Peter Morici: Generous child care benefits won’t save Biden’s Democrats in November

To overcome the drag of inflation and President Joe Biden’s low job-approval ratings in the midterm elections, Democrats want to bank on Build Back Better programs aimed at easing family burdens.

However, for many in the middle class, the promise of federal assistance with child care is likely to come too late or disappoint. Should Democrats push Biden’s program across the finish line, it could cost progressives critical votes.

Childcare is expensive. Licensed providers in school-like settings charge up to $24,000 a year. Waiting lists—especially for infants—are long.

For Boomers and Gen Xers, grandmothers often stepped up but for Millennials and Gen Zers, those options are less available. Often couples and single moms turn to micro providers—licensed women working in their homes—and the informal sector—unlicensed providers operating under the radar.

Minimum state standards requirements vary. Some don’t offer better guarantees of safe, competent care than informal referrals through church congregations, baby-sitting co-ops and similar parent networks.

In the early years, poor care often causes difficulties with disruptive behavior and academic performance in elementary and secondary school and antisocial behavior and low earnings among adults.  

Childcare is labor intensive. Wages account for about 60% of costs at licensed providers even though workers are paid only an average of $12 an hour. That’s well less than half of compensation for preschool instructors in formal school settings.

Progressives are quick to point to Europe where government subsidies help put most children in professional settings. What they don’t mention is that the kind of welfare state Build Back America would create—through the child tax credit, family care, paid family leave, universal pre-K, and guaranteed assistance to working parents for child care—requires the typical European worker to fork over 50% more of their pay in income and payroll taxes than do Americans.

The net gain to the working and middle classes then becomes ambiguous.

More immediately, the Biden plan would lower child-care costs to zero to 2% of income for families earning less than their state median wage and 7% for those earning up to 250% of that standard—but for licensed care only.

Programs would be administered by the states but to qualify, they must first come up with federally approved plans to pay child care workers a “living wage” and enable more providers to become licensed.

Bureaucracies move slowly. Just look at the difficulties implementing the Affordable Care Act exchanges or how deftly states distributed federal pandemic supplements for unemployment insurance.

Vouchers and cash subsidies would overwhelm the available supply of licensed care and to mitigate, the state programs would phase-in benefits over several years starting first with low-income families.

With licensed facilities already having about 30% more demand than slots that would render licensed care unavailable for many more middle-class families—especially those with children under 2 years.

The program would further exacerbate shortages by denying funds for the improvement of facilities at churches. Sheer madness because those have lots of inexpensive space mostly used only on Saturdays and Sundays.

Women forced out of the labor force would get no help at all. The program would offer no benefits to stay-at-home moms or parents compelled to use unlicensed providers.

It reflects the biases of the Ivy League professionals—Manhattan corporate attorneys married to college professors—and not the reality of state college graduates and non-degreed families in less-remunerative work.

An American Compass survey found a majority of working- and lower-class couples and a plurality of middle-class families would prefer a one parent working and one parent at home model. Only upper-class professionals prefer the child care option.

The Acela class can afford the nannies, au pairs and the most expensive licensed options. They enjoy the most stimulating careers and for them, staying at home for a few years can be a more disruptive and threatening option.

Gallup poll found 50% of women with children under 18 would prefer taking care of their families at home over holding a job.

Additionally, paying child care workers a “living wage” by bringing their pay up to the level of preschool teachers—about $27 an hour—would raise the cost of quality care to about $43,000. Even closing half the gap would make child care much more burdensome.

Lower-earning parents in two-income families would be better off taking care of their young children than in paid work. If they choose, enable that choice and the national welfare would be better served.

Focus on the child tax credit—give the money directly to parents and let them decide how it should be best spent.

Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.

More insights from Peter Morici

Why wait? The Federal Reserve should raise interest rates now

America’s baby drought poses a risk to our prosperity and security

Americans don’t want socialism shoved down their throats