Fact Sheets

Fact Sheet: Impact of the President’s 2021 Budget on Income Support

Federal Budget
Poverty & Family Economics

On February 10th, President Trump presented his budget request for fiscal year 2021 (FY21) to Congress, outlining his spending priorities for the coming year.

The FY21 budget request calls for $4.8 trillion to fund government operations in the next fiscal year. This would set funding at $590 billion in non-defense discretionary spending, down from $622 billion in FY20. In so doing, it cuts education, health, and child welfare funding. On the mandatory side of the ledger, the budget uses various policy proposals to effectively gut funding for housing and nutrition assistance, health programs, and income support. If implemented, the cuts proposed in this budget would be devastating to low-income families with children who are struggling to make ends meet and would result in an increase in child poverty in the United States.

This fact sheet will look in greater detail at policy proposals in the budget that impact the economic security of families with children. Because some spending on income supports is mandatory, however, some of the resources dedicated to this area of the President’s budget are projections of what will be spent. Policy changes that affect funding for particular programs are also noted below.

Notable Income Support Programs

Temporary Assistance for Needy Families (TANF): The budget cuts $21 billion over 10 years, including zeroing out of the TANF Contingency Fund ($6 billion over 10 years).

The President’s budget also directs states to strengthen work requirements by directing states to use 30 percent of the block grant for activities that directly promote work (which does not include basic cash assistance) as well as requiring that all parents participate in work activities for at least 20 hours a week. The 2019 landmark National Academy of Sciences study, A Roadmap to Reducing Child Poverty, finds that work requirements are not effective in reducing child poverty and are just as likely to increase child poverty as decrease it. The Administration also rightly requires states to target all TANF funds to low-income households (those with incomes 200 percent of the federal poverty line or lower).

TANF is the primary cash assistance program for low-income families with children, and over 70 percent of TANF funding goes to children. Boosting family income through cash assistance helps parents and guardians provide resources for children that support their healthy development, such as nutritious food and stable housing. In addition, TANF funds go towards funding child welfare services, child care, and state tax credits benefiting low-income families. Due to TANF’s design as a fixed block grant, very few families currently receive assistance. When TANF started in 1996, 68 percent of families in poverty received assistance. However, by 2018 that number dropped to just 22 percent, and caseloads have continued to drop even though the need has not decreased.

This enormous cut proposed in this budget would devastate TANF by reducing caseloads even further and eliminating the Contingency Fund reduces its already weak ability to respond to increased need during economic downturns.

Low Income Home Energy Assistance Program (LIHEAP): The President’s budget for FY21 would completely eliminate LIHEAP, which provides assistance for low-income families in paying the energy costs necessary to keep families safe and healthy. LIHEAP currently receives $3.7 billion, with nearly $775 million going to children.

Supplemental Security Income (SSI): The budget cuts Supplemental Security Income benefits by $8.1 billion for children with disabilities over 10 years through implementing a “sliding-scale family maximum” policy for families with multiple SSI recipients. The scale would work by allowing the maximum benefit for a family’s first disabled child but would reduce the amount for each additional eligible child. Since 1972, the SSI program has served as a critical lifeline for low-income families of children with special needs. SSI pays benefits to adults and children with disabilities who have limited income and resources in order to offset the financial burden associated with disabilities for families. Nearly 500,000 children were lifted out of poverty due to SSI in 2018.

Family Tax Credits: The President’s FY21 budget proposes a $72.8 billion cut from the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) over the next ten years. The administration has proposed rejecting families that file their taxes with an Individual Taxpayer Identification Number (ITIN), which would, in turn, put over 4 million children of immigrant citizens at a much greater risk of poverty.

  • This goes beyond the cut included in the Tax Cut and Jobs Act passed in December 2017 which restricted access to the CTC for an estimated one million immigrant children through the imposition of a new Social Security number requirement for children in households filing for the credit. Current law already requires all family members to have a Social Security number to claim the EITC, but this provision claims there is a need to strengthen enforcement.
  • In 2018 alone, the EITC and CTC helped make almost 7.7 million children less poor and lifted nearly 5 million children out of poverty. In addition to supporting financial stability, the benefits for families with children who claim these credits also include improved maternal and infant health, higher test scores, and academic achievement for students in elementary and middle school.

Paid Parental Leave Proposal: As in years past, the budget proposes a national paid parental leave program to provide six weeks of paid leave to parents of newborn babies or recently adopted children. States would be required to pay for the program by transferring unemployment insurance funds. While a national paid leave program is needed in the United States, this proposal is woefully inadequate and takes the wrong approach to meet the lack of paid leave for millions of families:

  • It would only provide six weeks of paid leave after the birth of a new child, which is an insufficient amount of time for a mother to heal and for parents to care for a newborn or adopted child before having to return to work;
  • Paid leave could not be used for other medical purposes, such as caring for a sick child or relative;
  • Funding this proposal with unemployment insurance funds coupled with cuts to anti-poverty programs in this budget severely undermines the ability of this proposal to support family financial security. Families would be left without assistance if they lose their job, have hours cut or have trouble finding employment during economic downturns.

We need a paid family and medical leave program in the United States that is robust enough to give all workers the flexibility to balance their obligations at home and at work, thereby actually promoting financial independence for families and healthy child development.

Child Support: The budget proposes a small cut to the Child Support Enforcement Program, which distributes over $30 billion in child support, with 96 percent going directly to families. It assists with services such as the establishment and collection of child support orders, paternity establishment, and distribution of child support payments.

The President’s budget would now allow states to use funds to mandate work activities for all noncustodial parents, not just those participating in the TANF program. The budget also calls for increasing funds to support states in offering parenting services, as well as promoting program efficiency. Over 14 million children were served by the Office of Child Support Enforcement, and 400,000 children were lifted out of poverty due to child support in 2018.

Social Services Block Grant (SSBG): The President’s budget proposes to eliminate SSBG, which provides $1.7 billion for an array of state services for children, including child care, foster care, child abuse prevention, adoption assistance, and transitional services. Over half of SSBG funding goes to children, and currently, states use about 33 percent of SSBG dollars for child welfare services to supplement funds. Eliminating this funding stream would leave states strapped for resources to supplement systems serving the most vulnerable children and families in our society.

Language to Change Poverty Measure:

The President’s FY21 budget includes language on conducting research on alternative sources of data on poverty and program participation in the United States. Given the Administration’s recent attempts to lower the Official Poverty Measure and reduce eligibility for programs that rely on U.S. Federal Poverty Guidelines, we remain concerned that this language is another attempt to underestimate poverty. This would disproportionately harm children since they experience poverty at a higher rate than adults and therefore make up a large percentage of means-tested program recipients.

Conclusion

It is important to recognize that the President’s budget represents the Administration’s wish list of priorities and is non-binding for Congress. Ultimately, Congress, not the President, holds the power of the purse on setting funding levels and makes the final budget decisions during the appropriations process.

As Congress begins the FY21 budget process in the coming weeks and months, First Focus on Children will continue to remind lawmakers that investments in children are essential not only to protect their health and well-being but also to secure our nation’s future economic success. For more information, contact Cara Baldari, VP of Family Economics, at carab@firstfocus.org.