In Conversation with Timothy Smeeding


Equitable Growth in Conversation is a recurring series where we talk with economists and other academics to help us better understand whether and how economic inequality affects economic growth and stability. In this installment, Jonathan Fisher, research advisor and interim chief economist at Equitable Growth, speaks with Timothy Smeeding, the Lee Rainwater Distinguished Professor Emeritus of Public Affairs and Economics at the University of Wisconsin-Madison. Smeeding is a founding director of the Luxembourg Income Study, which produces cross-national data from 50 countries to facilitate comparative research on income, labor market outcomes, consumption, and other indicators of household and individual economic well-being. He was also the director of the Institute for Research on Poverty at the University of Wisconsin from 2008–2014 and a member of the National Academies of Sciences, Engineering, and Medicine’s committee on halving child poverty in the United States, which produced a report in 2019 with a series of strategies for achieving that goal. Smeeding’s research centers on social and economic mobility across generations, inequality of income, consumption, and wealth, and poverty, particularly among children and the elderly. He received an Equitable Growth grant in 2014 to examine wealth, income, and consumption inequality, and another in 2018 to study occupational mobility in the United States.

In their wide-ranging conversation, Fisher and Smeeding discussed:

  • Smeeding’s long-time research focus on poverty and well-being among children and older adults in the United States
  • The impact of family structure on future outcomes
  • Why more research is needed on debt and private transfers of wealth
  • Where the data on wealth, poverty, and well-being is lacking
  • Smeeding’s work to create official federal poverty measures in the 1980s
  • The ties between income, wealth, and consumption
  • The value of translating academic research for policy and media audiences
  • The importance of the Child Tax Credit for reducing poverty and boosting well-being
  • Smeeding’s work on private transfers of wealth

Jonathan Fisher: Tim, thanks for agreeing to this. I’m excited for our conversation today.

Timothy Smeeding: Thanks for inviting me.

Poverty and well-being among children and older adults

Fisher: One thing that seems to have driven your research over the years is comparing poverty and the well-being of children, and poverty and the well-being of those 65 and older. What motivated this focus for you?

Smeeding: Well, I’ve always been a very empirical economist. And when you think about who the vulnerable are in most societies, it’s children and the elderly. They’re the least able to work and they depend a lot on others—the elderly, on their assets, and children, on the incomes and other characteristics of their parents. So, I’ve always been particularly interested in them and their poverty and their opportunities to move forward.

Fairly early in my career, Sam Preston, who is actually an economist but is famous as a demographer, did a big presidential address on children and the elderly, comparing their well-being, and found that children were really behind in the United States and that the elderly were faring much better. And I said, well, that’s interesting. I had, at roughly the same time, started something called the Luxembourg Income Study, which compared how well children and the elderly did across countries, and found that U.S. children weren’t doing too well. I did a paper in Science with Barbara Torrey called “Poor Children in Rich Countries,” and a book with Lee Rainwater [titled Poor Kids in a Rich Country: America’s Children in Comparative Perspective], and found that American children were at a disadvantage, compared to the children in other rich countries. That’s something that I’ve been working on for a long time and continue to work on.

Recently, I’m much more interested in the elderly because there are a lot of elderly people out there and they have huge inequality among them, and there’s a lot of concern with an aging population. How are we going to support them? Can they support themselves? I’m interested in both, but my academic life has mainly been about children and about finding a way to support them regardless of who their parents are.

If you’re born in a two-parent household that is well-educated and live in a good neighborhood, you’ve got tons of opportunities and a lot of parental influence to help you get along. And if not, if you ended up in a wrong neighborhood, if you ended up with a single parent or in an unmarried family, and if they didn’t value education as highly as two-parent families do, and so on, it was much harder for you.

My idea all along was to help those who weren’t so lucky do better, to improve their upward mobility. I believe in equality of opportunity—all Americans do. And you have to create opportunities and then make sure that people take advantage of the opportunities. I’ve always believed that.

Fisher: You mentioned the cross-country differences in the well-being of children and elderly. Are the differences across the countries due to differences in the level of government support for children who are in lower-income families? What was driving the differences across countries?

Smeeding: Yes, to some extent, it was government support. To other extents, it’s just the basic inequality we built into a lot of our institutions, including U.S. labor market institutions.

There is something that Lee [Rainwater] and I invented a long time ago, which is quite popular now, and that’s looking at what we call the income package of families. The first part of the package is your earnings. What did you earn from the labor market or your return from capital? Then, what was the role of the family and private transfers in helping you? How did your family help you do better or worse? Were you stuck with a lot of caregiving responsibilities? Was your family able to help you at crucial times in your life? And then, finally, what did the government do for you? What did redistribution do for you?

