President Biden is proposing to bolster the Child Tax Credit. Specifically, his plan will likely include payments to parents of $300/month for every child under 6 and $250/month for every child ages 6–17.

My modest proposal: pay these benefits out up front. Over the 18 years of childhood, these benefits total $57,600. Rather than paying this out over time, slip the parents of newborns a cool $57,600 check.

This would make the benefits more useful, giving parents the money when they need it the most but have the least. A big check would also be more salient. In turn, the upfront payment would boost birth rates more, for the same fiscal cost*. We’d get more “fertility bang for the buck,” so to speak.

The Fertility Crisis

Birth rates have fallen precipitously in the United States, and they are now far below replacement. Critically, continued below-replacement fertility could lead to economic stagnation in the long run. What’s more, this aggregate trend reflects many tragic individual stories: women desire significantly more children than they end up having, and it is often financial constraints that stand in their way.

Many countries have responded with pro-natal policies, usually in the form of monthly “child allowance” payments. The empirical evidence seems to indicate that although these policies do boost birth rates, they do so only mildly. The “fertility bang for the buck,” i.e. the elasticity of fertility rates with respect to these payments, is low.

One margin we could push on is simply spending much more—increasing the payments. (For the record, I am very much in favor of this. We should spend whatever it takes to help families have the children they want to have and reignite population growth.)

But another margin we should consider is increasing that elasticity—figuring out how to get more “fertility bang for the buck.” Paying out the same amount as a lump sum up front could be one way to do that.

An Upfront Payment Is More Useful

Paying out the child benefits out front would give money to young parents when they could use the cash the most but also have the least. Young parents often need to uproot and reorient their lives when they found or expand a family—exactly at the moment when they will generally be earning the least and have little savings to fall back on.

People tend to earn more as they grow older and gain seniority. When you’re 45, established in your career with accumulated savings, the marginal dollar matters a lot less than when you’re 27, with barely a foot in the door at your job and earning a starter salary. And yet the 27-year-old must shoulder the immense startup costs of founding a family. (See the “lifecycle income problem”: there is a “mismatch between peak earning years and peak childbearing years.”)

Many of the biggest expenses for parents are incurred right around birth: buying a house in suburbia, buying a (larger) car to fit a(nother) child, the immediate income loss for parents who stay home to care for the child in the first few months, health care costs for childbirth as well as pre- and postnatal care, and so on. So at birth is when parents need the money the most, even though they have the least.

A big check upfront would thus be much more useful for most families than the same amount spread out over 18 years of childhood. The big uncertain plunge for (potential) parents is when they first have a(nother) child. Supporting them in this critical moment would lighten this burden, and in turn allow more families to have more children. (More specifically, the expenses start a few months before birth, so perhaps the check should be sent out a few months before the due date.)

Sure, theoretically, the Child Tax Credit is equivalent; expecting parents could borrow against their future income and their future stream of child benefits. But that doesn’t work in practice. A big check up front would alleviate this liquidity constraint.

And for parents that do just prefer small regular payments, they can save their big upfront check and pay out to themselves an equivalent monthly stream.

A Big Check is More Salient

Not only is an upfront payment more useful, but a big check would simply be more salient in the minds of potential parents. Potential parents would be more aware of the support they would get, and so the pro-natal incentive would be more effective.

How many people are thinking about the tax credits they will receive over the next nearly two decades when deciding to have a(nother) child? For most, the tax credits are illegible, hidden in their yearly tax return. To be sure, the tax credits make having a family slightly more affordable, so on the margin there is a modest pro-natal effect. But I don’t think it’s foremost on people’s minds.

Now imagine if people were literally handed a giant check on their way out of the delivery room. Many would suddenly have more money in their bank account than they’ve ever had before. It would be a big f-ing deal. For many families on the fence about having a(nother) child, knowing they would get this support could very well make the difference.

Biden’s proposal gets partway there; it improves upon the existing Child Tax Credit by paying the benefit out in monthly cash payments rather than hiding it in people’s taxes. The prominence of the recent covid stimulus checks—even though they are a relatively small part of the overall relief efforts—makes clear just how attuned people are to getting a direct check.

But Biden’s proposed cash payments are still spread out over 18 years. People aren’t perfect rational planners; they strongly prefer immediate rewards over ones far into the future. This is called hyperbolic discounting, and it’s a fundamental finding of behavioral economics. Potential parents likely irrationally discount the future benefits they would get under the Child Tax Credit—making the same payment immediately would make it much more present and prominent.


To recap, paying out child benefits upfront would:

  • (1) give young parents the cash when they could use it the most but have the least, and
  • (2) make the financial support more salient, by
    • (a) being more legible than tax credits, and
    • (b) getting around “hyperbolic discounting,” people’s instinctive tendency to massively discount future benefits.

As a result, I expect the same dollar amount of benefits would better support families and induce many more additional births as a big upfront check than a small child benefit spread out over 18 years. We would get more “fertility bang for the buck.”

Perhaps ideally, we would have both the $57,600 check upfront and the monthly payments. Heck, let’s give parents of newborns $100,000! The ambition of our pro-natal policy should rise to the gravity of the fertility challenge.

Still, given political and budgetary constraints, we shouldn’t just push to spend more, but also try to get more “fertility bang for the buck.” By paying out child benefits upfront, for no additional fiscal cost*, we could get many more babies—and happy young families.

Credit to Anonymous for the banner art; thank you!

I am also grateful to Anonymous, Alexey Guzey, and Stephen Malina for their invaluable feedback.

*Note that there might be higher costs during the transition, as we keep paying out the existing Child Tax Credit to current children, who didn’t receive the upfront payment, while paying out the lump sum payment for newborns. Still, the steady state fiscal cost would be the same.