Other industrialized nations have lower poverty rates because they seek to prevent hardship by providing assistance to all families. These supports include “child allowances” (typically cash supplements), child care assistance, health coverage, paid family leave, and other supports that help offset the cost of raising children.
But the U.S. takes a different policy approach. Our nation does little to assist low-income working families unless they hit rock bottom. And then, such families are eligible only for means-tested benefits that tend to be highly stigmatized; most families who need help receive little or none. (One notable exception is the federal Earned Income Tax Credit.)
At the same time, middle- and especially upper-income families receive numerous government benefits that help them maintain and improve their standard of living — benefits that are largely unavailable to lower-income families. These include tax-subsidized benefits provided by employers (such as health insurance and retirement accounts), tax breaks for home owners (such as deductions for mortgage interest and tax exclusions for profits from home sales), and other tax preferences that privilege assets over income. Although most people don’t think of these tax breaks as government “benefits,” they cost the federal treasury nearly three times as much as benefits that go to low- to moderate-income families. In addition, middle- and upper-income families reap the majority of benefits from the child tax credit and the child care and dependent tax credit because neither is fully refundable.
In short, high rates of child poverty and income inequality in the U.S. can be reduced, but effective, widespread, and long-lasting change will require shifts in both national policy and the economy.