FOR MANY Americans, finding someone to take care of small children during the working day is an expensive hassle; for many low-income workers, it’s plain unaffordable. Reducing this particular cost of holding a job could benefit the national economy by enabling more men and women to pursue their full productive potential. For the children, appropriate early care could contribute to their future productivity, too. To the extent a reliable supply of affordable child care encourages people to have more children, it also could help the U.S. economy avoid the demographic decline that plagues Japan and much of Europe.
Yet in this nation that spends hundreds of billions of dollars on the elderly each year, much of which goes to people who are not needy, federal support for child care is comparatively paltry: $5.3 billion in block grants to the states, plus a tax credit of at most $6,000 per year that disproportionately benefits the upper-middle class.
A proposal from the liberal Center for American Progress (CAP) would multiply this commitment many times over, in the form of a $40 billion-per-year tax credit, the bulk of which would pay for center-based care for children under 3 years of age. The top benefit, $14,000 per year, would go to households earning up to 133 percent of the poverty line per year; those earning up to 400 percent of poverty ($97,000 for a family of four) would be eligible for just over $2,300. Families would choose their own providers, to whom the money would be directly channeled by the government. Crucially, those providers would have to be certified “high-quality,” by meeting federal criteria for the wages, working conditions and credentials of their personnel, among other attributes.
An advantage of this approach is that it allocates scarce resources based on need, as opposed to some proposals for “universal” pre-K, which would cover many families that could afford to pay for their own. Indeed, under the CAP plan, even low-income families would be required to pay $660 toward the cost of care. Like a health insurance co-pay, this feature of the plan would give beneficiaries “skin in the game,” encouraging them to shop around for the lowest-cost option — and helping to prevent the new subsidy from fueling price increases.
Less attractive is the CAP plan’s call for highly detailed federal regulation of the child-care services themselves, as opposed to a decentralized approach that would draw more on state and local expertise. Similarly, the tax credit is pegged to national average child-care prices and incomes; yet those vary substantially from state to state, and even within states. CAP didn’t propose a specific way to pay for this big new program — though one place to start looking for offsetting savings would be in benefits and tax breaks that disproportionately benefit the non-needy elderly. One can quibble with the particulars of CAP’s call for a shift of federal resources in favor of the children of working parents, but the concept is sound and important.