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June 09, 2003

Child Tax Credits and the Mutilated Beggar Effect

Recently there has been discussion about the child tax credit which is part of the Bush administration's proposed tax cut.  Essentially it amounts to a $400/child tax deduction for families making less than $26K/year.  Both Republicans and Democrats are in favor of this credit, with the only disagreement being whether the credit should be temporary (Republicans) or permanent (Democrats).

Naturally both sides are falling over themselves emphasizing that they are in favor of the tax credit.  Nobody wants to appear to be opposed to a tax credit which helps poor families with children.  Well, I am opposed to it, and here's why.

This is a classic example of the "mutilated beggar effect".  Please let me digress momentarily to explain this.  In Cairo there exists a cottage industry which mutilates children to be used as beggars.  The more gruesome and pitiable the mutilations, the more the beggars will earn.  The disfigured children are placed on mats on street corners with a begging bowl and they ask for alms for the love of Allah.  The almsgiver is doing a good thing and a bad thing.  The good thing is paying for the mutilated child's next meal.  The bad thing is supporting a system which caused the child to be mutilated in the first place.

What is the analogy?  By giving poor families a per-child tax credit, we are doing a good thing and a bad thing.  The good thing is that we are paying for poor childrens' meals, clothing, etc.  The bad thing is supporting a system which financially encourages poor families to have more children than they can support themselves.

Families should not have more children than they are able to support.  If there were no social welfare, richer families would logically be larger families, since they could support more children.  In fact all through recorded human history and continuing to the present day poorer families tend to be larger.  In the past when people lived in agrarian communities this was an acceptable and appropriate state of affairs, since the children of a family were put to work farming and essentially "paid for themselves" via their work.  Now that most people live in urban communities this is no longer the case, and poor families can only be large if society supports them.

The logic is inescapable - the more society supports poor families' children, the more poor families are encouraged to have more children, and the more poor children there will be for society to support.  It is a loop with no exit.  Only by decreasing the financial incentives for having children will poor families adjust their numbers of children to be consistent with their ability to support them.  But this would take time, and political courage, because in the meantime poor children would be worse off.

There is zero chance that any politician will publicly take my point of view.  Why?  Because everyone would be horrified!  That would be - gasp! - like arguing against motherhood!  Yeah, so?

People often use "motherhood" as something nobody could be against.  As in, "arguing against child tax credits is like arguing against motherhood".  Let's think about this for a moment.  Why is "motherhood" something everyone can agree on?  Should every woman have as many children as she can?  Most women are physically capable of having about twenty children in their lives.  Should they do so?  Would society then just jump in and feed and clothe and educate all these children?  It doesn't really make sense.  In point of fact arguing against child tax credits is exactly like arguing against motherhood, or at least against irresponsible motherhood, and this is a good thing.

Perhaps you agree with this logic, but what can be done?  If no politician is willing to oppose motherhood (imagine the outcry), then are we doomed to an ever-increasing subsidy for poor families' children?  Already it is the case that in the U.S. a teenager with no marketable skills is financially better off having a child and going on welfare than she is working a minimum wage job.  Furthermore, if she marries the kid's father, she'll get less welfare.  Think about that for a moment, and then consider that 69% of all U.S. inner-city kids are born to a single mother.  This isn't a mystery, is it?  We're paying unskilled women to have kids, and paying them to stay single, so that's what they do.  It is just water flowing downhill.

I realize this can't all be reversed overnight.  Any change in these incentives would have to be phased in gradually over many years to avoid penalizing people (and their kids) for following the incentives.  But at least we can start by not making things worse.  Why use a tax cut designed to stimulate the economy as an excuse to increase the incentive for poor women to have children?

Let's go back to the child tax credit.  It was always part of the Bush plan, but pressure from Democrats has expanded it.  As Tom DeLay (R) put it, "To me, it's a little difficult to give tax relief to people who don't pay income taxes.  It's a spending program."  And the spending is a subsidy for having children.  The other point of view comes from Artur Davis (R), "People who are making between $10,000 and $20,000 can't throw a fund-raiser, don't have large teams of lobbyists, but they're people doing hard work for their country.  We ought to be valuing their contributions, not ignoring them."  Sure, let's value their contributions, but let's not pay them to have kids they can't afford.

