Episode Transcript
Joree N. 00:00:18 Hi, Just a Bite listeners. This is Joree from the Ohio Association of Foodbanks. I'm so pleased to get to intro this episode in which my colleague, Sarah, talks with Dr. Lauren Jones, associate professor in the Department of Human Sciences and Consumer Sciences at The Ohio State University. Her research background and specialty is in the impact of government policies that affect children, low income families, and other vulnerable populations. So she has an incredible grasp of the broad literature as it relates to policies like the advanced expanded Child Tax Credit, which we still hope to see solidified in federal policy. So I just find this research informed conversation really informative and engaging, which I think is a rare combination. And I hope you do too. Enjoy.
Sarah K. 00:01:20 Hi, Professor Lauren Jones. Thank you so much for being on Just a Bite today. Um, to start out, could you introduce yourself and give the listeners some background on your research and your work?
Lauren J. 00:01:33 Sure. Thank you so much for having me. I'm really excited to be here. Um, I'm Lauren Jones, I'm an associate professor at The Ohio State University. Um, and I teach in the departments of human sciences and the John Glenn college of public affairs. And I'm also a, um, faculty associate at the Crane Center for Early Childhood Research and poverty policy. Excuse me. Um, and so my research is focused on policies that impact low-income families. Um, and I'm interested in how, uh, you know, the way we shape and implement policies, like for example, the Child Tax Credit, and then similarly the Earned Income Tax Credit here in the United States, how those policies and decisions we make about them impact the way families are able to use the money, um, how families respond in terms of their work and childcare arrangements, um, and other behavioral outcomes. And then, you know, just kind of overall how those policies benefit families.
Sarah K. 00:02:33 Awesome. Yeah. Well, to give the listeners some context around our discussion today, um, the American Rescue Plan Act expanded the Child Tax Credit to go to more families to increase the amount of the credit of families receive and to split up the credit into monthly payments for 2021. Um, as many of our listeners, I'm sure remember the Build Back Better Act, which included spending for child nutrition programs, affordable housing, drug price, negotiation program, as well as provisions to improve tax enforcement. So that billionaires pay what they owe among other things. Also tried to make some of the enhanced, enhanced Child Tax Credit provisions, permanent negotiations on Build Back Better have been ongoing since summer of 2021. Yet they have stalled since December. So you sort of joined the noise as far as the Child Tax Credit goes. And, um, in September you are one of the 400 plus economists that signed onto a letter urging Congress to make the enhanced Child Tax Credit, permanent. And your research has even cited in that letter, um, which is very impressive by the way. Um, could you explain what you and your colleagues were arguing in that letter?
Lauren J. 00:04:02 Yeah, well, um, you know, I'll first start by saying that was like a real high point in my career. Having my research cited in support of what I think is such an important and, um, you know, it could be a really positive change for American families across the country. Um, so to, to answer your question, what my colleagues and I were really trying to argue is that, that the proposed expansions to the Child Tax Credit, um, based on, you know, years of work that many of us have, have done and, um, reading of the literature by those 400 economists really, uh, you know, see the Child Tax Credit in the expansion and the Child Tax Credit as, as a policy change that, you know, doesn't have a lot of downsides. So, um, you know, work including my work has shown that when you expend, uh, tax credits targeted to families with kids, families are able to use the money to buy things that we think are really important inputs to raising kids, for example, healthy food, which is an important one to you all.
Lauren J. 00:05:07 I know other things include, um, childcare, um, you know, educational inputs like books and things like that. So, you know, what we see is that, um, transferring, you know, doing a cash transfer to families in the form of a tax credit, really results in families, being able to meet the needs that they have in order to, you know, raise healthy children that will grow up to be themselves productive members of the economy. Um, and, you know, ultimately, you know, have higher earnings themselves, which will in turn pay for some of the initial investments. So, you know, from that perspective, we, we, the, the signatories of that letter really agreed that, um, the expansion of the Child Tax Credit had really a lot of positives and not many negatives that we could, we could see based on the research.
Sarah K. 00:05:57 Yeah, the research is, I mean, pretty consistent, um, across the board, it seems like, but there are still some common misconceptions about the impact of the Child Tax Credit, many of which are cited by some, um, uh, congressional members. And then some of which you and your colleagues have addressed in that letter. Um, so I wanted to ask you, does the Child Tax Credit inhibit work, and then also does the Child Tax Credit contribute to the inflation we're seeing in the economy right now?