If you look at those three lenses, if you look at what you do for yourself or what your family does for you on the private market, then private transfers, and then after that, what the government does to help you—that helps us study poverty and inequality and look at some of the sources of differences across countries, groups, and periods.

So, for example, if you just looked at the market income that people made, which is more or less the first part, market income inequality is higher than after-government inequality. But market income inequality in the United States is fairly close to market income inequality in other countries, particularly for working-age people. The difference is redistribution, and those differences can be really important.

Now, those differences could be offset by private family transfers, if you have that, too. But we don’t measure them as well as we should. And that’s a big thing I think that’s missing in the literature. Because labor market inequality then feeds into the well-being of children.

Fisher: That’s really important. I’m glad you laid out those differences in support systems, but it’s also in the differences in our labor market structures as well.

Smeeding: Yeah, and especially in support if you lose work. I always tell my colleagues, it’s really hard—if you’re teaching labor economics, you have to remember that you get paid every month regularly without fail. There’s no volatility. Sometimes you change jobs, there’s a temporary movement, but mostly that’s voluntary. If you’re an academic, a tenured academic in particular, then you are in a very fortunate spot. Because your economic life will go on and you will get paid every month and it’s very reliable and you learn to deal with that. That’s not true for most of the people out there, and particularly lower-income people.

Fisher: And as a professor, you teach at the same time every day. You have a predictable work schedule. They don’t tell you on Tuesday, “Oh, tomorrow you’re teaching at 6:00 p.m. instead of 10:00 a.m.”

Smeeding: Exactly. And then, most countries also have a stronger unemployment compensation system than we do, or another safety net that helps you in times of slack work. Now, this can be overdone. It might affect economic growth at some point. But the idea of who gets economic growth is really important. That’s why absolutes, as well as relatives, are important. Your country may grow a little less quickly than another country if you have a very progressive system, but the benefits are more widely shared.

Economic growth doesn’t really help if it’s not widely shared. There have been a number of efforts at the World Bank, the Organisation for Economic Co-operation and Development, and others to talk about shared prosperity and sharing the benefits of growth among a wider range of people than we’ve had in our country. It’s clear that we need to share things more widely. We need to be concerned, in particular, about assets. Yet, on the other side, accumulation of wealth allows you to find better neighborhoods and do lots of things for your kids and grandkids.

The impact of family structure on economic outcomes

Fisher: Actually, that leads next to my question. You’ve been discussing complex families or doubled-up families, which, I think, focuses on the children and often all three generations—the children, the parents, and sometimes the grandparents as well. My question here is, then, what do you see as the core issue when you talk about complex families or doubled-up families?

Smeeding: It’s difficult. Most complex families and doubled-up families are in need.

[University of Maryland economist] Melissa Kearney just advanced the importance of a stable, two-parent, married family [in her book, The Two-Parent Privilege: How Americans Stopped Getting Married and Started Falling Behind], but that only applies to 40 percent or 45 percent of kids now. We can’t just produce healthy marriages. We’ve known this for a long time. You have to deal with families as they are. And complex families, where not everyone is completely related within the family—for instance, there’s something called multi-partner fertility, where a man or a woman will have children with different partners, so one child is essentially a half sibling to the other in the same household—it’s difficult because usually it’s the mother who’s there with the kids. But it creates a lot of issues on who should be helped, on who’s really in charge of these kids?

The expanded Child Tax Credit ran into a lot of these problems with kids in complex families. The one thing [the IRS] knows is that each kid in the United States—or 95 percent of them, even 98 percent of them—has a unique Social Security Number. Who last claimed these children as their dependents, meaning that they’ve spent at least half a year living with them and they’ve got at least half their support? And that’s the parent to which they sent the expanded Child Tax Credit.

Well, it turns out, in a lot of cases, there was confusion about, “Oh, that was a guy I was living with back then, and because he earned more than me and we wanted to maximize the Earned Income Tax Credit, he claimed the children. And now you’ve sent him the money, but the kids are living with me, I’m the one who’s providing support.” And we saw a lot of that, and the IRS just stopping payment because they’re not sure who should get the benefit. A lot of cases needed to be adjudicated. That’s one example.

Another important example is something I’m working on now, which are grand-families. In grand-families, which applies to maybe 3 million or 4 million kids in the country today, you’re living with your grandparents and not your parents. In other cases, there are three generations in the same household and that indicates some stress, too, because the reason the middle generation is there is either the elderly person is disabled or, more often of late, the younger family can’t afford housing and has moved back in with grandpa and grandma because they can’t afford rent. And the implicit rent that they get—the value of the housing they get—is the biggest transfer.

