How Much Government Spending Goes to Children?

Programs to support children are a key component of the federal budget, representing a critical investment in the nation’s future, helping to alleviate child poverty and supporting the next generation of productive adults.

The latest Kids’ Share report from the Urban Institute provides a view of resources targeted to children, placing such spending in the larger context of the country's budget. The report contains valuable insights about federal spending and tax incentives designed to help children and how those activities compare to other priorities within the budget.

Here are the top five takeaways from the latest Kids Share report, with further detail below:

1. Only 9 percent of the federal budget goes toward kids.
2. Temporary COVID-19 relief helped reduce child poverty.
3. Federal spending on children is projected to decline as a share of the budget.
4. Certain tax provisions account for half of all federal resources devoted to children.
5. In the coming years, we will spend more on interest on the national debt than on children.

Only 9 Percent of Federal Outlays Goes Toward Children

In 2021, federal spending on children amounted to $642 billion, or 9 percent of the federal budget. In comparison, 33 percent of outlays in 2021 went towards health and retirement benefits for adults 18 years of age and older through Social Security, Medicare, and Medicaid; 11 percent went towards defense spending; and 5 percent went to interest on the federal debt. In total, federal expenditures averaged about $10,700 per child — an increase of more than $3,000 from 2020 and $3,800 from 2019. The increase over the past two years primarily reflects federal relief efforts in response to the pandemic. Of the $5 trillion allocated for pandemic relief, $600 billion went to support children. However, federal spending on children was lower in 2022 because much of that funding was temporary.

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COVID-19 Relief Helped Reduce Child Poverty

In 2021, the official child poverty rate was 15.3 percent, which was a slight increase from the 14.4 percent measured before the pandemic in 2019. The official rate for children in 2021 was significantly higher than the 10.5 percent rate for working-age adults (ages 18 to 64) and the 10.3 percent for older Americans.

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However, as calculated by the Supplemental Poverty Measure (SPM), which accounts for government programs designed to assist low-income families, the child poverty rate was 5.2 percent in 2021 — a decline of 7.4 percentage points relative to 2019. The drop in child poverty under the SPM reflects the expansion of the child tax credit and other anti-poverty programs provided through legislation related to the pandemic. Those enhanced benefits had a particularly large impact on alleviating poverty for children; by comparison, that poverty measure fell 3.3 percentage points for adults (ages 18 to 64) and 2.1 percentage points for the elderly between 2019 and 2021. However, much of the temporary spending has expired or will do so soon as pandemic-related programs end.

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Federal Spending on Children is Projected to Decline as a Share of the Budget

Despite growth in the absolute amount of dollars spent on children in 2021 because of pandemic relief funds, spending on children remains similar to pre-pandemic years as share of total federal funding. That proportion is projected to decline significantly over the next decade from 9.4 percent in 2021 to 6.4 percent by 2032, a 32 percent decline in the share of the budget devoted to children. The majority of federal spending will continue to go towards Social Security, Medicare, and Medicaid — with combined spending for adults in those programs set to increase from 33 percent to 49 percent by 2032.

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Tax Provisions Account for About Half of All Federal Resources Devoted to Children

Tax provisions constituted 49 percent of the total federal resources allocated to children in 2021, the largest category of such spending. Tax provisions that benefit children — primarily the child tax credit, earned income tax credit, as well as the Economic Impact Payments (also known as “stimulus checks”) — totaled $406 billion in 2021 (including $214 billion in refundable tax credits that are classified as spending).

Health programs — largely stemming from Medicaid and the Children’s Health Insurance Program — was the second largest category, comprising $132 billion, or 16 percent, of federal spending on children. Other major categories of spending on children include:

• Nutrition programs such as the Supplemental Nutrition Assistance Program ($102 billion)
• Title I funding to schools with high percentages of children from low-income families and other education programs ($77 billion)
• Income security programs such as Social Security survivors’ and dependents’ benefits ($59 billion).

Other budget categories that benefit children — such as early education, social services, housing, and training — received about 7 percent of federal expenditures on children.

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In the Coming Years, We Will Spend More on Interest Payments on the National Debt than on Children

One of the most damaging effects of rising debt is growing interest costs, which makes it harder to invest in our nation’s future. In 2021, spending on interest payments totaled $352 billion — more than half of the amount of federal spending on children. However, interest costs are expected to rapidly outpace spending on children in upcoming years.

By 2032, the Congressional Budget Office projects that interest costs will increase to $1.2 trillion. 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.

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Conclusion

Government spending on children was bolstered following the pandemic and played a significant role in reducing child poverty in the past two years. However, the share of the federal budget devoted to children is projected to fall over the coming years. As the nation’s fiscal outlook continues on an unsustainable path, it is important that policymakers understand the way debt, deficits and interest costs affect our ability to invest in our priorities, including the way public funds are spent on children.

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Related: What Are The Economic Costs of Child Poverty?

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