Kids' Share 2007

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

Abstract

This study reports on trends in federal spending on children from 1960 to 2017, looking across over 100 major federal programs, including tax credits and exemptions. Children's spending increasingly shifted from broad-based programs to programs targeting low-income or special needs children over the 1960 to 2006 period. Thirteen major programs enacted between 1960 and 2006, which include Medicaid, the earned income tax credit, and Food Stamps, comprised 65 percent of federal spending on children in 2006. Overall, federal children's spending increased in real terms from $53 billion in 1960 to $333 billion in 2006, or from 1.9 to 2.6 percent of GDP. Yet as a share of federal domestic spending, children's spending declined from 20.1 to 15.4 percent. Meanwhile, spending on the automatically growing, non-child portions of Social Security, Medicare, and Medicaid, nearly quadrupled from 2.0 to 7.6 percent of GDP ($58 billion to $993 billion) over the same time period. Over the next ten years, children's programs are scheduled to decline both as a share of GDP and domestic spending, because they do not compete on a level playing field with these rapidly growing entitlement programs.

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Executive Summary

How much does the federal government spend on children? How have children's priorities fared against other national priorities in the federal budget? Are children becoming more of an afterthought in future budget planning? This report answers those questions with the most comprehensive examination available of trends in federal spending—plus tax credits and exemptions—on children. Over 100 federal programs aim to improve the lives of children through cash assistance, health care, food and nutritional aid, housing, education, and training. Credits and exemptions through the tax code put working families with children on more solid financial ground.

The report classifies about 100 federal programs within eight major budget categories: income security (e.g., Temporary Assistance for Needy Families and Supplemental Security Income), nutrition (e.g., Food Stamps and Child Nutrition), housing (e.g., Section 8 Low-Income Housing Assistance and Low Income Home Energy Assistance), tax credits and exemptions (e.g., Dependent Exemption and Child Tax Credit), health (e.g., Medicaid and Children's Health Insurance Program), social services (e.g., Children and Family Services Programs and Head Start), education (e.g., Impact Aid and Education for the Disadvantaged), and training (e.g., Job Corps and Workforce Investment Act). Children are defined as individuals under 19 years of age who are not yet engaged in post-secondary education.

HISTORICAL TRENDS, 1960–2006

• Federal spending on children, adjusted for inflation, grew from $53 billion in 1960 to $333 billion in 2006. However, as a share of the economy, spending on children rose from just 1.9 to 2.6 percent of GDP.
  
• By comparison, spending on the big three entitlement programs—the non-child portions of Social Security, Medicare and Medicaid—nearly quadrupled from 2.0 to 7.6 percent of GDP over the same period (or from $58 billion to $993 billion).
  
• Looking at just domestic federal spending—spending that excludes defense and international affairs—the children’s share declined from 20.1 to 15.4 percent.
  
• Over time, the sums spent on children's programs tend to fall behind growth in the economy and often inflation. The children's budget has maintained its share of GDP primarily due to the introduction of major new programs every few years. Since 1960, 13 major new programs were enacted that account for 65 percent of total spending on children in 2006. By contrast, the sums spent on elderly entitlement programs automatically tend to outpace growth in the economy and prices—driven by rising wages, medical costs and the aging of the American population.
  
• In 2006, the three largest children's programs—the Child Tax Credit, the Earned Income Tax Credit, and Medicaid—together comprised 38 percent of federal spending on children or $127 billion dollars. Moreover, these three programs accounted for 45 percent of the increase in children's spending between 1960 and 2006.
  
• The dependent tax exemption, once the largest single source of federal spending on children, declined from 68 percent of child spending to just 7 percent.
  
• Federal spending on children has become increasingly targeted to the poor, or means-tested. Of all federal spending on children, the share spent on low-income children rose from 11 percent in 1960 to 61 percent by 2006.
  
• Programs that put money into parents' pockets, such as tax credits and exemptions and welfare cash payments, lost ground to targeted, in-kind spending, such as Food Stamps, housing, and Medicaid. This trend has reversed somewhat over the last ten years, due to the introduction of programs like the Child Tax Credit.
  
• The ongoing shift in children's spending from broad-based middle class relief to programs targeted at the poor has created program benefits that phase out steeply with additional household income, discouraging additional work effort or marriage, both of which may bring new income to a family.
  
• In 1960, tax programs (specifically, the dependent exemption) and income security programs comprised 92 percent of federal spending on children. By 2006, while tax and income security were still critical program areas (49 percent combined), health, education, and nutrition programs supplied another 37 percent of federal child spending (compared to just 7.7 percent in 1960).
  

WHAT THE FUTURE HOLDS, 2007–2017

• Over the next ten years, spending on children under current law is scheduled to shrink relative to other programs that have more rapid, built-in growth and thereby command ever-increasing shares of projected government revenues.
  
• By 2017, if current spending and revenue policies continue, children’s spending will decline from 2.6 to 2.1 percent of GDP, while Social Security, Medicare, and Medicaid will rise from 7.6 to 9.5 percent.
  
• In 1960, the children's share of domestic federal spending was roughly 20 percent (or $53 billion out of $263 billion). By 2006, despite some recent increases, its share was little more than 15 percent. By 2017, current law projections indicate it will drop to about 13 percent.
  
• Children are also scheduled to receive much less of the increase in spending largely made possible by economic growth. While children enjoyed 20 percent of federal domestic spending in 1960, their share of the increase in spending between 1960 and 2006 was less than 15 percent. Under current law, children’'s share of the increase from 2006 to 2017 would be less than 6 percent. That is, children's programs would gain only $36 billion while other domestic programs would expand by $609 billion. Absent growth in the children's portion of Medicaid, children's programs are scheduled to see a real decline in spending.
  

In sum, the analysis of historical and future trends in the federal budget reveals that children are a diminishing national priority.

The complete report is available in PDF format.

An accompanying powerpoint presentation is available for download.

For a complete listing of references and data sources used, see the separate Kids' Share 2007 Data Appendix and its reference section.

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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