Child Support and Trickle-Down Economics

Trickle-down economics has been the basis of many arguments concerning the benefits of this model for the working class and poor people in a society.  InvestorWords defines trickle-down economics as an economic theory which advocates letting businesses flourish since their profits ultimately trickle down to lower-income individuals and the rest of the economy.  The child support system is a perfect example of the trickle-down theory and how it fails low-income children and families.  The government, in this instance, is the business that is flourishing and has been collecting huge profits since the reform of the child support system under former President Clinton in the early 1990’s.  One alleged objective of the child support system is to recover money to recoup welfare payments awarded to low-income families through the Temporary Assistance for Needy Families (TANF) benefits program.  The price of this grant is huge for the recipient of the award.  According to the National Conference of State Legislatures or NCSL, under federal law, states are allowed to retain collected child support to reimburse themselves and the federal government for any welfare payments to a family.  Based on the trickle-down theory, the billions of dollars that the government collects through child support enforcement, is paid to the low-income families in very small amounts.

Since many states fail to pay any child support money to the families receiving TANF benefits, the payment only trickles down in the way of the low grant amount.  Time limits and strict qualification criteria often significantly decreases the number of payments that families receives which often leave the family with a zero dollar monthly income.  The grant amounts, although helpful in assisting families satisfy some basic needs, are often extremely low in many states across the country.  States like Mississippi and Tennessee provide less than $200 for a family of three in monthly TANF benefits.  Alabama, Louisiana and South Carolina all fall short of a $250 monthly cash benefit for its neediest families.  Yet, struggling families are forced to forfeit their rights to their own child support payments in favor of receiving temporary help while the government any collections.  This money is magically supposed to drip down to the families and somehow better their situations.  If the money was paid directly and in full to the owners of the money, there would be no need for government involvement.   Even though some states pay a small amount or pass-through some money to the families, the government is the true beneficiary.  Any child support collected on behalf of the family is shared between the state and the federal governments, (NCSL).  The trickle-down theory is an utter failure when the family cannot rely on TANF benefits or child support payments because the government is hoarding the money.

Currently 27 states do not pass-through or allow any money to trickle-down to TANF recipients.  Some of the other states have policies in place but not all let the child support money trickle-down to its rightful owners.  Minnesota, for instance, is supposed to pay some money to families receiving state benefits.  Michelle Vinson and Vicki Turetsky wrote in a Center for Law and Social Policy or CLASP (2009) report that Minnesota should pass-through all support to court-ordered amount but does not disregard any for purposes of calculating benefits.  Unfortunately, the state failed to pass-through any of the money it collected during 2009-2013 to any families receiving welfare benefits.  According to the Administration of Children and Families (ACF) (2014), in 2013, the state of Minnesota reports its share of child support collections at $12,514,455 and the federal share almost equaled that amount at $12,514,462.  The major problem, yet again, is that out of the reported $584,830,863 distributed child support collections, zero dollars trickled-down to the most vulnerable American families.  The people in favor of the trickle-down theory argue that if the ‘too big to fail’ entities continue to turn a profit, some of the money will eventually reach the pockets of the lower class.  But as clearly stated in the 2013 ACF preliminary child support report, none of the over half a billion dollars collected seemed trickle-down to the families that depend on child support for survival.

Michigan, is a little different, in its policies of passing-through or trickling down collection money to low-income families.  According to the Vinson, et al. (2009), up to $50 is passed-through and the amount is disregarded for purposes of eligibility and benefits.  Michigan has paid some of the $1,296,510,912 collected in 2013 to some TANF families.  Unfortunately, for the families, the amount of the trickle-down money decreased from $5,987,766 in 2009 to a mere $341 in 2013, (ACF, 2014).  The reason for this drastic plummet in trickle-down money is a restriction to the Client Participation Payment (CPP).  The Michigan Department of Human Services (2012), announced that as of October 1, 2011,due to changes in the department’s Fiscal Year 2012 budget, the state of Michigan will no longer pass-through $50 CPP to the family.  The state and federal governments continue to reap the financial benefits of the child support system despite the alleged budged deficits.  In fact, in 2013, the state reported $21,333,881 as its share in collections, (ACF, 2014).  The federal government exceeded the states multi-million dollar payday courtesy of the less fortunate children and families.  According to the ACF (2014), the federal government collected and retained $42,140,924 as its share of the child support collections. The problem with the trickle-down theory is that the millions retained by the government did nothing to help decrease the 24% of children currently living in poverty in the Michigan or any the other state across the country.   

Washington State must have shared its budget cut idea with Michigan as it had already failed to pay any significant money to its residents receiving TANF benefits.  The $47,076,931 that trickled-down to the families between 2009 and 2011 decreased to a measly $3,484 in 2012 and 2013, (ACF, 1014).  This is due to a new law, affective May 1, 2011, Washington State suspended pass-through payments. It has been over three years and several budgets later, but Washington officials have failed to reinstate the original pass-through law.  Before the uncompassionate change to the law, the state increased the pass-through and disregard to $100 for one child and $200 for two children, (Vinson, et al., 2009).  The state and federal governments were able to collect $29,137,879 and $29,317,887 respectively in child support money.  Again, none of the money reached the low-income families and this exemplifies the reasons that trickle-down economics is a failure when utilized by the child support system. 

The wealthiest corporations, in this case the state and federal governments, pocket the money while leaving the poorest citizens to live in poverty.  For decades, the higher powers have argued that the money paid to wealthy corporations and individuals, would mysteriously appear in the purses and wallets of the middle and lower class.  The trickle-down theory did not work when it was first introduced by Former President Reagan and it does not work now.  There is a grave misconception that ignores the fact that public assistance benefits are paid for by taxes.  The child support system demands that grant money, already paid for, should be reimbursed by noncustodial parents.  After the government receives its ‘repayment’ of the money, the remainder will be paid to the families that the money is owed to anyway.  More than half of the states retain 100% of the child support payments which means that zero dollars is trickling down to the people that need it the most.  The states that do pay some money limit the payment to a maximum of $200 a month.  This is done while the government continues to collect billions of dollars on the backs of US children.  Even worse, states that did pay a small amount of money to the families have ended the policies blaming budget constraints to justify these prolonged interruptions in payments.  As long as the less fortunate are expected to wait patiently for money to trickle-down from the government, poverty levels will, more than likely continue to rise.  We, the people, must force the government to reform the child support system because the trickle-down theory has been and continues to be a dismal failure to the children of America.