Lauren J. 00:06:32 Sure. So in terms of the, you know, on the work front, um, based on the research, we're finding that, you know, our predictions are that there would be very little, um, labor supply response to the, if we were to make the expansion to the Child Tax Credit permanent. Um, so you know, that finding is based on, um, what we call kind of policy experiments in other countries that have implemented or expanded similar programs. So for example, Canada, um, expanded their Child Tax Credit in 2016 into a program. It looks very similar to what the expanded Child Tax Credit here in the United States looks like. And research on that program has found, found no evidence that there was any labor supply changes in response to the expansion. Um, here in the United States, there's been some kind of modeling to see what we, you know, what we predict would happen if, if the Child Tax Credit where, uh, expansion work be made permanent, because of course, we've never done something like this year in the United States before.
Lauren J. 00:07:34 So it's difficult for us to kind of, we don't have experience, right? So we're, we're kind of going based on our best, um, our best informed, um, predictions and modeling that we can do. Um, and those studies have also shown for the most part, pretty limited responses in terms of labor supply to the Child Tax Credit. And so a big reason for that is that, um, you know, the, the structure of the expanded Child Tax Credit, uh, if you kind of look at it, if you were to kind of graph it, you'd kind of see, um, you know, for a really large income range for households earning up to almost $200,000 a year. Um, there's no kind of change in the Child Tax Credit over that earnings range, right? You get the same amount. Um, and the phase out period kind of only starts for households earning more than $200,000, meaning that, you know, those sort of really higher income households or, or, um, the households that are seeing decreased declining Child Tax Credit in response to, to higher earnings.
Lauren J. 00:08:35 And so one really nice feature of structuring the program like that is that for families who are at the lower end of the income distribution, who we think are going to be kind of more responsive to, um, the, the, that kind of, uh, benefit cliff situation, right, where earning more is gonna cause you to lose some of your benefits, we've structured the, the expanded Child Tax Credit in such a way that that's not going to happen because they don't have reduced earnings or reduced credit and in response to higher earnings. Um, so, you know, in some ways that makes the expanded Child Tax Credit look a lot more similar to a universal, basic income type credit where everyone's receiving the same amount of money. Um, it's not a universal credit because as I was saying, for those really high earning families, those families are seeing reductions in the credit as their earnings increased.
Lauren J. 00:09:24 But the reality is for our households, earning that much, the credit, you know, the amount of the credit in real terms and kind of relative to terms doesn't have as much value to them. And so they're much less likely to respond to it in terms of their, their labor supply decisions. So I think, you know, based on, um, what we've seen in other countries like Canada, for example, who, as I said implemented, um, or where such a credit wasn't implemented, and we didn't see a labor supply response and based on the modeling and the kind of theory behind it that that researchers have used to predict what would happen here in the U S um, the credit word, it may be made permanent, uh, you know, the, my colleagues. And I really agree that there's not much concern that, um, making the credit permanent would have strong labor supply changes, um, and kind of, you know, deter, people's willingness to work in any, in any severe way.
Lauren J. 00:10:21 So that's the answer to your first question that I think now, um, you know, straight, straight up, I don't think there's, we're gonna, you can expect to see much labor supply response to, um, making the credit permanent, um, in response to the inflation question, you know, I think, uh, I think the, the question there is why are we seeing such high inflation right now? Right. Um, so we know that the Child Tax Credit was expanded in 2021, families were receiving, um, you know, more money and they were receiving it on a regular basis, which could also change spending patterns. Um, the question, I think you want to ask yourself, if you want to think through this on your own is, you know, how much is that, how much could that possibly affect demand for goods compared to all the other changes we saw in 2021 in our economy?
Lauren J. 00:11:11 So, you know, I was just kind of looking up some numbers, um, between, uh, you know, the middle of 20, 20 middle of 2021, um, nearly 15 million people returned to work. We also coming off a period of extremely high personal savings rate. So 50 year high and household savings rates during the pandemic. Um, so, you know, those two factors combined is, is clearly gonna lead to increase demand for goods, right. We've also kind of seen, um, you know, issues on the supply side and, and there being kind of supplied chain issues that are, uh, stifling the supply of goods, right? So we have kind of a classic situation here where we've got increased demand due to these market forces, um, you know, reduce supply due to other, um, economic factors that are kind of causing ports to be, uh, uh, clogged and that kind of thing.
Lauren J. 00:12:07 And the question you really want to ask yourself is amidst all that, how much could the Child Tax Credit really be contributing to this issue? I'm not going to say that it has no effect, but based on my reading, it's really a drop in the bucket compared to these existing, um, economic factors that are affecting everybody in the economy, not just the family, kids who are receiving the Child Tax Credit. So, you know, I, I think that, um, you know, just looking at the data on that front, my answer to your question would be that if it is affecting inflation at all, which it could be, um, it would be a really small effect relative to these other, other forces that are kind of at play right now.
