The child poverty rate increased dramatically in 2022 after dropping to a historic low in 2021, according to new Census Bureau data. The drop in child poverty in 2021 was largely attributable to the temporary expansion of the child tax credit (CTC) and to the three economic impact payments (or stimulus checks) families with low incomes received.
The CTC expansion in 2021 provided immediate benefits to children and families, helping them meet basic needs amid the COVID-19 pandemic and soaring inflation. It also held promise for future societal benefits: because people who experience poverty as children have lower earnings and tax contributions and are more likely to need public supports as adults, reducing the number of children living in poverty can save the country hundreds of billions of dollars annually when those children reach adulthood.
Recent Urban research supports these findings. Much government spending on children, particularly in health and education, has long-term payoffs for society, and many programs pay for themselves in the long term through higher tax revenues and lower government expenditures.
But public spending on children has declined since temporary pandemic relief measures have ended, and it’s projected to continue dropping over the next decade. Understanding trends in public investments in children and the societal benefits of such spending can help policymakers and advocates as they seek to boost investments in children.
Many public investments in children have payoffs for society in the long term
Income supports for families, including tax credits and other tax benefits, Social Security survivor and dependent benefits, and Supplemental Security Income, represent the largest category of public investment in children. Federal, state, and local governments also support children’s well-being through public spending on health programs, including health coverage through Medicaid; access to healthy food through nutrition programs such as the Supplemental Nutrition Assistance Program; K–12 and early education and child care programs; and child welfare and social services, housing, and youth training programs.
These programs can substantially improve children’s well-being in the short and long terms. For the programs with the largest returns, the estimated return to society is $10 or more for each dollar invested in children. Urban research shows the largest payoffs for specific programs come from children’s health, early care and education, and K–12 education programs. Many of these programs also more than pay for themselves over time by increasing tax revenues and reducing government expenditures.
The Earned Income Tax Credit and housing programs also have payoffs for society when accounting for their effects on children’s academic achievement and the higher adult earnings and tax payments and lower public expenditures associated with higher achievement.