Trends in TANF Receipt: Select Information for the Debate to Extend the Expanded Child Credit

Trends in TANF Receipt: Select Information for the Debate to Extend the Expanded Child Credit

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INSIGHTi
Trends in TANF Receipt: Select Information
for the Debate to Extend the Expanded Child
Credit
October 1, 2021
The American Rescue Plan Act of 2021 (P.L. 117-2) temporarily expanded the child tax credit,
transforming it into a near-universal cash benefit to families with children for 2021. For July to
December, up to half of the credit is being advanced to families on a monthly basis. The expanded child
credit was part of the policy response to the economic fal -out from the COVID-19 pandemic that
included directing cash payments to households through the credit, expanded unemployment insurance,
and economic impact (stimulus) payments.
In fal 2021, Congress is debating whether to extend the expanded child credit, or even make parts of it
permanent. This includes advance payment of the credit as a monthly cash benefit. The debate is occuring
as the pandemic continues, but many of the temporary measures enacted in response to the economic
fal out from the pandemic have expired—and the expanded child credit is scheduled to expire at the end
of 2021. Directing cash on an ongoing basis to needy families is a departure from pre-pandemic policies
to aid needy families with children. Before the pandemic, noncash benefits and refundable tax credits
paid in a lump sum represented the bulk of aid for these families. This Insight looks at one of the main
potential sources of monthly cash income support for families with children: public assistance from the
Temporary Assistance for Needy Families (TANF) block grant.
Creation of TANF
TANF was created in the Personal Responsibility and Work Opportunity Reconciliation Act of 1996
(PRWORA; P.L. 104-193), which ended dedicated federal funding for public assistance to needy families
with children, consolidating that funding into a broad-purpose block grant to states. PRWORA was the
culmination of a debate that spanned four decades and focused on the Aid to Families with Dependent
Children (AFDC) program and single mothers (who headed most AFDC families). TANF’s creators
viewed AFDC as creating dependency on government benefits because of its effect on work and marriage.
An oft-cited indicator of the impact of PRWORA is the increase in employment of single mothers. Figure
1 shows, by year, the share of single mothers who were employed and unemployed from 1994 to 2021,
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based on monthly averages. Combined, the percentage of employed and unemployed single mothers
represents the labor force participation rate for this group. Both labor force participation and employment
increased from 1994 (two years prior to the enactment of PRWORA) to 2000. After 2000, the percentage
of single mothers employed fluctuated with economic conditions, regaining its 2000 level only in 2019. In
2020 and 2021, amid the pandemic, both employment and labor force participation rates of single mothers
fel .
Figure 1. Percentage of Single Mothers Employed and Unemployed, 1994-2021
Monthly Averages

Source: Congressional Research Service (CRS) tabulations of the monthly Current Population Survey.
Notes: 2021 data reflect the first eight months of the year.
Before the pandemic, the child poverty rate (based on the Supplemental Poverty Measure [SPM]) reached
historical y low levels. Particularly since 2000 (with some variation because of changing economic
conditions), increases in government assistance accounted for much of its decline. However, ongoing cash
assistance from TANF contributed relatively little to child poverty reduction, with the bulk of child
poverty reduction from pre-assistance rates coming from noncash benefits and refundable tax credits paid
as a lump sum in the following year as part of tax refunds.
Number of Families Receiving TANF
The number of families with children receiving AFDC public assistance reached its historic al high, 5.1
mil ion, in March 1994. After that, the number of families receiving assistance declined, with accelerating
declines in the late 1990s after the enactment of PRWORA. Figure 2 shows the number of families
receiving AFDC or TANF from 1959–2020. It shows that the number of families receiving assistance
from TANF continued to decline, albeit at a slower rate than in the late 1990s, after the steady increase in
employment rates for single mothers ended in 2000.

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Figure 2. Number of Families Receiving Cash Assistance from AFDC/TANF: 1959-2020

Source: Congressional Research Service (CRS), based on data from the U.S. Department of Health and Human Services
(HHS).
Notes: TANF families include those receiving benefits from Separate State Programs (SSPs) with expenditures countable
toward the TANF maintenance-of-effort requirement. Shaded regions reflect recessions as determined by the National
Bureau of Economic Research (NBER).

Figure 3 shows estimates of the size of the population that was both eligible for and received TANF
assistance in selected years. Much of the decline in receipt of cash assistance since 1994 was because
fewer families eligible for TANF assistance actual y received it. This was especial y the case after 2000.

Figure 3. Number of People Who Were Eligible for and Received TANF Assistance, Selected
Years, 1994-2017
Estimates from the TRIM3 Microsimulation Model

Source: Congressional Research Service (CRS). Estimates from the TRIM3 microsimulation model’s baseline data for
selected years. TRIM3 is funded by the Department of Health and Human Services (HHS) and maintained at the Urban
Institute.

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Conclusion
The expanded child credit was part of a set of policies to address the economic effects of the COVID-19
pandemic, policies estimated to reduce child poverty in 2021 to below their pre-pandemic levels. If the
expansion of the child credit were to expire as scheduled, cash income support policies for families with
children would revert to relying on more traditional, targeted programs, such as social insurance
(permanent law unemployment compensation programs) and public assistance funded from TANF.
This Insight provides some data on TANF receipt as context for congressional consideration of extending
the expanded tax credit, and/or other potential changes to income support for families with children, or
reverting to the pre-pandemic status quo. State-run TANF assistance programs have seen a declining
number of families receiving assistance, reaching a point where about 1 in 4 eligible persons receive
benefits. Based on concerns that assistance led to dependency on government benefits, the crafters of
TANF assistance cal ed for it to be “temporary and provisional.” Rather than being temporary, TANF is
often not received at al among those eligible for it.

Author Information

Gene Falk

Specialist in Social Policy

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff
to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of
Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role.
CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United
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