US president Joe Biden’s proposed $1.75 trillion climate and social spending bill, known as Build Back Better, is effectively dead after West Virginia senator Joe Manchin said he would not vote for it in its current form. The bill, which allocates billions of federal dollars to expand access to things like affordable housing, medicare, and childcare, together with the $1.2 trillion infrastructure bill, was the centerpiece of Biden’s policy agenda.
Manchin said publicly that he “cannot” support the legislation because of its size; he worried it would worsen inflation and add substantially to the US national debt. But in private conversations with other senators, however, he appeared to take issue with how people might use some of its benefits. As HuffPost reports, Manchin allegedly shared concerns with his fellow Democratic senators that people would abuse an expanded paid sick leave policy included in the bill to go on hunting trips and that parents would use monthly child tax credit payments to buy drugs.
But on at least one of those counts, Manchin’s alleged fears are unfounded. Monthly child tax credit payments have already been reaching 35 million American families since July when, as part of emergency pandemic legislation, the Internal Revenue Service temporarily expanded the amount of child tax credits and began sending out half the money—up to $3,600 for children up to age six, and $3,000 for ages six to 16—as cash payments to all but the wealthiest families. (The remaining half stayed a lump sum for families to claim on annual taxes).
How Americans spend child tax credit payments
The monthly payments of $250 or $300 per child (depending on their age) were intended to help alleviate child poverty by giving families a consistent source of income to spend on food and other household expenses, or address other financial needs. As it turns out, they have done just that. Between July and October, the US Census Bureau collected weekly survey data on how people used child tax credit payments and found that families tended to spend, save, or use the money to pay off debt almost equally.
When people spent the money, they most often put it towards housing, food, and school expenses like tuition and books, according to the survey. On the whole, this extra income has made a difference for families; even in the first few months of the program, it reduced the number of families experiencing hunger.
Of course, “drugs” was not among the categories of expenses families were asked about in the survey, but study after study on cash transfer programs shows that this fear about people misusing benefits on vices does not bear out. A 2014 World Bank metastudy of cash transfer programs from around the world found no evidence that beneficiaries spend significant portions of the money on alcohol or tobacco. A March 2021 study (pdf) of a pilot cash transfer program in Stockton, California, found that recipients used less than 1% of the funds on alcohol or tobacco.
The end of a lifeline for families
The existing child tax credit payments are temporary, and the last payments of the year went out on Dec. 15. Already, families are worried about what they will do without the extra income. The Build Back Better act would extend the payments for another year, bringing the US into the ranks of more than 100 other countries with a cash benefit program for children and families.
Democrats expect to go back to the negotiating table next year to renegotiate a smaller version of the deal. If the child tax credit expansion is left out, millions of families could once again find themselves struggling to make ends meet.