Sarah K. 00:12:51 I think that's really great framing. I don't think I've really heard it sort of frame that way. Um, and like you mentioned earlier, a lot of families are using this credit for necessities. Um, and so I was wondering if you could go into a little bit more detail about, um, what families are generally spending this credit on each month.
Lauren J. 00:13:18 Yeah. So early research on the, the expanded Child Tax Credit that families were receiving in 2021, um, indicated that they were spending it, you know, exactly, as you said, Sarah, on, on everyday necessities, healthy food, for example, um, childcare needs, uh, that also confirms studies from other contexts, including my own work, um, in the Canadian context where we found that expansion of that same child Canada benefit, which mimics the child expanded Child Tax Credit programs structured almost exactly the same as the us Child Tax Credit. We saw the exact same thing. Families use the money on healthy food, buying food at home rather than out at restaurants. Um, we found evidence that families use the money for childcare for tuition. Um, and we saw some evidence of families using the money for recreation as well. So, you know, using some of the money to go and spend some time together.
Lauren J. 00:14:15 Um, in the Canadian context, we also kind of interestingly found that, um, when the Canadian child benefit was made more generous, families appeared to reduce their consumption of alcohol and tobacco products. So I think that really points to, um, you know, the, the idea that when families have enough money, it reduces stress in the household. You know, they're able to use some of that Child Tax Credit money to go to the movies together. That's a really wonderful thing for a family, you know, and what we see is that, you know, some of these indicators of household stress, um, and, you know, kind of financial stress that can really impact a child's wellbeing and child child's performance in school, and things like that, we find that this cash transfer can really help those issues by just easing the budget constraint and allowing families to spend money on things. Every family spends money on, right. Food childcare having fun together.
Sarah K. 00:15:17 Yeah. Um, we don't just want families to survive, but also to thrive and bond with one another. And even we just heard about this preliminary research just a couple days ago, about how there's some suggestion that monthly cash payments, um, increase, uh, brain development or frequencies in infants. Um, as well as, you know, um, building research about how these monthly payments are increasingly lifting families out of poverty. Um, and so I was wondering, what has the research shown about these benefits of monthly, uh, payments to families?
Lauren J. 00:16:03 Well, the research is pretty conclusive. I would say, you know, for the most part, um, studies on programs like the expanded Child Tax Credit show that, you know, these programs are good for kids. They're good for their, um, you know, educational outcomes. They're good for college going. Uh, so kids who lived in families that received generous Earned Income Tax Credits, for example, when they were younger, um, are more likely to attend college. Um, we see, uh, improvements in kind of behavioral outcomes for kids. Um, and you know, I, I, I loved reading about that study that you mentioned showing that, you know, even in utero, we're seeing some evidence that, you know, cash transfer a cash infusion to a family that, um, doesn't have enough to make ends meet, can even potentially have important, um, impacts on, on a fetus that really confirms what we found in, in other contexts, um, or looking at other kind of, um, maternal outcomes.
Lauren J. 00:17:08 So research on the Earned Income Tax Credit shows that moms who receive or moms to be who received more generous credits are also more likely to use, uh, prenatal care and, um, reduced maternal smoking. So, you know, I think there's like a clear mechanism for why transferring cash to unexpected mother could lead to increase neural activity in her fetus. You know, not only because, um, the money's going to allow her to eat better, et cetera, all things that we know are important, um, in terms of creating a healthy environment for a fetus to grow in, but, you know, also increasing her access to, to important care that she needs. So most outcomes we've looked at as a research community, we found really, really important, um, benefits on a whole host of outcomes for kids and moms.
Sarah K. 00:18:05 Yeah. I feel like a lot of the research sort of debunks the misconceptions and myths that people are using, you know, these cash payments for drugs or alcohol are not benefiting their kids in any way. Um, when that's just clearly not the case. So, you know, January was the first month without the monthly payment for families. I know, um, our food banks are really nervous and sort of hunkering down as we, um, are preparing to weather the storm with families coming back into our food bank lines. We saw a reduction of families coming into our food bank lines when they were receiving that Child Tax Credit. Um, and so we're preparing in February, um, especially, but, um, what are some of the consequences of Congress not passing the Build Back Better Act with the extension of the enhanced Child Tax Credit?
