Tuesday, December 21, 2021

No, Joe Manchin, Americans aren’t using the child tax credit to buy drugs

The Advanced Child Tax Credit program isn't fueling drug benders, Joe.


REUTERS/ELIZABETH FRANTZ/FILE PHOTO


By Camille Squires
Cities reporter
QUARTZ
Published December 20, 2021

US president Joe Biden’s proposed $1.75 trillion climate and social spending bill, known as Build Back Better, is effectively dead after West Virginia senator Joe Manchin said he would not vote for it in its current form. The bill, which allocates billions of federal dollars to expand access to things like affordable housing, medicare, and childcare, together with the $1.2 trillion infrastructure bill, was the centerpiece of Biden’s policy agenda.

Manchin said publicly that he “cannot” support the legislation because of its size; he worried it would worsen inflation and add substantially to the US national debt. But in private conversations with other senators, however, he appeared to take issue with how people might use some of its benefits. As HuffPost reports, Manchin allegedly shared concerns with his fellow Democratic senators that people would abuse an expanded paid sick leave policy included in the bill to go on hunting trips and that parents would use monthly child tax credit payments to buy drugs.

But on at least one of those counts, Manchin’s alleged fears are unfounded. Monthly child tax credit payments have already been reaching 35 million American families since July when, as part of emergency pandemic legislation, the Internal Revenue Service temporarily expanded the amount of child tax credits and began sending out half the money—up to $3,600 for children up to age six, and $3,000 for ages six to 16—as cash payments to all but the wealthiest families. (The remaining half stayed a lump sum for families to claim on annual taxes).
How Americans spend child tax credit payments

The monthly payments of $250 or $300 per child (depending on their age) were intended to help alleviate child poverty by giving families a consistent source of income to spend on food and other household expenses, or address other financial needs. As it turns out, they have done just that. Between July and October, the US Census Bureau collected weekly survey data on how people used child tax credit payments and found that families tended to spend, save, or use the money to pay off debt almost equally.

When people spent the money, they most often put it towards housing, food, and school expenses like tuition and books, according to the survey. On the whole, this extra income has made a difference for families; even in the first few months of the program, it reduced the number of families experiencing hunger.

Of course, “drugs” was not among the categories of expenses families were asked about in the survey, but study after study on cash transfer programs shows that this fear about people misusing benefits on vices does not bear out. A 2014 World Bank metastudy of cash transfer programs from around the world found no evidence that beneficiaries spend significant portions of the money on alcohol or tobacco. A March 2021 study (pdf) of a pilot cash transfer program in Stockton, California, found that recipients used less than 1% of the funds on alcohol or tobacco.

The end of a lifeline for families

The existing child tax credit payments are temporary, and the last payments of the year went out on Dec. 15. Already, families are worried about what they will do without the extra income. The Build Back Better act would extend the payments for another year, bringing the US into the ranks of more than 100 other countries with a cash benefit program for children and families.

Democrats expect to go back to the negotiating table next year to renegotiate a smaller version of the deal. If the child tax credit expansion is left out, millions of families could once again find themselves struggling to make ends meet.

Goldman Sachs says Joe Manchin's rejection of Biden's $2 trillion spending plan is bad for the US economy

hrobertson@businessinsider.com (Harry Robertson) 
Senator Joe Manchin all but killed Biden's spending bill Sunday. 
Samuel Corum/Getty Images

Sen. Joe Manchin's move to torpedo the Build Back Better plan will likely weigh on US growth, Goldman Sachs said.

The Wall Street Bank on Monday cut its US economic forecasts for the first, second and third quarters of 2022.

Manchin told Fox News Sunday that he couldn't go along with the $2 trillion social and climate legislation.

Sen. Joe Manchin's rejection of the Biden administration's $2 trillion "Build Back Better" spending plan will likely tank the legislation and lead to slower economic growth, Goldman Sachs has said.

The Wall Street bank cut its forecasts for US gross domestic product late Sunday after the West Virginia Democrat told Fox News: "I cannot vote to continue with this piece of legislation."

Goldman's analysts, led by chief economist Jan Hatzius, think the Build Back Better bill is now unlikely to pass. A much smaller set of measures is the most likely outcome, they said.

Hatzius and team now expect the US economy to grow:
2% in the first quarter, compared with a previous estimate for 3%.
3% in the second quarter, down from 3.5% earlier.
2.75% in the third quarter, versus 3% before.