Posted by ole at 09:43 PM




I am not against a welfare safety net of some sort but I agree that if there is a child related component then it doesn't make sense to give a differential level of support as between rich and poor. Poor families could get a sum that is calculated to support, say, a family of 2 or 3 and they would then have to use that wisely as they see fit. The fact that there is a per child subsidy for poor families is one reason I am not so fussed about professional women getting subsidised child care. Of course the ideal is to have a more rational support system but this may be 2nd best.

Posted by: Jason Soon at June 10, 2003 12:40 AM


Ole,

Brilliant! Can you follow me around and have my political arguments for me? You're better at explaining my position than I am. :)

Posted by: Jacqueline at June 10, 2003 01:18 AM


The whole argument rests on the premise that poor people have large families using some sort of calculative logic ("hey we have a tax credit, so we can afford a few more children"). Actually, the post itself shows why this logic fails:


In fact all through recorded human history and continuing to the present day poorer families tend to be larger.

In other words, the reason why poor families have more children has nothing to do with "tax credits", since these things did not exist throughout most of recorded human history.

In any case, the moral issue is dubious to begin with, since withholding financial support from poor families with many children is penalizing them with the intent of preventing future, other families from coming to the same situation.

Regardless, the end result of not supporting poor families is that poor families suffer. The corresponding "good", which as outlined in the previous paragraph is morally dubious, is also uncertain, as shown in the previous-to-previous paragraph.

Posted by: Dienekes at June 10, 2003 03:37 AM


Dienekes
Your logic is flawed. It's like saying throughout history people have always committed crimes, therefore the reason why people commit crimes now has got nothing to do with the fact that sentencing has become more lenient. No doubt there is more than one reason why people have large families but that doesn't mean that adding an extra incentive to do so won't marginally influence their decision and therefore if you have one variable that might be withing your control it would be useless to tweak it to achieve desired results. Your statement that poor people aren't influenced by financial incentives even when planning families is just plain ridiculous. Are you telling me that if, say, the government offered $1 million to each family that had a chils this year, the birth rate wouldn't increase substantially this year? You might wish to argue that the magnitudes of the effect in the case of present policy aren't sufficiently great to have much of an effect but that is far different from saying that financial incentives have no effect on family considerations as if they were hermetically sealed from other considerations where financial incentives matter.

Posted by: Jason Soon at June 10, 2003 04:28 AM


PS Dienenkes, it's also quite obvious you can't read or are reading selectively. In the same post, ole writes:
>>In fact all through recorded human history and continuing to the present day poorer families tend to be larger. In the past when people lived in agrarian communities this was an acceptable and appropriate state of affairs, since the children of a family were put to work farming and essentially "paid for themselves" via their work. ****Now that most people live in urban communities this is no longer the case, and poor families can only be large if society supports them.****

I don't agree with abolishing all social welfare but I don't think Ole has made the logical flaw you think he has made.

Posted by: Jason Soon at June 10, 2003 04:35 AM


I should clarify that I'm not opposed to social welfare. I just feel it should be more intelligently deployed. For example, what if we gave poor families a tax credit for having fewer children? That would help them (they would be better off with fewer kids to support) and it would help society (fewer poor kids). Note I said fewer not none. I know it won't happen anytime soon, because at present it is wildly non-PC, but it is worth considering... Thanks for everyone's comments!

Posted by: Ole Eichhorn at June 10, 2003 07:09 AM


While I basically agree with your position, I doubt the tax break in question is large enough to significantly affect people's behavior. On the other hand, it would be interesting if the tax credit were a percentage (of income) per child rather than a flat dollar amount - in this way the incentive would not be so skewed towards the poor. But politically that wouldn't fly.

