Government ‘allowances’ are the new welfare
Washington seems to have developed an “allowance” fetish, and it has nothing to do with parents paying their children for household chores: a number of new government “allowances” are reportedly distributing shipments of taxpayer money to tens of millions of households. First there was a proposal, which is now law, to temporarily convert the federal long-standing child tax credit to what supporters call a “child allowance”. As the name change suggests, the new payments have little to do with a parent paying taxes. This year, parents do not have to pay taxes at all to receive an annual allowance of up to $ 3,600 per child. In fact, the only parents who are not entitled to the allowance are the few high-income earners who pay the most federal income taxes. According to the New York Times, “over 93% of children – 69 million” will benefit from the new federal gift. Like a parent with low expectations, the federal government will be extremely lenient in the distribution of these allowances: no work is expected from the parents who receive them. This is reminiscent of welfare programs before the bipartisan reforms of 1996 which required parents to work or take training in order to receive government checks. In fact, the main beneficiaries of the new child allowance will be parents who earn less than $ 2,500 a year – including those who do not work or pay no taxes at all. Even adults who do not live with their children can keep up to $ 2,000 per child in benefit payments mistakenly offered each year. The Republicans’ tax reform law of 2017 had already doubled spending on child tax credits from $ 1,000 to $ 2,000 per child. The new child allowance will double that spending again, adding nearly $ 110 billion to the budget this year alone. The lion’s share of these new costs – and all increases for part-timers and the unemployed – reflect new benefits paid for by others, not tax relief that a recipient should otherwise. Extending family allowances until 2025, as proposed by President Biden, would cost an additional $ 500 billion. It’s not the only new allowance in town. A recent proposal by Senator Ron Wyden (D., Ore.), Chairman of the Senate Finance Committee, proposes permanent extensions to unemployment benefits, including key “temporary” federal policies created in response to the COVID-19 pandemic. His proposal, the Law on the Modernization of Unemployment Insurance, also calls for the creation of new “dependents’ allowances” and “jobseeker’s allowances”. Wyden’s Dependents Allowance would add $ 25 per dependent to weekly unemployment benefit checks, paid out of general federal government revenues rather than payroll tax funds. In other words, they would look more like pre-1996 social assistance checks than traditional unemployment benefits paid based on an individual’s previous work and income. Wyden’s proposal separately expands eligibility and raises unemployment benefits to at least 75 percent of a worker’s previous salary – almost double the current average – and to 100 percent during public health and other emergencies. . Dependent allowances would be added to these extended benefits. This means that many workers with dependents could receive checks approaching or even exceeding previous wages, undermining their incentive to return to work quickly. New jobseeker’s allowances would in fact make the current temporary unemployment assistance program in the event of a pandemic (PUA) permanent. PUA is already the largest unemployment program today, with 7 million apparent beneficiaries – and also the most abused, as experts suggest that up to 30% of the program’s claims may be fraudulent. Wyden Jobseeker’s Benefits would start at $ 250 per week, could last up to 91 weeks depending on unemployment conditions, and would be payable to all unemployed people over 19 – including those who have never worked before. Again, all of this largesse would be paid out of general revenue rather than payroll taxes, meaning beneficiaries wouldn’t need to pay taxes before withdrawing benefits. How to interpret the sudden appearance of all these new “allocations”? As explained in a 2019 report proposing family allowances in the United States, the idea came from “other countries”. The UK, for example, offers Jobseeker’s Allowances, Employment and Support Allowances, and even attendance allowances. American policymakers could therefore simply follow suit. But it seems more likely that they are simply looking for an acceptable way to condition their current boom in new spending, a throwback to the failed policies of the past: greater benefits, for more people, funded by the taxes of others. . After all, calling these payments “welfare” just wouldn’t do the trick, right?