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Economist: Providing direct cash benefits could cut child poverty in half | Deseret News National
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Reed Saxon, Associated Press
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Economist: Providing direct cash benefits could cut child poverty in half

One in five children in the United States lives in poverty. In all, there are 16 million poor children in the country.

Those numbers make the problem sound pretty insurmountable, but some experts say there's a solution with dramatic results. Austin Nichols, an economist of the Urban Institute, wrote on its MetroTrends blog that offering cash benefits to poor families could cut child poverty in half.

According to his calculations, with $400 a month a child will rise above poverty. If government spent $400 for each child, and cut tax subsidies for higher-income families, he estimates that child poverty could be reduced from 22 percent to less than 10 percent. Going further, if one worker per family was guaranteed employment to make a minimum of just $15,000 per year, plus receive $400 a month per child, child poverty could drop to just 1 percent.

Nichol's idea is not totally untested. Child benefits are available in places like the U.K. for $140 a month, Japan for $160 and $250 in Germany. In the United States, even a smaller benefit of $150 per month would drop child poverty from 22 percent to 17, writes Nichols.

TANF and other safety net programs are not covering families' basic needs, according to some researchers, and studies from Stanford and elsewhere continue to show that children from low-income families struggle at school, potentially hampering success over a lifetime.

There is mounting evidence that giving poor people money as a straightforward way to boost income is successful. One study by the World Bank and a charity called GiveDirectly.com found that in a randomized trial, Kenyans that were given cash, with no strings attached, had more assets, less hunger and more general happiness than those that didn't receive the cash. Those who received the cash took steps such as buying cows and starting small businesses to better care for themselves and their families.

Brazil has a conditional cash-transfer program that gives from $35 to $70 a month to families for sending kids to school and attending regular doctor visits. The benefit, which goes to a quarter of the country's population, has been running for 10 years and combined with other anti-poverty programs has been credited with pulling millions out of poverty and creating Brazil's emerging middle class.

So what's to stop the United States from taking similar steps? It's expensive, for one thing. But Zach McDade from talkpoverty.com argues that it's even more expensive not to. Urban Institute studies estimate that the economic costs of child poverty in America are $550 billion or 3.8 percent GDP. Being born into poverty affects outcomes for health, education and financial future.

"We know — when a baby is born — if she's likely to be poor as a child and therefore likely as an adult," writes McDade, "her kids will likelier be poor and unhealthy, and the family as a whole will rely more on the social safety net."

If poverty is currently costing $550 billion a year, it would only cost $76 billion a year to give cash transfers to dramatically reduce it, he argues.

In that case, cash transfers would be more of an investment, he argues. "Dramatically reducing poverty is in fact the financially prudent thing to do, and helping 16 million American children out of poverty is the moral thing to do as well."

Email: laneanderson@deseretnews.com