Cash benefits are the best family policy

Do one big thing well

I haven’t been writing much about the legislative sausage-making around the Build Back Better plan because, to an extent, if you’re not in the room where congressional negotiations happen, you just don’t know what’s going on.

But we’re getting to the endgame where Democratic leadership’s “let’s give something to everyone” plan is coming under intense pressure as moderates want to significantly reduce the headline spending total. And it seems like party leaders are basically taking the coward’s way out here, trying to avoid saying “no” to anybody and instead shrinking every program by scheduling it to expire at some point.

This is a really big mistake that confuses the true fact of “welfare state programs are hard to repeal once they exist” with the falsehood of “it’s hard to allow the scheduled expiration of a program to go forward.”

To take an obvious example, if the Affordable Care Act had been scheduled to expire in 2017, it would have expired. And Paul Ryan never would have brought an ACA extension bill to the floor of the House, so any frontline House Republicans who wanted to lie and say they favored extending whatever particular provision could have done so as cheap talk. But assembling concurrent majorities for repeal was too big a lift for the GOP.

Rather than cutting costs by scheduling programs to expire, Democrats should take whatever money they have to work with and put it into creating permanent programs. You can start small and hope to expand, but small should be “preschool for 4-year-olds rather than 4-year-olds AND 3-year-olds,” not “preschool for 3- and 4-year-olds, but then it vanishes in five years.” Or to really put my cards on the table, it shouldn’t be preschool at all — it should be cash benefits to parents. Because even though there are strong independent cases for paid parental leave, cash support, child care programs, and preschool, the strongest case of all is for cash support.

If you have a limited pool of funds to assist America’s parents and children, you should use those funds to provide cash — cash that can be used to pay for child care but also other good things.

Democrats’ family agenda is a little weird

In “One Billion Americans,” I argued for creating a comprehensive program of support for America’s children and their parents. That included flexible cash assistance to parents, but also investments in child care and preschool, plus the creation of a federally-funded parental leave benefit as part of Social Security.

The Biden administration’s original Build Back Better proposal included all of those things — sort of.

The proposal addressed cash assistance, parental leave, preschool, and child care. But while my idea is modeled on Matt Bruenig’s Family Fun Pack, which in turn is loosely modeled on the design of the Finnish welfare state, Biden bundled together several separate ideas that reflect different philosophical approaches to the welfare state:

  • The Biden preschool proposal is for a Nordic-style universal system. Preschool would be free for everyone, with no means-testing and no work requirement. It was conceived of as an extension of K-12 public schools in the United States where, similarly, we don’t charge rich people tuition and we don’t worry about educational services going to the children of the “undeserving.”

  • The Biden child care proposal is the descendant of a Center for American Progress child care plan that came out in 2015 that I characterized as “Obamacare for child care” when I first wrote about it. It reflects the Clinton-Obama party consensus that programs should be means-tested and in-kind to avoid the toxic politics of “welfare.”

  • The Biden cash assistance proposal is the descendant of the Bennet-Brown child allowance proposal, whose explicit design was to drop those hang-ups and get serious about deep child poverty by providing flexible cash assistance without a work requirement. It addresses labor market concerns by making the benefit flat without a phase-out that penalizes earnings.

  • The Biden parental leave benefit is, I believe, in a state of flux. Senate Democrats seem to prefer the FAMILY Act, which is pretty good but does reflect the work requirement mindset. But in the House, Ways and Means Chairman Richard Neal has concocted a bizarre set of subsidies for private parental leave insurance that makes no sense to me.

There are further inconsistencies and complications. The preschool proposal is not means-tested, which could make it very expensive, so it saves money by setting up a joint state-federal structure in which states are ultimately going to be expected to pick up the majority of the tab. In practice, that structure saves a lot of money by ensuring that most states won’t actually do the preschool program at all.