Lauren J. 00:19:05 Well, I mean, one clear one is kind of settling for higher child poverty rates, right? And so, you know, it's kind of, it's not rocket science to understand that if you give a family that does not have enough money, if you give them cash, that's going to move the family out of poverty. So, you know, when we do don't pass, when we leave, you know, it's seeming more and more as though this bill is not going to pass. And at least the Child Tax Credit expansion, part of it is not going to pass, but I still have my fingers crossed, but, you know, if it, if it does turn out that it's not passed, it's, it's really us as a society kind of, you know, stating that we're okay with more kids, be in poverty, not having enough food, not having enough, um, childcare and not having the resources that the family needs in order for the parents to, um, find a job that works for their family and they can continue working.
Lauren J. 00:20:07 So I think that's kind of another important component of it that we're not just seeing kids in poverty, we're seeing the family in poverty. And when the family is in poverty, the parents are put in a position where they need to accept whatever job comes along in order to, um, you know, keep food on the table. Whereas if there is a support program in place, they're able to wait for that job, that's going to work for their family. They're able to stay in that job, um, for the longer term, which is going to have then benefits for the company. That's hired them because we're going to have less turnover, et cetera. Right? So, you know, this a, these are policies that really impact the entire family. The other thing I'll say a brand new paper coming out, just came out in national tax journal. Um, that shows essentially that was the, the kind of status quo Child Tax Credit, um, where the tax credit was not fully refundable.
Lauren J. 00:21:07 That kind of feature of the tax credit meant that, um, families of color were disproportionately left out of that, uh, support program. So the way I'll just kind of review this really quickly for your listeners. So the way refundability works in tax credits, a refundable tax, fully refundable tax credit as a tax credit, you get whether or not you owe taxes. So even if you have zero tax liability, if you're eligible for a thousand dollars tax credit and the tax credit is refundable, you'll get that thousand dollars in your pocket. Whereas a non-refundable tax credit worth a thousand dollars is only going to be valuable is only going to have value to a family that owes taxes, right? So you need to kind of earn enough money that you owe at least a thousand dollars in federal taxes in order to get the benefit of that non-refundable tax credit.
Lauren J. 00:21:57 So, you know, one of the big changes in an, in my view, really the most important change of the expanded Child Tax Credit was that it moved it from a non-refundable credit or partially refundable credit to a fully refundable credit, which meant that that big change really expanded access to the credit for the lowest earning families. So these are families, um, we're talking about families learning less than $20,000 a year, and those families are disproportionately families of color. So, you know, going back to the status quo Child Tax Credit, uh, I think is going to have implications for child poverty, um, gonna have implications for, um, you know, the, the kind of stability of, um, of working in those families. It also has important implications for equity concerns and the extent to which the structure of our social safety net kind of disproportionately leaves out families of color. So I think that's another important concern that for me is, is really, you know, one of the most important issues here that we have a part of our tax code as part of our social safety net, that disproportionately benefits, white families over families of color. And I think, you know, more and more, we need to be aware of the way that our existing structure of these programs are kind of, you know, building in and reinforcing the inequities we see every day in our society.
Sarah K. 00:23:26 Yeah, that was, um, really well put. And there's so much here to sort of dig into, I just want to thank you so much for being on today. This was great. I think you really, um, shed some light on this issue and we are going to keep on working on it and trying to encourage our congressional members to early, um, consider the Build Back Better Act, but especially the Child Tax Credit and the expansion of that investment. So, um, just to end on how can the listeners find more of your work?
Lauren J. 00:24:04 Yeah. Thank you so much for having me. It was great to come on and talk about one of my favorite topics, price, credits, love taxes. Um, and yeah, I'd love to hear from any of your listeners. You can find me, um, at OSU at the Glenn College, um, or you can find me at I'm on Twitter. My handle is @proflaurenjones, um, or on my website, which is LaurenEdenJones.com.
Joree N. 00:24:39 Well, I know that I'm enormously grateful to have researchers like Professor Jones in this field of study. I can't think of any field that has more direct implications for the dignity and security of families and kids. And while we may feel like transferring cash to household with fewer resources is common sense policy to reduce hunger and hardship. It matters to have the clear perspective of bias, free policy research to support the case for tax credits for workers and families. So in closing, I'll just say that we agree with economists Greg Duncan, one of nine coauthors of the preliminary study. Sarah mentioned showing that cash payments increased brain activity in babies, who said he hopes this research would refocus the debate toward the question of “whether the payments are good for kids” – it's that simple. And we can still get federal policy that includes the advanced expanded Child Tax Credit done. So let's do this. Thanks again to Professor Jones for joining us and for her work in this field of study. And we look forward to having you for our next episode. Until then have a good one.
