Urban Wire Despite Potential Long-Term Returns, Federal Investment in Children is Expected to Continue Declining
Cary Lou, Hannah Daly
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Teacher looking at books with children

The federal government once again faces the prospect of a shutdown, as Congress remains at an impasse on federal spending. A lapse in funding could disrupt programs and services families in the US rely on.

Federal spending provides critical investments in the health and well-being of children and adults in the US through programs such as Medicare, Medicaid, and the Supplemental Nutrition Assistance Program (SNAP). It also supports K–12 education, early education programs such as Head Start, and youth training programs to help children reach their full potential. Despite the long-term payoffs, however, spending on children accounts for a relatively small share of the federal budget each year.

Released today, the Urban Institute’s 2023 Kids’ Share report finds that after increasing temporarily during the pandemic, federal investments in children declined in 2022 and will continue to decline over the next decade. As policymakers weigh spending cuts in the latest round of budget negotiations, they should consider both the short- and long-term positive implications of devoting public resources to support children. Investments in children are associated with improved outcomes in health and education, as well as increased probability of employment and higher earnings in adulthood, potentially saving the government money in the long term.

Spending on children in 2022

The federal government spent $761 billion on children in 2022, or about $9,910 per child, through both program outlays and tax expenditures. Compared with other spending priorities, however, investments in children were only a small portion of federal expenditures. We found just 10 percent of federal outlays in 2022 were invested in children, versus 39 percent for health and retirement benefits for adults, 12 percent for defense, 8 percent for interest payments on the national debt, and 31 percent for all other priorities.
 

Only 10 Percent of Federal Outlays Went to Children

Sources: Authors’ estimates based primarily on Office of Management and Budget, Budget of the United States Government, Fiscal Year 2024 (Washington, DC: US Government Printing Office, 2023), and past releases of this report.
Note: Numbers may not sum to totals because of rounding and do not include tax expenditures via reductions in tax liabilities owed


Similarly, child-related tax reductions—not included in outlays—accounted for 10 percent of all federal tax expenditures in 2022. Tax provisions—such as the child tax credit, earned income tax credit, and exclusion of employer-sponsored health insurance from taxes—were the largest source of expenditures on children, totaling $264 billion.

A substantial share of federal spending on children also came from health programs ($146 billion) such as Medicaid; nutrition programs ($119 billion) such as SNAP and school lunch and breakfast programs; and K–12 education programs ($104 billion) such as special education, Title I, and the pandemic Education Stabilization Fund. The federal government also provided $64 billion in support for children through income security programs, such as Social Security and Temporary Assistance for Needy Families, and $38 billion for child care and early education programs including Head Start and the Child Care and Development Fund. Almost $30 billion was spent on children through housing, foster care and other social services, and youth training programs.

Research has shown that public spending on children, especially through health, early education, and K–12 education programs, produce positive, long-term outcomes. Child-related tax reductions, financial assistance programs, and food assistance programs support children’s development by helping to reduce material hardship among families. Investments in health insurance for children improve health outcomes, reducing the likelihood of chronic conditions in adulthood and saving the government money in the long run by reducing future hospitalizations and emergency room visits. Spending on education increases the likelihood that children will graduate from high school and postsecondary school, making them more likely to be employed, achieve higher earnings, and contribute more in taxes as adults. Investments in health also benefit education and financial circumstances, and vice versa, contributing to improvements across the board.

Spending on children is projected to decline over the coming decade

Public spending on children declined in 2022 as pandemic relief spending ended. Federal spending on children, including tax expenditures, fell from $11,360 per child in 2021 to $9,910 in 2022 and is projected to drop further to $8,470 in 2023. This decline is driven by the drawdown of temporary pandemic relief funding for economic impact payments (stimulus checks) and the expanded child tax credit. During the pandemic, the child poverty rate based on the supplemental poverty measure fell from 12.6 percent in 2019 to 5.2 percent in 2021, largely as a result of emergency relief programs. With the decline in emergency spending, child poverty returned to prepandemic levels in 2022 (12.4 percent).

Our projections show that spending on children will continue to decline over the coming decade. Under existing law, investment in children is expected to fall from 10 percent of federal outlays in 2022 to only 6 percent in 2033 as rising spending on adults and interest payments on the national debt put pressure on other budget priorities. Spending on adults through Social Security, Medicare, and Medicaid is projected to grow from 39 percent of federal outlays in 2022 to 48 percent in 2033, while interest payments are projected to nearly double from 8 percent to 15 percent, surpassing outlays on children.

These projections do not account for any additional cuts to federal spending on children that may occur in the ongoing appropriations negotiations. Though a reduction in children’s spending may lower government outlays and deficits in the short term, they may be counterproductive in the long term, as reduced investments in children would also diminish the potential positive payoffs to society.

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Research Areas Children and youth
Tags Children's health and development Child care and early childhood education Children's budget Federal budget and economy Head Start and elementary education K-12 education Kids in context Medicaid and the Children’s Health Insurance Program  Refundable tax credits State programs, budgets Supplemental Nutrition Assistance Program (SNAP)
Policy Centers Center on Labor, Human Services, and Population
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