American public, and even national news outlets continue to uplift the powerful impact that the expanded Child Tax Credit (CTC) is having on the everyday lives of children and families. Indeed, 61 million children received their second CTC monthly payment on August 13th, totaling $15 billion in payments to help families raise their children and keeping three million children out of poverty in its first month alone.
Thanks to the American Rescue Plan, which was signed into law on March 11, 2021, the CTC is available to more children and their families than ever before. It extends eligibility to the 23 million children—disproportionately Black and Latinx children—who previously did not qualify because their families made too little. It corrects a long-standing issue with the policy: reaching the kids who need help the most and doing right by our children. While it does leave out immigrant children– a flaw we are fighting to correct – this expansion still has the potential to significantly reduce child poverty and racial disparities this year. In the long-term, it will promote child and family well-being, boost economic security, significantly advance racial equity, and ensure all communities thrive.
The CTC has been around since the late 1990s and is a critical program for families in their everyday lives. It is mostly focused on the basic income needed to help families cover everyday expenses and raise their children: from buying groceries to paying rent and bills, affording childcare, or buying back-to-school clothes. Indeed, according to the most recent Census Household Pulse Survey Data from early August, most families used the CTC to cover basic necessities, and recent estimates indicate the payments are contributing to a reduction in food insecurity by 3.3 million adults living with children. For the first time, as an advance monthly credit, this new approach to the CTC gives families flexibility and freedom to make the best decisions for themselves.
However, even with its benefits, the CTC is not a silver bullet. It does not provide generational wealth-building opportunities for families. This is where investments like Baby Bonds, a policy proposal supported by the Children’s Defense Fund (CDF), Prosperity Now, and countless organizations that are focused on closing the racial wealth gap, come in. Advocates want Congress to invest in them now, along with a permanently expanded CTC program. Let’s be clear – our children and youth need both programs, not just one. Here’s why:
Baby Bonds, first championed by economist Darrick Hamilton, would help provide families of color, who have experienced centuries of systemic racism and discrimination, an opportunity to build wealth through a birthright investment. Under the American Opportunity Accounts Act, sponsored by Senator Cory Booker (D-NJ) and Representative Ayanna Pressley (D-MA-Seventh), each child born in the United States would receive an account at birth, beginning with a $1,000 investment from the federal government. Every year until children turn 18, the accounts would be supplemented further with annual deposits provided by the federal government of up to $2,000, with the largest amount going to children from the lowest-income households.When a child turns 18, the funds could be used to invest in wealth-building activities, such as paying for a college education or a down payment on a home. For too long, politicians have put up barriers to prosperity for communities of color, with the racial wealth divide continuing to widen. Even in the most recent estimates, White families have eight times the net worth of Black families and five times the wealth of Latinx families. Baby Bonds and the American Opportunity Accounts Act are the first steps to correcting this wrong.
Baby Bonds and the CTC are necessary for our children and youth NOW.
Baby Bonds will help close the racial wealth gap and level the playing field for Black families and families of color by investing in youth and their futures. Coupling this with a permanently expanded CTC to help families with everyday expenses, creates a winning combination to help families and children from zero to young adulthood. We must begin to create a world that invests in our children from the cradle to higher education and beyond. A world where our young people have the tools they need to succeed, both with strong incomes and opportunities to build wealth.
Let’s correct the historical disinvestment and intentional harm done to our communities of color, and let’s invest in permanent Baby Bonds and an expanded CTC NOW. Congress must include both of these policies in the reconciliation package. It is, foremost, the right thing to do for our children and youth, and it is also smart economics for all.
This blog post was co-authored by Emma Mehrabi, CDF, and Joanna Ain, Prosperity Now.