PHILADELPHIA (KYW Newsradio) — President Joe Biden signed his $1.9 trillion COVID-19 relief bill on Thursday, enacting the second-largest spending bill in U.S. history. Along with aid to state and local governments, schools, day care, businesses and $1,400 checks to individuals, the American Rescue Plan revives an anti-poverty measure the U.S. employed from the 1930s to the 1990s. In a high-poverty city like Philadelphia, it could be a game-changer.
For 60 years, the federal government made direct payments to families with children to reduce poverty. The Depression-era Aid to Families with Dependent Children was abolished in the '90s, but this is more or less a return to that strategy, this time through an expansion of the child tax credit and a change in the way it’s paid.
About one-third of children don’t even qualify for the current $2,000 tax credit because their families make too little money. The American Rescue Plan increases the credit to $3,600 for children under 6 and $3,000 for older children, and it provides it to every family, regardless of income.
And, as Garrett Watson of the Tax Policy Foundation notes, the money won’t be claimed one time only, when filing taxes, but can be paid out in monthly installments.
"It’s a more regular form of support that will help them more than the current system," hs said.
In Philadelphia, more than 300,000 children will benefit, a third of whom live in poverty. With monthly payments of up to $300 per child, scheduled to start in July, more than 40,000 of them could be lifted over the poverty line. That alone would cut Philadelphia’s poverty rate by 10%.
Donna Cooper, executive director of Public Citizens for Children and Youth, says it will help thousands more living on the margin.
"Seven out of 10 families in Philadelphia are underwater. Between the cost of raising their children, paying rent, paying child care costs, paying taxes and then feeding and making sure their kids are healthy? They’re tanking," Cooper said. "This could mean the difference between filling a prescription and also eating dinner and keeping the lights on or avoiding eviction."
She calls it an extraordinary step forward.
"It recognizes that the cost of raising children is rising and wages aren’t," she said.
However, Watson says there are potential pitfalls. One, the IRS has to get the program up and running fast, making sure the payments are tailored so that families don’t end up having to refund any overpayments.
Also, it’s temporary. To make lasting change, it would have to become permanent, at a cost of about $100 billion a year.
"There will have to be consideration of the long-run costs, which will be somewhere around $1.1 trillion over 10 years, and of course advocates will point to that being worth the reduction in poverty."
The bill has many other benefits for Philadelphia, including money for transit, schools, child care and $1.3 billion to balance the city budget.