In those cases, it’s hard to decide who to help and how to help them. It’s complicated, and it changes a lot. So, we have to sort it out. Complex families are difficult.

Here is another important cross-national comparison. There’s a Family’s Life survey that’s done across nations by people in Sweden, and they ask a very simple question: Up to age 15, are you living with your biological children? You can call it cohabitation, you can call it whatever you want. The point is that if there were two parents there, are they still the same two parents? And we are the country that has the lowest fraction of children still living with both biological/birth parents at age 15.

So, even cohabitation is different in other countries where there’s more of a commitment. Marriage is, of course, the ultimate commitment. But our marriage rates are poor, except for the highly educated—among the highly educated, they’re pretty good. And in cases where there has been marriage and it leads to divorce, generally child support is provided. In cases where there was an absent father who never connected with their child, or the father went to jail for a while, child support builds up, and the kids don’t tend to get any help because the parent—generally the father but sometimes the mother, too—they’re not earning an income.

Why we need more research on debt and private transfers of wealth

Smeeding: That leads me into something else that I think is really important that we have to study. And that’s debt. There is no dataset in the United States that includes child support debt and legal debt, as well as the traditional sorts of debt.

We know about secured debt, we know about housing—that’s good debt, there’s an asset behind it and it appreciates in value. We know that. Auto debt is sort of 50/50—you have an asset, but the asset depreciates. But hopefully you pay it off before it fully depreciates. But then, there’s student debt, which is secured only through your earnings. Sometimes you take on the debt and don’t get the degree, and therefore you have a hard time paying it back. And then there’s credit card debt, which you take on in order to sustain your consumption because you don’t have any wealth that you can otherwise draw on, and it is high.

But the two biggest ones are, as I mentioned, child support debt and legal debt, particularly legal debt for people who have been formally incarcerated. Those two forms of debt aren’t on any major national dataset.

Now, the Survey of Consumer Finances actually asked this year about legal debt. It’s a very, very small sample, and it doesn’t probe a lot. The reason is, different states have different rules for paying that debt, and it’s an important source of revenue. And along with not paying back your prison debt, it makes it much harder for people who have been incarcerated to go out and get jobs, to get driver’s licenses, and so forth, because they have to keep paying this debt. It also drives formally incarcerated people into the underground economy, the cash economy. Because there, you can find a way to support the debt. But in the long term, that doesn’t help.

What is really interesting, which I think that we don’t know, is how does that debt accumulate early in life? And how long does it take to pay off that debt? We don’t really know that. We haven’t looked. You have to look intergenerationally to see how long debt persists and to see what leads to asset accumulation. Because if you don’t have assets, you can’t transfer them. You can’t help your kids or your grandkids if you haven’t accumulated some assets.

Right now, the current elderly generation has done fairly well. If you saved and you put your money to a defined contribution pension plan, you’ve done fairly well, and you have the ability to make transfers across generations, either to your kids or to your grandkids. And we’ve all done those, but they’re not recorded anywhere. For instance, my children have never paid college tuition. I also put money into 529 bank accounts, which helped me accumulate wealth tax free so I can help my kids go through college.

Economists also know that families with wealth are more likely to finance businesses for their kids. And we also know that in the very top of the income distribution, a lot of kids end up in the family business or inherit the family business.

These are what I call strategic transfers at different points in your life—they’re not well recorded. I think they make a huge difference. And I think that’s the biggest thing that we don’t know and that we really have to study. We need to find out more about “in vivo” transfers, transfers during your lifetime which help reach a strategic purpose, such as finishing a college degree, buying a house, getting a good job. Unpaid internships are another example of something where people will subsidize their children to live in an expensive city that they couldn’t otherwise afford while they’re working at a very low-cost internship until they get a good job.

Fisher: There was a lot there. I think you’ve anticipated some of my questions already. But as you mentioned, regarding the transfers you’ve done for your children, if you are answering a survey, just because you know that it’s important, you’d report it. But the question is, if your children were answering the survey, would they have reported those as income?

Smeeding: Exactly. Or even if you ask me right now, do I give any cash to any of my children? Last year, I didn’t give cash to any of them. But if they’d asked, did you pay college tuition or did you purchase something? I’d say, “Oh, of course, I’m paying my granddaughter’s out-of-state tuition at the University of Wisconsin-Madison.”

