As Covid-19 wreaked public health and economic havoc on the United States, the Federal government’s fiscal stimulus produced a number of unprecedented policy firsts. One of the most significant of these policies is the expansion of the childcare tax credit, which was enacted in March 2021 until President Biden’s American Rescue Plan. The new law released direct payments to parents of up to $300 per child. It was also refundable, allowing those who can’t afford income tax payments to still receive payments. 

The benefits of this expansion were enormous: the Center on Poverty & Social Policy at Columbia University found that the new childcare tax credit lifted three million children from poverty in 2021 alone (representing a 25% reduction in child poverty). It also estimated that, in a non-recession year, the credit would keep six million children (or around 40% of impoverished kids) from poverty. This unprecedented and rapid reduction has not been achieved by any single policy in United States history. 

The U.S. Treasury, in coordination with the IRS, found that this credit was available to 88% of American families. For low-income households with children, this has been a godsend: the Census Bureau found that such families experienced a three-point reduction in food insufficiency. Columbia’s study also reported that the greatest gains for the childcare tax credit would be won by Black and Latino children. 

However, on December 15, 2021, the credit’s expansion expired. President Biden, working with Congressional Democrats, hoped to keep it alive in the signature $1.75 trillion Build Back Better plan. The bill has now essentially become dead, due to Senator Joe Manchin’s (D-WV) signalling that he would not support the bill. According to Manchin, the childcare tax credit is fiscally irresponsible and discourages low-income parents from seeking employment. 

Because Congress failed to extend the credit, millions of families will lose payments that they had come to rely on, and millions of children will be plunged back into poverty. The magnitude and bleakness of this impact raises an important question for United States policy moving forward: why is fiscal conservatism continually favored over the real-world fates of American people? In answering that question, we cannot forget that lives hang in the balance.