In 2022, the child poverty rate spiked to 12.4%, a dramatic increase of 7.2 percentage points from the previous year, according to data released Tuesday by the U.S. Census Bureau. The increase in child poverty resulted in 5.28 million additional children living in poverty. 

The implications for each of these children are massive. Children who experience poverty endure immediate hardships, including "food insecurity and hunger, inadequate clothing or diapers, lack of health care, living in overcrowded or substandard housing, or being homeless." 

The long-term consequences of child poverty are severe. As Indivar Dutta-Gupta, President of the Center for Law and Social Policy, explained during Congressional testimony in July, "poverty also harms children by imposing high levels of stress on their parents, which impairs their capacity to give their children the care and attention any child needs to thrive." As a result, children who experience poverty at any time are "far more likely than their peers to fail to finish high school, become parents as teens, and experience poverty as adults."

The massive increase in child poverty last year was a completely predictable and avoidable tragedy. Powerful people inside and outside the federal government chose to let this happen because they had other priorities. 

In 2021, the child poverty rate fell to 5.2%, a record low. The key to this reduction was tax policy. As part of the national response to the pandemic, the federal government expanded the child tax credit (CTC). The CTC was increased from $2,000 per child to $3,600 for each child five or younger and $3,000 for each child six through 17. (The credit phased out for couples making $150,000 or more and individuals making $75,000 or more.) Further, from July to December 2021, credits were sent to eligible families as a monthly benefit instead of forcing families to wait for a tax refund. Finally, the CTC was made fully refundable regardless of income. Previously, millions of families were denied some or all of the tax credit because they made too little money. 

The expansion was scheduled to expire at the end of 2021. The Biden administration initially proposed extending the expanded CTC for four years. The cost of the expanded CTC is about $100 billion per year. Could America afford to extend the tax credit indefinitely to help millions of children?

It's a matter of priorities. In 2021, when Biden took office, the Pentagon budget was $740 billion. In July, the House of Representatives approved a $886 billion Pentagon budget. (These numbers exclude military aid to Ukraine.) So, in two years, the leaders of the country increased the Pentagon budget by $146 billion. And, since the Pentagon budget is never reduced, this $146 billion will be spent annually, in perpetuity. Next year, the Pentagon budget will surely exceed $886 billion. 

None of this military buildup increase was offset by spending reductions or tax increases. The money has simply been added to the deficit. The Biden administration had numerous proposals to pay for an extension of the expanded CTC, including a modest increase in the corporate tax rate, the elimination of a tax loophole for private equity managers, and a surtax on billionaires. 

But wealthy and powerful people either opposed those measures or opposed, on principle, adjusting tax policy to benefit poor families. So, they used their influence to defeat proposals to extend the expanded CTC. As a result, millions of children are living in poverty. 

Corporations sunk the expanded child tax credit

In 2021, the U.S. Chamber of Commerce – a group that represents nearly every major corporation in the United States – spent millions of dollars lobbying against the expanded CTC  extension, which at the time was included as a provision in Biden’s reconciliation bill. The group claimed to have concerns about "large amounts of transfer payments that are not connected to work” and suggested that the CTC “will dampen participation” in the workforce. Similarly, the Business Roundtable, which represents many of the nation's top CEOs, also spent hundreds of thousands of dollars to defeat Biden’s bill.

Corporate lobbyists were even more concerned with proposals that would have required companies to pay a more equitable share of taxes to offset the cost of the expanded CTC. As a result of former President Donald Trump’s 2017 Tax Cuts and Jobs Act (TCJA), many of the largest companies in the country paid little to no taxes for several years, despite raking in record profits. In 2021, AT&T, for example, made $29.6 billion but paid no federal income taxes. Charter Communications also made $6 billion in 2021, yet paid nothing in federal income taxes. And AIG (a company that was bailed out by the government during the 2008 financial crisis by more than $182 billion) made $9.8 billion and paid nothing in federal income taxes. 

Biden’s proposal, which would have extended the expanded CTC, would have reversed these deep corporate tax cuts by a modest amount. Major corporations prioritized maintaining the lowest possible tax rate over the well-being of impoverished children. 

Manchin opposed child tax credit extension, claiming parents would use the money to buy drugs

One of the Biden administration’s most prominent proposals to expand the CTC was in Biden’s Build Back Better agenda, which included expanding the CTC for one year. This proposal was blocked, in part, by Senator Joe Manchin (D-WV). In December 2021, just weeks before the CTC was set to expire, Manchin announced that he would not be voting for the Build Back Better Act, even after Democrats “shaped much of the current version of the bill around” his demands. With Democrats holding 50 seats in the Senate, Manchin joined a unified Republican Party to sink the bill.

Manchin released a statement stating that he opposed Build Back Better “largely because of its cost,” stating that his “colleagues in Washington are determined to dramatically reshape our society in a way that leaves our country even more vulnerable to the threats we face.” Publicly, Manchin stated that “he has always supported the child tax credit” and opposed Build Back Better for other reasons. But, according to HuffPost, Manchin privately “told his colleagues that he essentially doesn’t trust low-income people to spend government money wisely.” Manchin “told several of his fellow Democrats that he thought parents would waste monthly child tax credit payments on drugs instead of providing for their children.” 

There is no evidence that CTC payments were being used by parents to purchase drugs. US Census Household Pulse data found that, between July 21 and August 16, 2021, the payments were spent “on basic household needs and children's essentials.” The data found that food was “the most common item” purchased using CTC money, with “half of all families in the US using their Child Tax Credit payment” for food. Food also “top[ped] the list in every state” except Mississippi, “where school essentials and food are essentially tied for number one.” Other top expenses paid for by the CTC payments included “essential bills,” “children’s clothing,” “[r]ent/mortgage,” and “school and child care.”