So, in terms of me—the donor generation—it’s consumption. I decided that I’d take $40,000 and I’d use that to pay for my granddaughter’s tuition. Because I think going to college for her is important and because I think her parents aren’t terribly well-off. And I think this is the most important investment I can make in her, so I do that. So, for me, that’s a form of consumption, I would say. It’s something that I want to do with my money. But that’s not well-picked-up anywhere, actually. So, we really have to know more about this.

In some sense, it’s a private safety net that we have. It’s private family insurance. A lot of other families and other kids don’t have the family safety net. So, we need a little bit better safety net for them. And if it’s not going to come through the family, then we need to provide some of it. That’s why I’m such a great believer, for instance, in the child allowance. [Editor’s note: A child allowance is a fully refundable monthly tax credit paid to the person or couple claiming the child on their tax return. The expanded Child Tax Credit that was part of the American Rescue Plan Act of 2021 is an example of a temporary child allowance in the United States. This stands in contrast with the standard Child Tax Credit in the United States, which is not fully refundable and is paid once per year when filing the tax return.] I think that it solves a lot of our problems. It works in 85 or 86 other countries. It’s a major piece of economic security.

Here’s an example. I was a member of the National Academy of Sciences committee on halving child poverty. I did most of the cross-national work, looking at Canada, Australia, Ireland, and England, which were good comparisons for us to make. We’re not Sweden. But, you know, if you look at Australia and Canada, they’re big countries with lots of different parts. And, you know, they’ve done better largely because of their child allowances.

Where the data on wealth, poverty, and well-being is lacking

Fisher: You’ve already mentioned the Luxembourg Income Study, which you created and ran for many years. And you’ve also helped launch the American Opportunity Study, which is linking decennial censuses that weren’t already able to be linked at the U.S. Census Bureau. Do you have a wish list for data that need to be built or need to be created in the next few years?

Smeeding: We definitely need to integrate wealth more. Wealth and income together—those two are fairly easy. It turns out we have a lot of income surveys, a lot of income data, that we can link to some administrative records. That’s not always the case, but it could be the case for wealth data if you use private equity firms, Equifax, and others. And there are ways of doing it. But most good wealth surveys, like the Survey of Consumer Finances, have an income definition that’s fairly close to what the rest of us use. So, having the two together in the same dataset is good.

In some income datasets, you have a lot of detail on the flows of wealth or ownership of wealth, but then you can use the sorts of analysis that Eric Zwick [a professor of finance at the University of Chicago] and others have been doing to generate actual wealth. And if you want to study intergenerational mobility, something like the American Opportunity Survey is important. I mean, the problem with studying intergenerational mobility that we’ve had for a long time is, okay, we’ve got a dataset, we followed the same people for a long time, and we follow their kids. We have to follow their kids until, in my opinion, they get to be around 40 before we can really make a valid comparison. But that means that you’re always looking in the past.

The Panel Study of Income Dynamics or the National Longitudinal Survey of Youth, they’re both good datasets, but you have to rely on what happened 20, 30, and 40 years ago. So, they miss maybe 40 million or 50 million people who have moved to the United States since. Unless they happen to marry in, they miss all of the immigrants. But if you started with the current generation and the current situation of families with kids—where they live, the type of education they’re getting—and then you can link back somehow to their parents and grandparents, that would be the way to go. And that’s what the American Opportunity Survey offers. The decennial census link project is going to produce data that allow us to go back a number of generations.

Now, you’re not going to get the exact wealth. However, you’ll find out where you grew up, when you emigrated into this country, what your parents did, what some of their income was, and so forth. You can fill in a lot of the blanks that will help us make the next generation better off.

The Luxembourg Income study was a big wild card. But I thought it was worth doing, and I invested a lot of my time and energy into it, and it really paid off. Janet Gornick and others who followed me directing the LIS project have taken it even further. It allowed us to look cross nationally. And you can learn from other countries. Other countries have learned from us. We more or less invented the Earned Income Tax Credit in our country, which is now called the working family tax credit in 40 or 50 countries. It helps people who make low wages support their families. And its general effects are an increase in the number of people who work and the number of hours they work. So, you can learn from other countries, and hopefully we’re going to learn with the child allowance.

Many economists are out to impress other economists with their techniques, and their methods, and their two-stage estimators, and the structural modeling. Not me. I’m out to find evidence and look at the weight of the numbers and the evidence, and then try and convince other people, particularly policymakers and some of the influential press and others, that this is something you should pay attention to. This is important. And I think the evidence-based policy movement is one of the best things we have. For the long run, I think evidence will win out.

Smeeding’s work to create official federal poverty measures in the 1980s

Fisher: You talked about the Earned Income Tax Credit and about the child allowance. Do you have examples of your research that have had a direct impact on policy?

