October 1, 2020

How Much Government Spending Goes to Children?

Federal spending on children is a key part of the budget and is seen by many as being a critical investment in the nation’s future, helping alleviate child poverty and supporting the next generation of productive adults.

The latest Kids’ Share report from the Urban Institute provides a baseline view of public expenditures before the onset of the coronavirus (COVID-19) pandemic; it reflects budget priorities scheduled to unfold under law prior to the economic impact of the crisis and legislative responses to it. Nonetheless, the report contains valuable insights as an annual accounting of government spending on children, how that spending compares to other priorities within the budget, and other key indicators that such spending is intended to address.

Child Poverty Remains High

Child poverty remains a significant and costly challenge in the United States. In 2019, the child poverty rate was 14.4 percent — significantly higher than the 9.4 percent poverty rate for adults and the 8.9 percent poverty rate for seniors. While the child poverty rate remains relatively high, the share of the federal budget directed towards children was approximately 9 percent.

Poverty levels among children have decreased recently, but remain above poverty levels for those 65 and older

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Only 9 Percent of Federal Outlays Goes Toward Children

In 2019, federal spending on children amounted to $408 billion, or 9 percent of the federal budget. In comparison, 45 percent of 2019 outlays went towards health and retirement benefits for adults through Social Security, Medicare, and Medicaid; 15 percent went towards defense spending; and 8 percent went to interest on the federal debt.

In addition to that spending, the federal government reduced tax payments for families with children by $118 billion. In total, federal expenditures averaged about $6,700 per child — an increase of $200 from the previous year. That increase primarily reflects delayed effects from the temporary expansion of the child tax credit enacted in the Tax Cuts and Jobs Act of 2017.

Spending on children was less than 10% of the federal budget in 2019

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Federal Outlays on Children are Projected to Decline as a Share of the Budget

Prior to the rapid increase in federal spending in response to the pandemic, federal outlays on children were on track to become a smaller share of the budget going forward. Under pre-pandemic law, total federal spending was projected to increase by $1.6 trillion over the next decade, but only 2 cents of every additional dollar would have gone towards children’s programs; 71 cents of every additional dollar would have gone towards Social Security, Medicare, and Medicaid and 18 cents would have gone towards interest on the debt. In that context, outlays on children were projected to shrink from 9.2 percent of the federal budget to 7.3 percent by 2030. The rapid accumulation of debt to fight the pandemic will likely accelerate that timetable.

Share of Federal Budget Outlays Spent on Children and Other Items, Selected Years, 1960-2030

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Health Spending and Major Tax Breaks Account for Over Half of All Federal Expenditures on Children

Health programs and various tax provisions constituted 63 percent of federal expenditures on children. Tax provisions that benefit children (including $93 billion in refundable tax credits that are classified as spending) — primarily from the child tax credit, earned income tax credit, and the exclusion from taxation of employer-sponsored health insurance for dependent children — totaled $210 billion in 2019. Meanwhile, $121 billion was spent on health programs in 2019 — largely stemming from Medicaid and the Children’s Health Insurance Program.

Nutrition, income security, and education comprised roughly 30 percent, or about $154 billion, of federal expenditures on children. Those categories include programs such as the Supplemental Nutrition Assistance Program, Social Security survivors’ and dependents’ benefits directed toward children, and Title I funding to schools with high percentages of children from low-income families.

Other budget categories that benefit children — such as early education, social services, housing, and training — received less than 8 percent of federal expenditures on children.

Federal Expenditures on Children by Category and Major Programs, 2019 Billions of 2019 dollars

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Growing interest costs would crowd out investments in children

One of the most damaging effects of rising debt is growing interest costs, which makes it harder to invest in our nation’s economy. In 2019, spending on interest payments totaled $375 billion — nearly the amount of federal spending on children. In a recent report, the Congressional Budget Office lowered the outlook for interest costs in 2020 to $338 billion, but such costs are projected to double by 2030. That growth would crowd out other national priorities including spending on children. The federal budget is a statement of the nation’s priorities — and we are on pace to spend more on interest on the debt than we are on the next generation of Americans.

Net interest costs are projected to rise sharply


Related: What Are The Economic Costs of Child Poverty?


Image credit: Getty Images/iStockphoto

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