House Democrats are pushing back against claims by critics on the right and the left that their child care proposal would have costly unintended consequences for many in the middle class.
Democrats have outlined a $450 billion plan to increase access to early childhood care, improve wages for care workers, and provide universal prekindergarten. The “Build Back Better” agenda under consideration in the House includes a six-year program that offers subsidies to ensure eligible families spend no more than 7% of their income on child care while also providing “living wages” for child care staff.
Under the proposal, the subsidies ramp up over the first three years of the new program, with lower-income households receiving them first and all income levels becoming eligible in 2025. Democrats acknowledge the increased wages for workers would drive up the price of care eventually, but states are not required to boost pay until the end of the third year.
In a report Wednesday, Matt Breunig, founder of the left-leaning People’s Policy Project, argued families that earn too much to receive subsidies in the early years could be on the hook for much higher costs. Families earning more than 130% of their state’s median income would not be eligible for any subsidies until year four, but he estimated other provisions in the bill could drive up costs by as much as $13,000 a year before then.
Breunig suggested Democrats could make subsidies available to all families in the first year of the program to address the disparity, or they could model the early child care program after their free universal pre-K plan instead. He warned the proposal, as written, could leave Democrats facing a storm of angry middle-class parents in the 2022 and 2024 elections.
The Democrats are walking towards disaster, both as a policy matter and, very likely, as a political matter,” Breunig said.
As tensions rise among Democrats over which policies will survive in their shrinking reconciliation package, Politico reported Breunig’s analysis triggered alarms among Democratic lawmakers and child care advocates. They fear his claims could dampen public enthusiasm for a program that has been among the most popular in their proposed agenda.
Democratic supporters of the child care proposal maintain Breunig misunderstands key aspects of the legislation. A House Education and Labor Committee aide disputed his conclusion that labor costs would outpace the subsidies in the first three years, and they noted grants would be available to keep tuition costs down.
Democrats also rejected his proposed solution of offering universal care subsidies from the start, which would significantly increase the total cost of the program while creating a sudden surge in demand that the child care industry could not meet. The House aide cautioned lower-income families would be the ones most likely to be crowded out in that scenario.
Breunig responded to Democrats’ objections to his analysis Thursday. Since the program would presumably be implemented alongside the universal pre-K plan and the child care industry is already experiencing a labor shortage, he argued early childhood care providers would need to increase wages sooner than the law requires to compete for workers as demand rises.
The much higher pay will be needed to actually hire the number of people required to deliver the services being paid for in the bill,” he wrote.
Some experts believe the predictions of a price shock for middle-class parents are overly dire. Melissa Boteach, vice president of income security and child care at the National Women’s Law Center, called Breunig’s analysis “alarmist” and countered that states would receive federal funding to offset the costs of building up the child care system over the first three years.
Boteach’s organization estimates the Democratic plan could provide child care and early learning opportunities for up to 11 times more children than are reached by existing subsidies. Under the House proposal, families earning less than 75% of their state’s median income would receive fully subsidized care.
However, Breunig is not alone in raising concerns about the potential ramifications. Ben Ritz of the Progressive Policy Institute cautioned the child care proposal is “not ready for prime time,” urging Democrats to prioritize universal pre-K and extending the enhanced child tax credit instead.
In a recent Bloomberg op-ed, American Enterprise Institute expert Michael Strain predicted subsidizing increased demand for child care would push prices up, much like federally subsidized student loans have done for higher education. He proposed increasing the supply of care by relaxing regulations while also giving families more flexibility in using subsidies.
Some conservatives also believe generous child care subsidies would discourage parents who want to stay home with young children from doing so. Despite the vocal misgivings from some observers across the ideological spectrum, though, Democrats appear unlikely to change course.
“If we get what you all are helping me get done, no working family in America will pay more than 7% of their income on child care for any child under five,” President Joe Biden said at an event Thursday.