Smeeding: Well, my dissertation was on the effect of noncash transfers on poverty. I was the first person to do that. I used simple methodology, and I cashed out food stamps [now the Supplemental Nutrition Assistance Program], which were close to cash, and I looked at housing allowances and their impact on poverty.

Now, I didn’t bother to change the poverty line because, well, the poverty line at that time was based on three times an adequate food diet. So, the food part fit. And then the housing part is a necessity, so that worked. I even included what economists call the cash equivalent value of Medicaid. In other words, how much cash would you take in return for this little card you have in your pocket that gives you healthcare?

I did this far enough back—it was 1968, ’70, and ’72—and I could find a lot of elderly people back in the Consumer Expenditure Surveys in the early ’60s who didn’t have health insurance. And I could make some estimates of what people were willing to pay. And it turns out I got to about 30 percent.

I’m proud of that number, because that cash equivalent number is the number that Amy Finkelstein [a professor of economics at the Massachusetts Institute of Technology] and others have come up with using for all sorts of difficult econometrics recently. But I would rethink that, because I think healthcare is a special need. It’s a different need. Medical debt is another sort of debt that I could have mentioned earlier, which is really biting into people now and affects their credit rating. And when it goes to collections, it can really damage your ability to buy homes and do other things.

But what we really need is a basket for poverty. It should be food, clothing, shelter, internet connectivity, which I think is crucial and indispensable, and also some need for an amount of healthcare. When I did my work, I didn’t make any changes in the needs budget. Later on, people came by and said we should count the near-cash one, certainly—food and housing. And the Census Bureau did that. I did a report for them in ’82, which became a policy for a long time.

In the official poverty measure, or OPM as it’s called today, no one pays taxes using the OPM, and no one gets tax refunds. We’ve seen in the past 3 or 4 years that the IRS, in 2021 for sure, was the largest redistributor in the country because they were paying out the Earned Income Tax Credit, they were paying out the Child Tax Credit, and they were paying out emergency income supplements—all of which helped drive the poverty rate down in 2021 and helped low-income families survive the COVID-19 crisis. We wouldn’t know anything about them if we were still using what we did before.

Fisher: I was looking at that 1982 report. I didn’t realize it was based off your dissertation.

Smeeding: The way it came to be is that the National Science Foundation wanted to put an American Statistical Association fellow at the Census Bureau to study this topic, and four or five people came to me and said, “You just wrote your dissertation and so you should think about it.” So, I went there and I got put in the Income Division. And the first week I was there, I was invited to lunch with Vince Barabba, who was the director of the Census Bureau, and the head of the Income branch, Roger Herriot.

Essentially, they showed me a piece of legislation that had just been passed and the statement was, unless the Census Bureau published data on the effect of noncash benefits, they were going to withhold $40 million of their budget the next year. So, the Income Division became my research assistants. They would pound out any number I wanted, any way I wanted to do it, and I took a couple of years and did it.

There were a couple of people there who were looking over my shoulder saying, “Well, you really shouldn’t…” I said “No, I’m just going to do this and publish it.” So, I published it, and it’s in my name. A lot of Republicans liked it because it pushed poverty lower using the current poverty line. A lot of my liberal friends didn’t like it because it did that. But come on, this is where we’re putting our public policy efforts. This is what we’re doing. If you want to evaluate public policy, you have to know how the Earned Income Tax Credit and food stamps or SNAP and public housing affect people and how it helps them meet their needs. We have to do this. So, we finally did it, and eventually it developed into the Supplemental Poverty Measure.

And the other thing that I think you need to know is that when you look at poverty measurement, there’s two ways. Some people believe in an absolute poverty line, meaning that there’s some level that society needs and that shouldn’t change for a long time. And other people believe there should be relative poverty. How are you doing relative to people in your society, at some fraction of the median? There’s no science about one or the other, but I’ve always argued you should do both, and you can do both.

Relative poverty is easy to measure. The Census Bureau has now adopted the household as its unit of measurement, which is what all other countries look at. And income less than half the median—after you’ve adjusted for family size, of course, or needs somehow—half the world measures poverty that way. But I also think, let’s say, it’s 2023, and we have the 2013 poverty line. How did people in 2023 do at that same standard of living in 2013? Have they moved over that level? Or moved down? This is a type of anchored or absolute poverty measure.

Both are important. They give you different information. Both are crucial, and I don’t see why we can’t do both. That’s always been my belief. There should be a relative measure, and there should be an absolute measure.

