The submerged state common denominator

Sens. Kirsten Gillibrand (D-New York) and Rand Paul (R-Kentucky) have (improbably) teamed up to sponsor legislation that would expand the tax credit for child care. The bill would double the current child care tax credit from $3,000 to $6,000.

It’s a laudable legislative endeavor. As Gillibrand notes, the tax credit has only increased $600 since its 1981 inception, despite child care costs rising above the rate of inflation and consuming a growing share of working families’ incomes. The growing cost of childcare has not only strained family budgets, but may have begun nudging women out of the labor force.

The bill would take other worthy steps, like subsidizing employers to provide on-site childcare and aiding them in locating quality nearby childcare, along with encouraging more trained professionals to work in childcare. But the heart of the bill is the expanded tax credit. Importantly, this tax credit will be fully refundable, which provides full relief to low-income families who would already face minimal tax liability.

Paul’s support for the legislation is more than just a novelty, however. It is a convergence of the two parties on expanding what political scientist Suzanne Mettler calls the submerged state.

In her 2011 book of the same name, Mettler explains that the submerged state is the set of tax code subsidies that we’ve enacted to provide relief to working parents or to encourage home ownership. We’ve increasingly shifted our social welfare state toward a set of targeted carve-outs from tax liability, Mettler says, in ways that are often so subtle that beneficiaries don’t even realize they’ve received government aid.

Our polarized politics have spurred the proliferation of the submerged state. “In recent decades of conservative dominance and political polarization, the submerged state [. . .] became not a last resort but the template of choice for new policy initiatives,” Mettler writes. Targeted tax credits further conservative goals of reducing tax burdens generally. They also increasingly appealed to liberals as a way to provide relief to low-income and working-class Americans. During the ascendancy of conservatives during the Reagan era of the 1980s, liberals “increasingly acquiesced and supported policies such as tax expenditures because, to quote one member of Congress, they became ‘the only game in town,'” Mettler writes.

This interest convergence made submerged state tax credits something of a political least-common denominator in a polarized environment. It was a policy reform that conservatives and liberals could each support for ideological reasons, making them easier to muster through Congress.

We see this driving the Gillibrand-Paul alliance today. The traditional liberal ideal might be a universal childcare system of the type that Emily Badger described last month in the Washington Post: direct government provision of childcare centers across the country — a sort of public option for daycare — that we once had during World War II, nearly had again but for Richard Nixon, and would be unimaginable today.

But the pragmatic liberalism that developed during the 1980s (largely out of desperation) and has flourished during the Obama administration now embraces tax subsidies that allow Americans to better afford the services that the private market offers. This allows room for bipartisan agreement, particularly on relatively low-salience issues like childcare subsidies.

But joining conservatives in expanding the submerged state comes with distinct costs for liberals. Mettler describes how submerged state policymaking undermines democratic accountability, as taxpayers and subsidy beneficiaries barely realize that they’ve gained from public subsidies. This also poses asymmetric political harm for liberals, for when they propose bolder expansions of government assistance, few constituents realize that they have likely already benefited from tax subsidies. As Mettler notes, it’s the “keep your government hands off my Medicare” problem.

Expanding the subsidy we give to parents for childcare is a worthy policy goal. But liberals should nonetheless be wary of relying on submerged, low-visibility tax credits to provide relief to Americans in need. Admirable though the sentiment may be, subsidizing through tax credits undermines larger progressive goals of mobilizing government to alleviate the pressures on vulnerable Americans.


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