Recent news has implicitly highlighted some uncomfortable trade-offs in our decision making.
My various feeds were bombarded in the last couple of weeks with two seemingly unrelated items. The first was a small deluge of news, webinars, and reports about the UNFCCC’s first Global Stocktake, an every-five-years reporting process created by the Paris Agreement to summarize the state of the climate and of climate action. The second was the flurry of news around the spike in the child poverty rate in the United States, principally as a result of the expiration at the end of 2021 of the short-lived child tax credit included in the American Rescue Plan.
Most of my professional activity relates to the first item: I teach in the sustainability track of an MBA program and I work with companies developing and implementing ambitious climate and sustainability programs. Yet my connection to the second piece of news also runs deep: I have worked for years to incorporate rigorous thinking about economic inequality into my business school teaching, and I find that the prevalence of child poverty (mainly but not entirely in the United States) in particular poses important conceptual and moral challenges in that thinking. Also, I’m a parent; even the phrase child poverty feels wrong to most parents, I think. (The United Way has a concise summary of the causes and effects of child poverty in the U.S., in case the topic feels too abstract.)
So, what was the news? In a nutshell, the child tax credit passed in 2021 slashed child poverty “immediately and substantially” from 9.7% to 5.2%, lifting roughly five million children above the poverty line. However, the political deal struck in the American Rescue Plan, the COVID recovery law passed during the early months of Biden’s presidency, made that credit a one-year deal. Since the credit’s expiration, child poverty has spiked to 12.4%.
So, to my two quick comments.
Trade-offs, in quantitative perspective
First, this is about trade-offs – and those trade-offs have been woefully under-reported. What did we pay? What did we get? How much is that really, when we put it in context? Let’s provide a few examples of answers, then you’re welcome to search for more. In brief:
- Annual cost of the expanded child tax credit under the American Rescue Plan: $225 billion
- US GDP (annual): $23.3 trillion
The tax credit was just shy of one percent of GDP. One percent of national income. Hmm…that’s a helpful start. Any other comparisons?
- Total profits of the Fortune 500 in 2022: $1.594 trillion
- Profits of just Apple, Microsoft, Meta, and Alphabet in 2022: $256 billion
In other words, just 14% of the profits of the largest U.S. companies could cut child poverty dramatically. Since I think grasping relative scale often takes a little bit of work, I find a few other reference points to be similarly helpful:
- Annual expenditures on new cars in recent year: $650-700 billion (this total is a bit volatile)
- Annual U.S. defense spending: $766 billion (in 2022)
- Hypothetical defense spending, at the same GDP share as France or the UK: $443-513 billion
Maybe these comparisons feel like non sequiturs, but I offer them as signs of implicit prioritization. The child tax credit is a third of what we spend on new cars, and a slightly smaller share of what we spend on defense. And even if we funded our military the way France and the UK do – among, developed nations, they are #3 and #2 by that GDP share metric – we would have enough left over to get those kids out of povety.
To be clear: I am not arguing (here, at least) for any particular trade-off. I’m providing these examples because the reporting I’ve heard – from NPR and the Washington Post and CNN – don’t do it. I think that’s a problem because we have only so much money as a country, so we should be discussing trade-offs. To be fair, some leaders (such as US Rep Rosa DeLauro) are pushing to renew the credit, pitting it against other expenditures. To make that a serious conversation, let’s be clear how much money we’re talking about, and the items we appear to consider more important.
If sustainability requires long-term thinking…
So why I’m concerned that the work that my colleagues and I do on climate and sustainability will founder if we don’t create the conditions for long-term thinking with intelligent and deliberate trade-offs. If a family is struggling with basic needs, they won’t be able to make good investments for the long run in their own health and wellbeing; the child tax credit was designed to address exactly that problem, focused on some of the most inherently vulnerable among us.
We have a lot of enlightened, long-term-savvy investments to make for the energy transition. Wind and solar represent the lowest-cost new electric power resources in most of the U.S., but sometimes they cost more upfront than fossil generation. A society in which people are forced by circumstances to focus on the short run will struggle with those good investments that pay off over time.
Most important, we need to send the message to current generations, including the youngest among us, that the society is investing in their future. My daily work – which I believe in deeply – focuses on climate and sustainability, but my colleagues and I will face an uphill battle if we, collectively as a country, send a different and discouraging message to young people today. If we want to unite generations in this shared struggle, prioritizing resources to meet their basic needs would be a good place to start.