So, now we have something in between, the Supplemental Poverty Measure, which is quasi-relative, where it doesn’t change as fast as income. But at least we’re counting the right things.

And then, there’s a question of, if wealth is so important, what about wealth poverty? In other words, do you have enough liquid assets that you can offset? And suppose you lost all your income for three or four months, do you have enough that you could live in a nonpoor level based on your liquid assets? And for an awful lot of people, the answer is no.

The ties between wealth, income, and consumption

Smeeding: Then, of course, economists love consumption—if we ever knew what it was or how to measure it. And some people want to look at consumption poverty. Okay. But you need a better database, and you need to understand consumption a little better. For some groups, such as the elderly, consumption is an incredibly important issue. Can they maintain their consumption after retirement? And it’s not just out of their incomes. The most important thing is their wealth and their savings. That’s where they get most of their sustenance. So, the elderly consume out of wealth a lot, including the consumption we talked about before, where you buy something for your grandkids.

Fisher: Yeah. And, you know, we have a hard enough time defining income, which is part of what that 1982 technical report was. It gets monumentally harder if we have to agree on a definition of wealth and a definition of consumption. But they’re all three important concepts.

Smeeding: And they’re linked.

Fisher: And they’re linked. Exactly.

Smeeding: That’s the key. If you get income, either consume it or you save it, and if you save it, it adds to your net wealth. If you consume more than your income, you dis-save. So, there’s this iron triangle of transactions that links the three together. And if you know someone’s income and their savings, okay, you can figure out what consumption was by the difference between them.

We need to know more of that. But the trouble, as you all know, is that there are a lot of people producing different income data. Fewer produce wealth data, but that’s becoming more important. And the consumption data is very difficult to measure, and it’s sensitive to a lot of parameters.

I have nothing against any of these measures. I think they all help us understand better. And even the direct measurements of material hardship now, which are used widely in England and other countries, could be deployed in the United States. The most important one to hear has always been, can you maintain your food consumption? Are you insecure in terms of the amount or the quality of food that you can feed your kids?

That’s what’s SNAP and school lunches and other feeding programs are supposed to take care of. That’s the most basic human need, food. And it turns out food intake is very important. It’s been shown to be very important for birth weight and for child development and so forth, across all sorts of a wide range of countries.

Fisher: And even with those programs you mentioned, there’s still variation.

Smeeding: Huge variation. That’s the problem with the Supplemental Nutrition Assistance Program. It’s at least 50 different programs because every state runs it differently and has different rules and makes it harder or easier to recertify and maintain it. That makes things difficult a lot of times.

The beauty of the Child Tax Credit is that it is federally administered. The states can’t interfere. Once the federal government knows that you’re the responsible parent or parents, and these are your children and they’ve lived with you and you’ve supported them, it just goes on.

Now, you find the biggest effects of the Child Tax Credit on poverty rates on the working poor in the rural South. And there’s a couple of reasons. One is that the cost of living varies across the country. The Child Tax Credit is the same amount per child no matter where you live, and it goes a lot further in Fort Smith, Arkansas or in Jackson, Mississippi than it goes in San Francisco or New York. So, it’s worth more. And it got directly to the families as long as they had filed taxes a couple of years before and had not become complex families. There, it worked amazingly well.

In cases where there’s complex families or things have changed, we need somebody else to be able to mediate that. And I always thought the Social Security Administration was the place to do that. In the National Academy of Sciences report, in one of our appendices, I recommended that the child allowance be administered by the Social Security Administration as well as the IRS because it could give people Individual Taxpayer Identification Numbers or Social Security Numbers, and then Congress could decide: If it only went to people with Social Security Numbers, fine. Then you have a Social Security Number, and all children born in the United States have one. Their parents aren’t all born here, and there’s some difficulties there, but the children are U.S. citizens and they’re eligible for the benefit.

Fisher: You touched on the importance of having lots of measures. You discussed having an absolute and a relative measure of poverty, but it’s also looking at consumption poverty, wealth poverty, income poverty. All those measures can tell you something when you look at them, but you just don’t want people to cherry pick the one that gives them the answer they want. Social scientists should be looking at all these things. You also mentioned food insecurity or just other measures of well-being that aren’t just dollar-based. So, look at all of them. I think that’s a really important point.

The value of translating academic research for policy and media audiences

Fisher: One thing I do want to turn to, and something you’ve mentioned, is translating research. Equitable Growth funds research, and then we translate it for policymakers and the media. One thing you have done in your career is interact with policymakers and media, and it’s not always rewarded in academia. As you said, economists reward each other by impressing other economists. What have you seen as the benefits of interacting with policymakers and the media, even though it’s not always advancing your career?

