The child tax credit increase in President Joe Biden's $3.5 trillion social spending bill could lead 1.5 million workers - or 2.6 percent of all working parents - to leave the US labor force entirely, a study published on Friday suggests.
Biden's American Families Plan, part of his sweeping Build Back Better agenda, would raise the maximum child tax benefit to $3,000 per child aged 6 to 17, and $3,600 for children under 6.
The current maximum credit is $2,000, doubled from $1,000 by Donald Trump's Tax Cuts and Jobs Act.
Right now parents need to report an annual earned income of at least $2,500 to qualify.
Democrats' proposal takes away the minimum income requirement. A parent with two children younger than 6 and no reported annual income would be eligible to receive $7,200 from the federal government per year under Biden's plan.
Federal investments in US families have been a main talking point for Democrats and Biden officials promoting the bill.
Democrats are looking to make Joe Biden's temporary increase to the child tax credit under the American Rescue Plan permanent. Under current US tax code the normal maximum child tax credit outside of the pandemic is 2,000
Vice President Kamala Harris visited an early childcare classroom in New Jersey today. She's also participating in a roundtable on the importance of federal dollars being spent on childcare.
But according to the University of Chicago's study, the increased tax credit likely won't have as big of an impact as Democrats hope.
Without factoring in behavioral responses, researchers say child poverty would be reduced by a third and deep child poverty would go down by 39 percent.
Deep poverty refers to households whose income is less than half of the existing poverty threshold, according to the US Census Bureau.
For a family of four with two children, living in deep poverty would be an income of barely more than $12,000 per year.
When researchers factored 'labor supply responses' into their child tax credit accounting, they found that the mass exodus from the workforce would mean child poverty only falls by 22 percent.
Deep child poverty would remain unchanged.
Kamala Harris visited an early childcare center in New Jersey on Friday as part of the Biden administration's push to sell the $3.5 trillion Build Back Better plan to Americans
Also today the Vice President is participating in a roundtable on the importance of federal investment in childcare
Biden's child tax credit boost is the same as his temporary increases under the American Rescue Plan, which was passed to help the US through the COVID-19 pandemic.
It became the largest child tax credit in US history when it was signed into law in March, but is only effective through 2021.
Now Democrats are hoping to make it permanent through their $3.5 trillion spending bill, which also includes funding for free community college and historic expansions to Medicare and Medicaid, among other reforms.
The bill has no Republican support and is getting pushback from moderate Democrats who think the price tag is too high.
The president's party is hoping to pass the measure through the reconciliation process, which would allow it to pass with a simple majority.
But with just a slim majority, Democrats - particularly in the Senate- will have to vote in lock-step to get it passed.
The study comes on the heels of a dismal September jobs report.
Just 194,000 jobs were added to the payroll last month, falling far short of the 500,000 that were expected, and offering one of the most dismal outlooks from a US jobs report all year.
Friday's report from the Labor Department showed that unemployment slipped more than expected, from 5.2 percent in August to 4.8 percent in September
Monthly job growth this year has averaged 561,000.
Supply chain bottlenecks and Covid-19 contributed to the unimpressive numbers.
Still, Friday's report from the Labor Department showed that unemployment slipped more than expected, from 5.2 percent in August to 4.8 percent in September. Economists surveyed by Refinitiv had only expected unemployment to slip to 5.1 percent.
The government doesn't count people as unemployed unless they're actively seeking jobs, so some may have ceased their search. The number of unemployed people fell to 7.7 million.
Republicans are calling the new jobs numbers 'pathetic' and say it's proof the it's proof his multi-trillion spending plans aren't working.
The report served as another blow after Biden earned his lowest approval rating yet - 38% - according to a new Quinnipiac Poll.
Data from previous months was also revised upwards - 38,000 jobs were added to July's figures, bringing the number up to a robust 1.053 million, and August's disappointment was raised from 235,000 to 366,000.
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