Commentary

Build Back Better Act Would Hike Day Care Expenses for Millions of Parents

By Hans Bader | December 13, 2021 | 5:14pm EST
A man proffers dollar bills. (Photo credit: Getty/Yuri Cortez/AFP)
A man proffers dollar bills. (Photo credit: Getty/Yuri Cortez/AFP)

Biden's Build Back Better Act will make day care more expensive for taxpayers and millions of parents, as Casey Mulligan explains in the Wall Street Journal:

"The bill’s latest draft proposes to reinvent child care with a trifecta of cost-increasing forces. First, it would remove much of the incentive to offer lower-cost care. Millions of families would have their child-care expenses capped by statute, which means they’d pay the same at an expensive facility as at a cheaper one. Providers would quickly discover that lower prices no longer are much of a competitive advantage. Moreover, the providers would be reimbursed extra for what Congress calls “quality,” which is a euphemism for having more staff per child. The history of rate regulation is that cost-plus schemes result in needless waste and higher prices for consumers without quality improvements....

"Second, providers would need extra staff to comprehend and comply with all the new statutes, certifications, and agency rules. Just as physicians complain about paperwork eating up time that could be spent with patients, child-care providers will lose time they could be spending with kids.

"Third, the bill imposes 'living wage' regulations on staff pay. In a study for the Committee to Unleash Prosperity, I estimate these regulations alone would add 80% to child-care costs."

"If the ‘Build Back Better’ plan passes in the most recently published form, virtually every middle-class family will see their childcare costs go through the roof, while severely limiting options,” notes Larry Fine.

“The Democrats’ “Build Back Better” proposals for childcare represent a disastrous step in the ongoing government takeover of the sector – raising care costs, creating dependence, and instilling incentives against work and earning more income along the way,” says economist Ryan Bourne.

As Bourne observes, “Despite a stated goal of making childcare more affordable, the legislation would make it more expensive.” This is because

  • "eligible providers would have to pay…child-focused care workers…. salaries [comparable] to their state’s elementary school teachers. These provisions would raise costs dramatically in a labor-intensive sector where staff costs can average around 60-70 percent of the total. The average childcare worker nationally is currently paid $25,460, against $60,660 for the average elementary school teacher (in other words, the latter earns 138 percent more)."
  • "to qualify for federal grants, states must also develop licensing regimes 'appropriate for childcare providers in a variety of settings.' Past research on childcare licensure, including educational requirements, has found that these also raise costs by restricting the supply of would-be carers, without improving child outcomes."
  • "state program plans would have to place providers into 'quality' tiers, providing resources to achieve 'high quality' care for all. In childcare speak, 'quality' isn’t about what parents actually want, but criteria defined by government officials, usually meaning low child to staff ratios, extensive educational requirements for staff, and other regulations, all of which tend to raise costs and reduce the availability of care in poor areas (again, without much evidence they improve outcomes for kids or parents)."

By piling on these costly mandates, the bill would make childcare more expensive. Taxpayers would pay for much of the expense, especially for low-income households. If parents earn less than 75 percent of their state’s median income for a family of their size, their childcare costs would be wholly paid by taxpayers. By contrast, higher-income households would pay the full costs of their childcare out-of-pocket.

Bourne says this would create perverse incentives for people to work less: "For households, the program creates big disincentives to work or earn more income....Matt Bruenig, a supporter of childcare subsidies, has shown that the way the program would be phased in over three years would create even more egregious work incentives in the near-term.”

As Bruenig explains,

"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… .

"…the median household income last year in the country was $67,521. If this was your state’s median income, then having a family income just $1 higher than that would result in you being ineligible for childcare subsidies in 2022 even as the unsubsidized price of child care skyrockets due to the wage and other mandates in the Democratic proposal….

"Under this scenario, there will be many dual-earning couples who cannot afford child care if both of them continue to work, but could afford child care if one of them quit their job and thereby brought their family income below the eligibility cutoff. Normally people who quit jobs to take care of their kids do so in order to save the money they’d have to spend on child care. Under this plan, they have to quit their job in order to afford child care!"

Hans Bader practices law in Washington, D.C. After studying economics and history at the University of Virginia and law at Harvard, he practiced civil-rights, international-trade, and constitutional law. He also once worked in the Education Department.

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