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Fiscal Policy

The Dems’ Mess of a Child-Care Plan

Yesterday at City Journal, I had a big-picture piece about the family policies the Democrats are wrangling over. As I explained, their debate isn’t just about how much to spend but also about how the government should shape the incentives parents face as they make important decisions about work and child care.

Here’s another point worth making: The day-care part of the existing plan is a complete and utter mess. Ultimately, it aims to cap day-care expenses at 7 percent of families’ income, which is tricky enough in itself to implement, but some technical aspects of the proposal would be disastrous.

As the lefty wonk Matt Bruenig explains today, the bill requires massive raises for child-care workers that could boost prices by $13,000 per year per kid, but the corresponding subsidies phase in over time:

In the first 3 years of the program, families with incomes that are just $1 over 100% of the median income (year one), 115% of the median income (year two), or 130% of the median income (year three) will be eligible for zero subsidies, meaning that they will be on the hook for the entire unsubsidized price, which as discussed above will now be at least $13,000 per year higher than before.

Angela Rachidi has also raised the alarm about the huge federal costs the plan will entail:

What is proposed is a new entitlement program, where every child in the US would have access to heavily regulated childcare, paid for by government-provided “certificates” with capped copayments at no more than 7 percent of family income. In high-cost markets like New York City, families earning $200,000 per year with one young child could receive government subsidies of $7,000 or more.

The Committee for a Responsible Federal Budget estimates that the 7 percent cap on childcare costs alone would cost roughly $250 billion over 10 years, and that was before the House of Representatives’ markup process eliminated the income eligibility criteria from the original budget framework altogether. However, even $250 billion is vastly underestimated. It is impossible to know the actual costs of this entitlement program, let alone predict how expenditures will increase over time. And the federal government will bear the responsibility for almost all these new costs.

I’m not a fan of subsidizing day care at all, for reasons I laid out in CJ. But any policy to do so needs to be better-designed than this.

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