Econ-Atrocity: Bad for Children, Bad for the Economy

(6/25/03)
By Anita Dancs, Staff Economist for the Center for Popular Economics and Research Director of the National Priorities Project

With great fanfare, President Bush signed the ‘No Child Left Behind Act’ in 2001. Contrary to Administration claims, this Act will leave many children behind. The Act sets out requirements on public schools in an effort to raise student achievement, but it also promises additional funding. Despite these promises, the Bush Administration’s proposed budget for the coming year would underfund the Act by $7 billion. State and local governments mired in fiscal crises in recent years, will have to find ways of meeting the Act’s requirements while also dealing with rising Medicaid costs, underfunded homeland security mandates, and neglected roads.

Children were also left behind in the recent tax cut package. The tax cut package includes an increase in the child tax credit, but last minute ‘trimming’ to bring down the costs of the package eliminated this increase to many families. Twelve million children live in these low-income families who have limited incomes to pay for food, clothing, and school supplies. Children in better off households, with up to $150,000 in income, will benefit from the increase.

“Fair enough,” say many conservatives, “only those who pay taxes should get the child tax credit.”

But this rhetorical flourish belies reality. The child tax credit is a government benefit. You can pay an enormous amount in taxes and yet if you do not have children, you will not get this benefit. This benefit has to do with having children.

Preventing lower-income households from benefiting from this government benefit saved $3.5 billion, a mere 1% of the total tax cut package. Yet, it was apparently necessary to make room for $150 billion of relief to those with capital gains and dividend income.

“Fair enough,” say conservatives, “we need to aim tax breaks at investors who will invest in jobs.”

Yet, the capacity utilization rate has fallen significantly over the last few years. What this means is that the country can produce much more than it is currently producing without increasing investment. Investors know this, which is why investment has recently been low.

While deficit spending can stimulate the economy, most economists agree that little if any economic benefits will come from tax cuts. These deficits will mean a higher debt burden for the workers of tomorrow: the children of today.

A healthy, united, well-educated populace is crucial for a robust economy. There are many organizations and coalitions fighting for more investment in children for a better tomorrow. Get involved with the Fair Taxes for All Coalition (www.fairtaxes4all.org) or the Campaign for America’s Future (www.ourfuture.org).

Sources:

(c) 2003 Center for Popular Economics

Econ-Atrocities are a periodic publication of the Center for Popular Economics. They are the work of their authors and reflect their author’s opinions and analyses. CPE does not necessarily endorse any particular idea expressed in these articles.