To me, that’s a sign that the preschool idea should just be dropped. If you don’t actually have a proposal for a national preschool program, you may as well just leave this up to the states. States and cities can lead on preschool, several of them are doing so, and the appetite just doesn’t exist for a federal takeover of early childhood education. I’m all for trying to sneak more federal money that helps state preschool initiatives into the next Elementary and Secondary Education Act reauthorization. But this universal preschool proposal isn’t really a universal preschool proposal, and you may as well fess up, drop it, and move on to other things.

Child care subsidies are playing with fire

The high cost of child care is intensively on the minds of educated professionals with young kids (or who are thinking of having kids soon) living in high-cost urban areas. In short, it’s a very hot topic with the kind of people who staff the Democratic Party and who create the digital content that constitutes The Discourse. But a perverse consequence of that is there hasn’t actually been much scrutiny from this set as to what the Biden proposal actually does, which I think is pretty seriously at odds with what the main constituency for it wants.

As I wrote back in May’s post “Assessing the Different Family Benefit Programs,” the expanded CTC is coded in the discourse as an anti-poverty program, but it actually treats middle-class married couples very generously. Conversely, the child care subsidy program — with the endgame of capping the cost of attending a high-quality daycare center at 7% of household income — is incredibly generous to the working poor while doing relatively little for married couples composed of two college-educated professionals.

Bruenig raises the concern that for more affluent families, the program will actually raise costs by mandating pay increases at child care centers.

The architects of the program point out that no provider is required to participate in the program, and high-end private daycare providers with an affluent client base may just opt-out (and a separate Build Back Better proposal expands the Child and Dependent Care Tax Credit, which helps richer families a lot). What the bill does is basically say that if you want to start a child care center that pays high wages and uses credentialed staff, the federal government will give you enough money to make that work while charging low-to-zero tuition to families of modest means.

This is supposed to dramatically increase the supply of child care centers. Right now the whole sector is in a terrible squeeze because the tight labor market is making it hard to recruit people to work for peanuts in child care. But the productivity in the child care sector is so low that when wages go up, prices rise, and parents can only pay so much.

What makes me queasy about all this is that setting up this huge new array of child care centers seems like a lot of really difficult work, and in lieu of figuring out exactly how to do it, the legislation basically directs states to formulate plans and then send the plans to Treasury for approval. “Punt it to the states” is often appealing to members of Congress, but I really struggle to think of a concrete example of it actually working out well. Is Greg Abbott going to spend the next three years hustling to set up BidenCare for Texas kiddies?

Over and above that, targeted subsidies for child care inevitably become a culture war flashpoint. Fewer than half of mothers of kids under five work full time (using 2019 data, so we’re not talking about Covid distortions), and about a third are not in the labor force at all. You could argue that part of the point of a child care benefit is to change that and to push part-time moms into full-time work and stay-at-home moms into at least part-time work. But only a small minority of part-time or non-working moms say they want to work full-time, so I think this is a weird fight to take on when giving people money helps support all kinds of families and aspirations.

Cash is very useful

Creating a new cash entitlement for families and kids is not without its own political difficulties. But on the merits, I think the expanded Child Tax Credit is a really good idea. For starters, it cuts poverty by a lot.

But it also helps middle-class families with the cost of child care.

And what’s even better is that by taking the form of cash, it’s agnostic as to what you mean by “child care.” Some kids are enrolled in formal daycare centers. Some are watched in less formal home-based settings. Others are cared for by relatives who might also be getting a little cash under the table as a token of their appreciation. But there are also all kinds of child care corner cases, like “what do you do on random days off from school?” and “who is watching the six-year-old when school ends at 3:15 p.m.?”

Again, in “One Billion Americans,” I call for taking a systematic approach to this stuff. Maybe we should have year-round schooling. Maybe we should have public sector summer camps. We should definitely have school-linked aftercare programs everywhere.

