Raising our children is the best investment

AMERICA is a pro-child nation with anti-child policies.

There is serious talk on Capitol Hill that the proposed $500 tax credit for children will be slashed -- perhaps to $200.

Why? There is only a finite amount of money in the alleged budget agreement for tax cuts, and that amount cannot accommodate the $500 credit as well as the other proposed tax draw-downs for estates, IRAs, capital gains and college tuition.

Idiotic. The tax credit for children is by far the most important.

Curiously, it is the one that gets the most criticism, sometimes by supply-side conservatives, those great populist tribunes, who say it's not the way to cut taxes because, get this, "people will only spend it." In supply-speak, that means the money won't be "invested" or "saved."

Raising children is not an investment? Tiger Woods doesn't play golf? Stephen Hawking doesn't know what time it is?

Raising children is not only the ultimate investment, but in fact, the only investment. (Today's infants will pay the Social Security taxes to finance the retirement of tomorrow's elderly.)

Money helps in raising children. Extra money may mean that a mom may not have to go to work for a few years, that day care can be of a higher quality, or that dad can take the kids to a ball game.

It can make it easier to send a child to a private school, without waiting for the argument about "vouchers" to be resolved.

I remember when a pregnant woman jokingly was said to be carrying "a deduction."

Back in 1948 the federal dependent exemption was worth $600 per child. If that exemption had kept pace with inflation and income growth, it would have been worth $10,042 in 1996. But it didn't keep pace.

The exemption in 1996 was only $2,550. That trend is anti-child, or in the demographic argot, "anti-natal." (The numbers have been compiled by C. Eugene Steuerle and Gordon Mermin of the Urban Institute.)

The proposed $500 credit would only be a small step in making up for lost time. (It would take a credit of about $1,300 to put us even with 1948.)

Moreover, both major presidential candidates in 1996 pledged that they would push for the $500 credit, not an insignificant thought as we are each day regaled with stories of voters steeped in cynicism.

It is said that $500 is too little to really help families, whereas some of the straight economic incentives might show quicker results.

Too little? A family with two children would get to keep an additional $1,000 of their money each year. Over the 18 years of childhood, that's $18,000. That may be a trivial matter to the tax philosophers, but it's not a small sum for many Americans. Moreover, the credit would be an economic stimulus in its own right; recipients would spend the money on goods, services and even on investments.

Two things should be clear as this debate warms up. First, like most things in the economic realm, it is about life at the margin. It is not a panacea; it can help some at the proposed level.

It would help more if it were made to match the proportional value of the 1948 exemption. Simply put, a children's tax credit is the equivalent of a European-style child allowance, without running the money through a nosy governmental bureaucracy.

Second, it is redistributive. It helps those rearing children at the expense of those not currently rearing children. It gives help to the strapped from the less strapped.

If it did not do that, as Mr. Steuerle pointed out in congressional testimony, any middle-class tax fix becomes mostly a payment to the middle class from the middle class. The tax credit is the purest form of "pro-natalism," which is exactly the broad policy we should be looking at.

Face time

It has become very difficult to raise children in America. Young couples complain that two earners are needed to make ends meet, and so children suffer from lack of parental face time.

Divorce, separation and out-of-wedlock birth typically create single-family households lacking on-site fathers and cash. Day care is often unreliable or expensive. Our schools are nothing to brag about. Is it any wonder that the American fertility rate is below the replacement level and has fallen for six straight years?

The $500 credit is useful in its own right. As important, is the signal it would send.

It's time America became a pro-child nation with pro-child policies.

Ben Wattenberg is a syndicated columnist.

Pub Date: 5/16/97