Also, you are in error in claiming that poor people have had larger families throughout history. I remember some stats from Volkmar Weiss's site (linked from this blog) concerning family size in medieval Germany - if memory serves the wealthier landowners and craftsmen had about two more children per family than the unlanded laborers, and (also very significant) their children survived to adulthood two thirds of the time rather than half the time as for the poor. But this is not relevant to your main argument.

Posted by: bbartlog at June 10, 2003 07:24 AM


some cultures-like the ancient classical greeks-were not necessarily pro-natal. the slaves for instance did not often reproduce to replacement. also, some studies of geneological records in hungary among jews show that the poor did not replace themselves while the rabbinical and wealthy families were prolific.

Posted by: razib at June 10, 2003 11:20 AM


SOOO true. I don't understand why more people don't see this.

Posted by: Sam at June 10, 2003 02:19 PM


Poor people have more kids. Dumber and lesser educated people have more kids. So apparently being poor, stupid, and uneducated increases one's Darwinian fitness (on average).

Posted by: Oleg at June 10, 2003 02:43 PM


"So apparently being poor, stupid, and uneducated increases one's Darwinian fitness (on average)."

In modern times, it seems so.

Posted by: the alpha male at June 10, 2003 03:28 PM


>> Your logic is flawed. It's like saying throughout history people have always committed crimes, therefore the reason why people commit crimes now has got nothing to do with the fact that sentencing has become more lenient.

That is true, but nothing in the entry gives me any information that poor people have more children above and beyond what they would have anyway according to historical experience.

Now, if policy makes are to keep themselves from giving some benefit to the poor, then it will take a bit more than drawing a parallel with mutilated beggars in Cairo to convince them that they will see an increase in poor peoples' fertility because of that decision.

Reducing the fertility of those who won't be able to support their offspring is a good thing. But, why don't we try removing the fear from peoples' minds that abortion is morally evil, or avoid teaching them about use of prophylactics because people think that premarital sex is evil, or any other possible means of achieving this goal that does not involve potentially penalizing children who happened to be born in poor families.

Posted by: Dienekes at June 10, 2003 11:35 PM


policy makes = policy makers in the above.

Posted by: Dienekes at June 10, 2003 11:38 PM


i would say that this is a "logical" argument... however it perhaps is too much so....

in a situation where the US is constantly trying to increase its population via immigration i don't think it is a bad idea to encourage homegrown babies...

Posted by: marinara at June 11, 2003 01:28 AM


It's actually not a terribly logical argument. It makes a lot of assumptions. For starters, you need to decide what improving the gene pool is worth to you. Even if
- the tax credit does encourage the poor to have more children, and
- the poor have inferior genes (for some definition of 'inferior' that we can agree on),

there is still a net benefit to GDP from increased population. The government pays out several thousand dollars in tax credit for each child, but ultimately collects much more (on average) in taxes from each additional citizen. Of course the credit is paid for children that would have been born anyway, so you would need to know how well the incentive worked before you could quantify the benefits.

But let's take on one of the other assumptions. We already know that the wealthy have fewer children. If we give the poor a significant amount of money, making them more wealthy, won't they then have *fewer* children? They might not, but in order to know what would happen we would have to understand why wealthy people have fewer children. The additional income from the child tax credit (for the first child) might actually decrease the odds of having more children, and in order to show otherwise you would need to model the sizes of the effects in question.

In the end, even if Ole is right, I think the dysgenic effects are too small to worry about when we consider that we are about to unlock the secrets of the genetic engineering. If you were planning social policy for a thousand-year republic with static 1950s technology, it would be a different matter :-)

Posted by: bbartlog at June 11, 2003 08:34 AM


Yes, of course. Especially if you look at the very low end of the curve, the costs could exceed the benefits. Regression to the mean works to the government's advantage, though, in this case.
The other thing of course is that while a government carrying trillions in debt has reasons to maximize future GDP, as an individual I have other priorities and don't necessarily see why this is important or even beneficial. I might prefer to develop a more intelligent but smaller population.

Posted by: bbartlog at June 11, 2003 12:43 PM