Smeeding: I always thought that was important, that my career was to solve social problems, policymakers were going to do it, and the media would call attention to it.

I’m not always the best interview. I sometimes take too long. Sometimes I go off track. But in general, people trust what I say, and I’ve become friends with a lot of members of the media. And I’ve become a source, a source for reporters to find the primary sources for what they’re looking at. I make myself available.

I’ve talked to the media throughout Wisconsin, as well as around the rest of the world. I’ve found it valuable. It’s something that I’ve wanted to do. I got my tenure as an economist. Then I thought, well, economics doesn’t want to answer all the questions I want to answer. There are a lot of other disciplines out there—demography, a lot of quantitative sociology—and those were people whose work I thought was also important.

And I can still find this today. I still look at wealth and wealth transfer, and economists are talking about this and that, and I say, “Well, wait a minute, don’t you ever read the sociological literature? You haven’t read [Harvard University sociologist Alexandra] Killewald and [Ludwig-Maximilians-University Munich sociologist Fabian] Pfeffer on using wealth and intergenerational transfers in the PSID.” Or “you haven’t talked to any sociologists about mobility, in terms of occupations or social classes.” You can’t live in an isolated ice box.

For a lot of economists, they need to stay in that ‘ice’ box because they have to get their papers in certain journals in order to become a celebrated economist. But I always thought the most important thing was to try and educate the public. And if I had something to say that I thought was worthwhile, I could find—and I have found—lots of journalists and have built up, you know, a pretty good reputation among them, which I think has helped. You know, you develop conversations with people, and they know your work.

The importance of the Child Tax Credit for reducing poverty and boosting well-being

Smeeding: The National Academy of Science’s report on halving child poverty is a classic example. A lot of people called me after it published. And I said, “Well, this is what the report says, you should read the report.” And then they would ask, “Well, what do you think of it?” And I would say, “Here’s what I think of it. This is my opinion, not the report.”

I always thought that the child allowance was something really important that we didn’t have in our country, and it made a huge difference in other countries. And with perfect timing, the Canadians put theirs in, in 2015 or 2016. And really, it slashed child poverty in half by international measures, by 2019 or 2020. So, this worked. And the beauty of cash, of course, is that you can use it to pay for child care, you can use it to meet whatever needs that you have. The evidence since shows very clearly that people don’t spend it on recreational drugs and on alcohol and so forth. They actually spend it on their kids. There’s good evidence for that now. It helps parents. I think almost all parents want to do everything they can for their kids. Some of them just don’t have the means.

But even the idea that you have $300 or $250 a month per kid coming in every month will give you some respite. “Volatility may go up and down, but if I really have to pay a bill or I’m really stuck, I’ll have this. And if times are good, I should be able to take some of that money and put it away in a safe place so I have it the next time somebody gets laid off, or the car breaks down, or something really important happens.”

And I’ve said this for 15 years, the big thing is the child allowance. The big thing is to try and give our children a better chance for higher mobility. And we should be doing it. And I still believe that it’s the right thing to do. It isn’t going to get you all the way out of poverty, but it made a huge difference, and it will make a huge difference in the lives of low-income people who have high income volatility and insufficient resources.

Fisher: One thing I want to make sure I highlight is that there was a Child Tax Credit before the American Rescue Plan Act, but it was just a tax credit like the Earned Income Tax Credit—you might just get it when you file your taxes. And so, do you think an important part of a child allowance is the monthly distribution? Is that a key feature of what you’d like to see?

Smeeding: Yeah. At first, the Child Tax Credit wasn’t refundable in 1997, then it was $1,000 refundable. Then, we went to $2,000 in 2018 and we had this strange thing, that unless you made enough money, you didn’t get the full $2,000. And that left a third of the kids at the bottom cut-off. And it also left a lot of those grand-families, who didn’t have high earnings or any earnings, cut-off when they were raising kids.

So, the idea was, unless you earn $25,000, or $35,000 with a couple of kids, you weren’t going to get the full Child Tax Credit. On the other hand, we’re subsidizing—and still are—families making up to $400,000 a year, they are getting a Child Tax Credit today. The 2021 Child Tax Credit had full refundability for low- or zero-earnings families, and it made a huge difference for those who were excluded before.

We could target the CTC a little bit better, targeting within universalism. And I think it should be available to everybody all the way down to zero income, full refundability—that’s what I believe.

Now, if you said, “Well, we have to have a work test or something.” Okay. But let’s exempt the 12 percent of children in this country living with families who are getting a Social Security benefit, where the parents or the kids are on Supplemental Security Income or some form of Social Security. They should be exempt from any earnings test.

