Federal spending projected to decline by $230 per child in 2024: report

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Federal spending on children climbed to a peak of $11,690 per child in 2021 in response to the Covid-19 pandemic.

Since then, there has been a “steep decline” in those expenditures, which fell to $10,190 per child in 2022 and then to $8,990 per child in 2023, adjusted for inflation, according to new research from the Urban Institute, a Washington, D.C., think tank focused on economic and social policy research.

In 2024, that spending is expected to level off to $8,760 per child — a decline of about $230 per child from the previous year, the research found.

Covid relief — through federal legislation as well as state-level initiatives — helped provide “unprecedented” new funding in 2020 and 2021 that significantly improved conditions for children and their families, according to the report. Those efforts included tax provisions, social services, training and housing programs.

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Those pandemic-era changes — which were largely temporary — had a “big and immediate” effect on poverty, according to Heather Hahn, associate vice president at the Urban Institute and a co-author of the report.

“For children, we saw poverty just plummet because they had more money,” Hahn said.

In 2021, child poverty fell to 5.2%, down from 12.6% in 2019. The expiration of the aid drove child poverty back up to 12.4% in 2022.

Tax expenditures represent the largest drop in federal spending on children between 2022 and 2023, while there were also sharp declines in spending on nutrition and more modest changes in education funding, according to the Urban Institute.

Covid federal tax expansions were largest in 2021

Pandemic-era tax expansions were the largest in 2021 and included direct payments to families.

Three rounds of stimulus check payments deployed by the federal government between March 2020 and March 2021 included larger maximum payments for families with children.

The first stimulus payments provided an additional $500 per dependent under age 17. The second round of payments provided $600 per dependent under 17. And the third, most generous payments provided $1,400 per dependent, this time including those ages 17 and 18. To qualify, certain income thresholds and other restrictions applied.

Federal lawmakers also temporarily put in place a more generous child tax credit for 2021 with maximums of $3,000 per child and $3,600 per child under age six — up from $2,000 per child.

The child tax credit was also made non-refundable, allowing families with little to no income to still access the full sums. As with the stimulus checks, families needed to meet income and other requirements to qualify.

By 2023, the stimulus check money had largely been paid out and the child tax credit expenditures had fallen back below pre-pandemic levels, according to the Urban Institute.

Child tax credit ‘a central part of the discussion’

Families may receive even less money when the Tax Cuts and Jobs Act expires in 2025, barring action by Congress before then. At that point, the current child tax credit of up to $2,000 per child under age 17 is poised to fall to $1,000 per child under age 17.

Lawmakers may again consider making the child tax credit more generous.

“The long-term future of the child tax credit and this broader support for families and children is going to be a pretty central part of the discussion next year,” Garrett Watson, senior policy analyst at the Tax Foundation said of the upcoming federal tax policy deadline Congress faces.

Along with the expanded child tax credit, lawmakers are also poised to look at other changes to the tax code that are set to expire, particularly the expanded standard deduction and repeal of the personal exemption. Taken together, those three changes net out to be revenue neutral, and therefore are interrelated, Watson said.

“Generally speaking, there is a bipartisan interest in at least maintaining current policy, meaning the child tax credit that was established and expanded in 2017,” Watson said.

However, there is no consensus on what changes should be included to that credit in the future, he said.

As part of her presidential campaign, Vice President Kamala Harris has suggested restoring the expanded child tax credit of up to $3,600 and providing $6,000 for families with newborn children. Meanwhile, Republican vice-presidential candidate JD Vance has said he wants to raise the child tax credit to $5,000.

Generally, federal spending on children will have to compete with other priorities.

The Urban Institute projects that by 2034 all categories of federal expenditures on children as a share of gross domestic product will decline below current levels. That’s as other areas, like interest payments on the national debt and outlays to Social Security, Medicare and Medicaid, are expected to take up a larger share of federal spending by that year.

Traditionally, states and localities have provided the most spending for children, primarily through education, Hahn said. The federal government temporarily had a larger role in spending on children during the pandemic, she said.

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