That stuff is all really hard to pull off, but a cash benefit helps with all of it. And it does so while being agnostic between “parents need to work, so they need money to cover child care” and “parents want to work fewer hours so they can cover more out-of-school time with their kids.”

Long story short, I do appreciate why nobody wants to pit these ideas against each other. There are in fact good reasons to want early childhood programming over and above cash assistance. But when you’re dealing with a limited pool of funds, you face tradeoffs, and doing everything but letting it expire after a few years is a deeply flawed way of making those tradeoffs. If you have to pick one child-focused initiative, the cash support proposal here is by far the best one. Even if you need to start it in a relatively modest way with means-testing, it could be expanded later. And it’s worth keeping in mind that all of these family-oriented plans are in competition with other programs.

Kids vs. olds

From the polling I’ve seen on individual items in the BBB package, the best-polling item is Medicare negotiating down the price of prescription drugs.

But all the elder-focused stuff — vision and dental benefits for Medicare, subsidies for home health aides, etc. — polls better than the kid-focused stuff. I think simple political prudence is that you’ve got to put some of your most popular stuff in the package. Then you also really need to put some climate-related spending in the package. In keeping with what I wrote in “The Case for More Energy,” I actually think Joe Manchin’s position here is correct on the merits — it’s better to spend freely on subsidizing all sources of zero-carbon energy than to do the Clean Energy Performance Plan concept of paying utilities to eschew fossil fuels. Maximizing the quantity of zero-carbon energy is better than minimizing the quantity of dirty energy.

But this all means, once again, that kids are getting squeezed from all sides.

An unfortunate fact about politics is that children aren’t allowed to vote, and parents are outnumbered by old people. Currently, the welfare state treats the elderly much more generously than it treats young kids, and the incentives point in the direction of further entrenching that imbalance. I fear that failing to support kids encourages further drops in the birth rate and accelerated population aging, trapping us in a gerontocratic political economy. So whatever scraps we can rescue for kids ought to be plowed into the best possible form of help: cash assistance.

Frankly, I also think cash is a kind of underrated idea for the elderly. Helping Medicare recipients with their vision care needs is nice, but wouldn’t it make more sense to increase Social Security benefits for the oldest and poorest retirees?

How I would spend $1.5 trillion

Working with this table from Don Schneider showing the different Build Back Better proposals, here’s my vision for a $1.5 trillion package that tries to deliver a few things well:

  • The expanded Child Tax Credit is a bit more than one-third of the package and represents a hefty commitment to America’s children and families.

  • Medicare expansion is not the most important thing in the world, but it would work and it polls very well. Catering to old people is important, so they get $300 billion.

  • Since Manchin has taken CEPP off the table, we do the two other climate things. Jesse Jenkins’ analysis suggests they account for the bulk of the emissions reductions in the initial proposal anyway.

  • That leaves room for two small initiatives that are near and dear to my heart: funding the tax police and improving the school lunch program, largely by expanding community eligibility and reducing administrative burdens.

Medicare drug pricing reform is an offset, not an expense, but it’s important to put that in because it’s super popular. That also leaves you with $62 billion worth of wiggle room, which should probably be deposited directly in Jon Tester’s pocket to thank him for being a good team player throughout all of this. Or more seriously, you’d raise slightly more revenue than you spend and can say you’ve cut the budget deficit.

I know that’s a much smaller package than progressives dreamed of, but I think it’s one that would let you hold your head high. A bill that cuts child poverty in half, cuts emissions by a quarter, cracks down on Rich People Crime, delivers cheaper prescription drugs, and addresses seniors’ needs for dental and vision coverage is a pretty impressive legacy. You wouldn’t want to pass a bill like that and declare all problems in society solved. But that never happens in politics. With my plan, you’d make huge dents in a few big problems and could live to fight another day on some of this other stuff. It would be a tougher conversation than promising everyone everything and then just praying that a future Congress extends a bunch of stuff, but I think making the tough calls is a much more responsible approach.