Next thing that should happen is if your youngest child is under age 3 or 4, you should be exempt too. That should exempt you from having to work. And if you want to put a work test on after that, make sure you guarantee and find child care. If you can do that, maybe.

So, there are ways to temper it. There are ways that I could compromise to get most of the good out of it.

I have a new paper that finds if we just extended the $2,000 Child Tax Credit we have today down to the people with zero incomes, that would cost $12 billion, is all, and it would reduce the poverty for those people—the newly eligible on the bottom—by about 40 percent, just by itself. If you wanted to go further, if you wanted to go to 50 percent or higher, you’d need a higher amount, as well as extending the $2,000.

But I just think it’s something that’s going to happen now because the weight of the evidence is that it helps. Poverty itself, regardless of household, family structure, race, gender, ethnicity, poverty itself hurts kids. And keeping kids out of poverty is going to allow them to grow up to be better earners, better Americans, better adults, have higher educational attainment, be healthier. To me, it’s a no brainer. But not to everybody.

Reviewing Smeeding’s work on private transfers of wealth

Fisher: So, I just have one last question. And this is more of a career retrospective question. Do you have one favorite paper or research topic that you’ve done that hasn’t gotten the interest you think it should? Or that you really want to highlight and hope others further it, further that research?

Smeeding: Well, the idea of the income package—I did that with Lee [Rainwater]—it’s coming through. And work that I’ve done with you and others on income, wealth, and consumption—in particular, looking at wealth, as well as income. I think that we have to do that in the world that we live in today.

But way back in ’82, I did a paper with [economist] Robert Lampman on private transfers versus public transfers in the Review of Income and Wealth. We talked about the beneficiaries of public transfers. We talked about that if your father is not well or your brother is disabled, you’d help support them. But if the government had a program, you were the real beneficiary because then, you didn’t have to support them.

The whole point was the importance of private transfers. And if you look at the world today, for instance, you realize how important private transfers across countries are in the form of remittances. Remittances are 30 percent of the income in Venezuela and Guatemala today. Immigrants who come here work at low wages in the United States, and they exist at much lower levels because they transfer money back electronically to their family members, who are really hurting in these other countries. Africans do the same thing, and Syrians do the same thing in Europe. So, remittances are really important. That’s one thing we should spend more time on.

And the other is these transfers of wealth that I mentioned earlier, which allow some kids who are ahead to stay ahead, and which allow people to graduate school without debt and to move into a good job and do all the right things. I think we need to tax transfers, at death in particular, and, you know, inheritances or bequests.

And I think we should think about “in vivo” transfers, too. Because we tax wealth among us so slightly. Then, we tax labor, and wealth is the source. You don’t want to make it so badly that people don’t save and accumulate anything. But do we really need 529 plans? People could put hundreds of thousands of dollars in 529 plans so they can let it grow tax free to help their kids, which is something they would have done anyway. I think that creates a lot of intergenerational inequality and a lot of persistence—and a lot less mobility. So, we need to do more of that.

Fisher: I really appreciate that. So, I want to thank you for taking the time to talk with me today.

Smeeding: Well, thanks, Jonathan. This is an honor to join you and to talk with you.

My parting thought is that I’ve been very lucky. I’ve had a wonderful life in academia. I was lucky enough to get a good job and to work hard enough to do well. I’ve had a number of great colleagues and a number of great mentors who helped me. So, I stand on the shoulders of Tony Atkinson and Lee Rainwater and Bob Haveman, and others—those who really helped me see the light of where things should be or where I should go.

I have always been a “chiffrephile,” in French a “lover of numbers”—a quant guy as they say, though policy implementation is also key, I learned as I grew older.

And I’ve had the wonderful pleasure of working with people like yourself and David Johnson [of the National Academies of Sciences, Engineering, and Medicine], and my student, Jeff Thompson [now vice president and economist at the Federal Reserve Bank of Boston], on this idea of income, wealth and consumption. I’m excited about the measurement challenges and measurement accomplishments that I and others have made. A lot of young people, like yourself, Jeff Larimore [of the Federal Reserve Board], David Splinter [of the Joint Committee on Taxation in the U.S. Congress], Hilary Hoynes [of the University of California, Berkeley]—the next generation is carrying on and doing more of this good work. That makes me feel good.

We could solve a lot of our problems, I think, if we stick to the evidence, and try and move forward. But we’ll see. I’m an optimist, so I have some hope.

Fisher: Yeah. Good. I’m an optimist, too. I’m glad to hear.


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