The roughly $2 trillion Build Back Better plan aims to expand the social safety net in the US, with a focus on children and childcare, and to tackle climate change.

To pass in the 100-member Senate, all 50 Democrats there, including Manchin, must vote for it. But the West Virginia senator blindsided the White House when he said Sunday he could not vote for the bill, all but dooming the legislation.

"My Democratic colleagues in Washington are determined to dramatically reshape our society in a way that leaves our country even more vulnerable to the threats we face," he told Fox, voicing concerns about inflation and government debt.

The winding-down of pandemic-era support programmes was already set to weigh on the US economy in 2022, Goldman's analysts noted.

But they said "this fiscal impulse will [now] become somewhat more negative than we had expected," with the expiry of child tax credits acting as a particular drag.

Hatzius and colleagues said the current high rate of inflation in the US will make it more difficult for President Joe Biden and his administration to revive the spending plan. Goldman expects inflation to top 7% in early 2022, after it rose to a 39-year high of 6.8% year-on-year in November.

"The Omicron variant is also likely to shift political attention back to virus-related issues and away from long-term reforms," the bank said.

However, Goldman's analysts said there could be some benefits for financial markets, given that the bill also imposed higher taxes to pay for much of the spending.

Goldman said the odds of higher corporate taxes — which the bank had estimated would reduce S&P 500 profits by 3% — have now fallen. It also said pharma companies may no longer come under pressure to reduce prices.


The United Mine Workers of America is urging Sen. Manchin to rethink his opposition to Build Back Better


Sen. Joe Manchin of West Virginia. 
Drew Angerer/Getty Images

The United Mine Workers of America asked Sen. Joe Manchin to rethink his stand on Build Back Better.

The UMWA asked Manchin to consider how the bill could help coal miners.
 
Manchin has had long-standing ties to both the union and the coal industry.

A coal miners' union with strong ties to Sen. Joe Manchin released a statement on Monday asking the senator to rethink his opposition to the beleaguered Build Back Better legislation.

The United Mine Workers of America (UMWA) asked Manchin to reconsider saying no to President Joe Biden's Build Back Better social and climate spending legislation, saying the bill had provisions for coal miners who suffer from black lung disease.

"The bill includes language that would extend the current fee paid by coal companies to fund benefits received by victims of coal workers' pneumoconiosis, or Black Lung. But now that fee will be cut in half, further shifting the burden of paying these benefits away from the coal companies and on to taxpayers," wrote UMWA leader Cecil E. Roberts in the statement.

Black lung disease happens after continued exposure to coal dust and is an occupational hazard for many coal miners. According to The New Republic, Build Back Better would help to extend an excise tax that funds the Black Lung Disability Trust Fund, a source of benefits for coal workers set to expire at the end of 2021.

Roberts added that the bill also includes provisions for tax incentives that might encourage manufacturers to build facilities in coalfields that could create thousands of jobs for coal miners.

"The bill includes language that will provide tax incentives to encourage manufacturers to build facilities in the coalfields that would employ thousands of coal miners who have lost their jobs," Roberts said in the statement. "We support that and are ready to help supply those plants with a trained, professional workforce. But now the potential for those jobs is significantly threatened."

"We urge Senator Manchin to revisit his opposition to this legislation and work with his colleagues to pass something that will help keep coal miners working, and have a meaningful impact on our members, their families, and their communities," Roberts added.

Build Back Betters had previously seen opposition from coal miners that complicated the bill's progress. Roberts previously penned an op-ed in November lauding Manchin for axing the Clean Electricity Performance Program from the bill. The CEPP advocated for the building of wind and solar generation plants over keeping fossil fuel plants running, an item in Build Back Better that Roberts strongly opposed.

The UMWA represents coal miners in Manchin's state of West Virginia, and has long-standing ties with the senator, having named him an honorary member in 2020. Manchin is also deeply invested in the coal industry and has millions of dollars in holdings in Enersystems, Inc., a coal brokerage firm he founded.

"If I can't go home and explain it to the people of West Virginia, I can't vote for it," Manchin said on Fox on Sunday, torpedoing a large part of the Biden administration's agenda by coming out against BBB. "I've tried everything humanly possible. I can't get there. This is a no."

However, there is a chance that Manchin might agree to vote on a scaled-down, $1.8 trillion counter-offer to Biden's plan, which includes provisions for universal pre-K and measures to combat the climate emergency. Politico also reported that Manchin and Biden had a phone conversation on Sunday night, which indicates there might be hope yet for Build Back Better.

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