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Biden’s free-money gambit

·Senior Columnist
·4-min read

Republicans think they’ll retake the House of Representatives and maybe the Senate in 2022, in a traditional midterm snapback against the president’s party. President Biden has a clever plan to stop them.

On May 17, the Treasury Department outlined details of the new child tax credit, which for the first time will arrive as a monthly check or automatic bank deposit for millions of parents. The American Rescue Plan, which Congress passed in March with only Democratic votes, enlarged the child tax credit and made it advanceable. The baseline credit was up to $2,000 for each child 16 and under. Parents would claim the credit for a given year when filing their taxes the following year, so it was a delayed benefit.

The ARP expanded the credit to $3,600 for kids under 6, and $3,000 for older kids. It expanded eligibility to include 17-year-olds and made the credit refundable, which means lower-income families that don’t pay taxes will get the money, too. And instead of waiting till the following year to claim it, parents will now get half the benefit on a monthly basis, beginning in July. Payments will arrive automatically, based on data the IRS already has on each family, unless taxpayers opt out, which few are likely to do.

The enhanced benefits are temporary, and expire in December. As part of his American Families Plan, Biden wants to extend the tax breaks through 2025. That would be expensive—around $110 billion per year—and Congress might not go that far. But once those payments start to arrive in July, any politician who votes to end them will plainly be on the wrong side of what is sure to be a very popular benefit.

Money arriving monthly

US President Joe Biden delivers remarks on Covid-19 response and the vaccination program, from the Rose Garden of the White House, Washington, DC on May 13, 2021, as US Vice President Kamala Harris looks on. (Photo by Nicholas Kamm / AFP) (Photo by NICHOLAS KAMM/AFP via Getty Images)
US President Joe Biden delivers remarks on Covid-19 response and the vaccination program, from the Rose Garden of the White House, Washington, DC on May 13, 2021, as US Vice President Kamala Harris looks on. (Photo by Nicholas Kamm / AFP)

About 39 million families in every Congressional district will start receiving these payments in July. Since there are income cutoffs—$75,000 for single taxpayers and $150,000 for married couples—the benefits will accrue to working- and middle-class families and be unavailable to wealthier taxpayers. It’s a meaningful amount of money, too. A married couple with one kid in each age bracket would get $6,600 per year, with half of that arriving in $275 payments on a monthly basis, upfront.

Whether you think such generosity is appropriate or excessive, it’s politically shrewd to create a cash entitlement that will expire unless voters keep the political party that made it happen in office. Shrewder still to administer the credit as a real-time payment. Tax credits claimed on a tax return are real money, but also an abstraction obscured by tax-filing tedium. Money that arrives on a monthly basis is about as tangible as it gets.

Strategists in predicaments often ask, how will this end? Republicans should ask the same about this Democratic gift to families. The answer is, it probably won’t end. Biden won’t get everything he’s asking for in the American Families Plan, but as a political ploy, the expanded tax credit is probably the best card Democrats can play. Both parties are battling for the fealty of working-class voters. Trumpy Republicans are hoping anti-woke outrage and small-government rhetoric will do the trick. Biden and his fellow Democrats could torpedo that approach simply by putting money in people’s pockets

NEW YORK, NEW YORK - NOVEMBER 21: A woman wearing a protective mask pushes a stroller with her child on her shoulders on November 21, 2020 in New York City. The pandemic has caused long-term repercussions throughout the tourism and entertainment industries, including short-term and permanent closures of historic and iconic venues, and costing the city and businesses billions in revenue. (Photo by John Lamparski/Getty Images)
A woman wearing a protective mask pushes a stroller with her child on her shoulders on November 21, 2020 in New York City. (Photo by John Lamparski/Getty Images)

Biden wants to pay for this benefit, and others, with higher taxes on businesses and the wealthy. If Democrats can pull this off, here’s how the battle lines for the 2022 midterms will shape up. Democrats will tell voters that if Republicans win, they’ll repeal a tax break for millions of parents and those monthly checks will abruptly end—all so they can lower taxes on the most prosperous Americans. Republicans will counter by saying … what? Voters don’t need the money? It’s costing the Treasury too much? Deficits are bad? They actually love the child tax credit, even though not a single Republican voted for it?

Republicans still have advantages in 2022. With control of more state legislatures, Republicans will benefit more than Democrats from redistricting following the 2020 Census. Population is shifting from bluer northern states to redder southern states. New voter restrictions in states such as Georgia, Florida and Texas could help Republicans, too, as the party intends. On policy, however, Biden’s Democrats have some ammunition. Cash is king, in politics as well as commerce.

Rick Newman is the author of four books, including "Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. You can also send confidential tips, and click here to get Rick’s stories by email.

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