The Center for American Progress released a new plan to expand access to childcare and improve affordability for working parents. The proposal centers around a new high-quality child care tax credit that would subsidize the costs of childcare for families earning up to 400 percent of the poverty line.
Modeled after ObamaCare’s health insurance subsidies, CAP’s new tax credit would be an advance tax credit paid directly to providers throughout the year. It would phase out as income rises, offering over $13,000 in childcare subsidies to low-income families, which dwindles to about $2,400 for middle-income families.
The CAP plan is a laudable effort to provide a much-needed boost in the financial support we provide for working parents. Our existing childcare subsidies are deeply inadequate: Child Care Development Block Grant funds (available to low-income families) reach only one out of six eligible families and cover only about half the average cost of childcare. Moreover, our current Child and Dependent Care Tax Credit provides a (non-refundable) maximum subsidy of $1,050 for low-income families — a negligible sum when the average cost of care is rivaling college tuition costs in 31 states.
While CAP’s plan appears effective at increasing financial support for working families, it does less to improve the supply-side constraints in the childcare market. High-quality childcare can be tough to find throughout the country, with parents waiting on lengthy admission lists, and many areas functionally childcare deserts due to a lack of adequate care options.
CAP largely relies on two factors to improve high-quality care supply. First, by making its subsidy scheme available only to highly rated care centers, CAP encourages the development of more high-quality centers. Second, CAP would redirect the annual $5 billion in CCDBG funding to invest in new care centers around the country.
A bolder plan might have remedied our inadequate childcare supply through direct government provision of childcare. We’ve already had government-run childcare for young children during World War II. And we continue to have government-provided care and development for older children via the public education system. Why not boost quality and supply directly by creating public pre-pre-K for young children with working parents?
CAP’s plan is plainly modeled off of the funding and supply scheme of ObamaCare. And maybe the aversion to direct provision comes from ObamaCare, too. Following health reform, liberals are placing increasing faith in competitive marketplaces regulated to ensure quality to provide social goods. Rather than provide the service itself, government organizes the space and standards for private actors to allocate subsidized social goods.
Perhaps this aversion stems from the defeat of a national health insurance public option. But a public option makes a good deal more political and policy sense in childcare than in healthcare. As discussed above, we are already very comfortable with the idea of government bureaucrats (read: teachers) looking after our children, so government-run childcare is hardly a foreign idea. What’s more, childcare doesn’t succumb to any of the adverse selection problems that made a public health insurance option a risky policy endeavor. So there’s little need for liberals to “over-learn” the lesson of the public health insurance option’s demise.
Interestingly, CAP’s plan unapologetically takes sides in the burgeoning home-care vs. daycare debate. When President Obama proposed greater subsidies for childcare in his State of the Union address, the right tried to pick a culture war over the issue, blasting his plan as a “war on homemakers” — an implicit tax on parents who would prefer to drop out of the labor force and raise their children at home.
Now this logic is deeply flawed — the spiraling childcare costs of our status quo poses a massively prohibitive tax on a potential second earner leaving the household to enter the workforce. The burden of free-market childcare is especially acute given that families with young children are more likely to live in or near poverty.
But CAP ups the ante by waging a full-throated defense of non-custodial childcare, arguing that it is developmentally better for children than being cared for by parents or relatives. Childcare programs aren’t just an economic necessity, CAP says, but an “educational necessity” for young children. Custodial care, on the other hand, typically “does not prepare children for school,” and CAP’s subsidy incentives are designed to wean the country off of such care and into high quality care centers.
This is by far the intellectually boldest piece of CAP’s plan, which otherwise amounts to a generous tax credit paid out to families utilizing childcare services. In truth, Congress was already moving us toward an ObamaCare-like system for childcare, encouraging consumer-friendly marketplaces coupled with subsidies and beefed-up quality controls.
It remains to be seen whether enhanced subsidies alone are enough to guarantee access in a market where demand often far outstrips supply. Nonetheless, CAP’s plan goes far to shore up the value of these subsidies in the face of rapidly rising costs. This is meaningful progress for American families struggling to pay for what has increasingly become a modern economic necessity. It will be interesting to see if the component parts of this plan make their way into any candidates’ platforms.