A persistently large number of children in the U.S. live in poverty, despite sustained economic growth. Growing up in poverty not only harms children in the short run, but by limiting investments in their human capital it also harms them in the long run. Government policies, especially tax and transfer programs targeting low-income families with children, are the primary policy lever to alleviate child poverty. In 2016, the federal government spent about $200 billion on such programs, and they had a substantial impact on reducing childhood poverty.

In a standard human capital investment model, resources are spent upfront that generate returns over the longer run across a variety of measures—potentially including better labor market outcomes, improved health, and higher education achievement. The provision of public education is a primary mechanism for our investments in children. Many compelling studies have found that there is also a substantial investment component to safety net programs that alleviate childhood poverty, suggesting that the investment framework is also helpful for thinking about these forms of assistance. Yet to date, this investment lens is not a common one for discussing the costs and benefits of social safety net spending.

Findings:

First, it documents the importance of a robust social safety net. Cuts to these programs, which are currently being discussed, will have direct, negative impacts on children in both the short- and long-term.

Second, since employment and earnings have become an increasingly important source of income for the poor, it is crucial to ensure that programs can respond quickly to replace lost income during recessions.

Finally, since there is a substantial investment component to safety net spending, and because there have been positive returns on expansions in spending, the evidence suggests we may not be investing enough in the safety net for the young