I wrote this short op-ed in the fall of 2021; however, it was never published. Given the recent passage of the Inflation Reduction Act (IRA), the legislation that Build Back Better morphed into, I thought it was worth re-posting this. All the programs I refer specifically to in this op-ed were stripped out of the final version of BBB, so the policy commentary is a bit dated, but I expect the subject to come up again in future years. Mitt Romney is still working on a version of a child allowance/child tax credit with a few GOP co-sponsors. That is almost certainly the ONLY path to increasing family support in the next 2-3 years, and I would thus urge Democrats to work across that aisle to try to enact that legislation.
More importantly, I firmly believe that sound policymaking rests on a clear articulation of priorities and trade-offs. This is a fundamental truth, yet too many in politics ignore this. While 2022 has had a few legislative accomplishments for the current congress, I worry that this point has not been solved/ Democrats are still overly fond of “laundry-list” policymaking that refuses to prioritize among dozens of constituancy, while, as Yuval Levin argued in National Review earlier this week, the GOP is largely still focused on cultural war fights over and above and not sober policymaking. I suspect that our next congress will involve a divided government of some flavor; thus, progress on any policy issues from 2023 through 2025 will depend on both parties moving away from these styles.
When Democrats passed a COVID-19 bill in the spring of 2021, it became apparent the bill had a fatal flaw. While a reasonable person could see a need for continued public investment during the pandemic, the bill showed no clear goals or priorities. Was the goal to stimulate the US economy to re-open as quickly as possible? Was it to provide generous public assistance to alleviate the economic pain of a strict “Covid Zero” policy? Was it to provide the funds necessary to vaccinate as many people as quickly as possible?
At the time, Democrats never really settled on an answer. Instead, they made the fatal mistake of many indecisive shoppers and simply tried to do it all. This summer showed the fundamental flaw in that thinking. One can trace back the current inflation crisis and supply chain woes, at least partly, to these contradictory goals. Stimulus funds hit an economy not yet positioned to open fully. Consequently, stimulus funds chased goods off the shelves and caused prices to rise higher than we have seen in several decades.
Unfortunately, the original Build Back Better legislation shows that Democrats have not learned this vital lesson. Few observers know which core problem the bill seeks to solve. As Yuval Levin astutely points out, Build Back Better resembles a laundry list of all the popular ideas among Democratic interest groups in their coalition, adding up to an extravagant price tag.
The closest thing to a priority the bill has is addressing escalating costs of raising children. The costs borne by families are a real social problem: research by Lyman Stone highlights how financial uncertainty reduces the likelihood that parents will have a family as large as they want. Moreover, children are essential to long-run economic growth: they are tomorrow’s scientists, technologists, and entrepreneurs, and they will drive future productivity growth. If the high costs of raising kids causes families to have fewer kids or drives families into poverty, we deprive ourselves of tomorrow's economic well-being.
That said, most reasonable people would argue that child-rearing costs are not an acute policy emergency but rather long-simmering cancer best addressed by long-range reforms. But, unfortunately, Build Back Better is, at best, a short-term fix, an infusion of cash lasting only a couple of years.
The best of the long-range reform proposals is the expanded child tax credit, which simply tries to help parents by giving them cash in the years of child-rearing that bring the most significant financial burden. Admittedly, this CTC expansion is not a perfect program: unlike the Romney plan, it is not paid for, nor is it designed to get cash into the hands of the neediest parents. However, if one believes that society would benefit from young parents having enough money to raise their children, the simplest and most efficient way to do this is to simply provide cash to parents. In an ideal world, Democrats would focus on making the CTC expansion as well-designed as possible.
On the flip side, the childcare subsidies in the bill are an utter mess. Most economists argue that inflated prices in cost-diseased industries like healthcare, education, and childcare have two driving factors: first, occupational licensing and other artificial limits on supply limiting provider competition. Second, government subsidies on the demand side increase the number of dollars chasing the limited number of providers.
Unfortunately, the Democrat's proposal will aggravate both of these core drivers. The bill would pump subsidies into the industry while requiring child care centers to get federal licenses that mandate specific educational requirements and pay rates. This proposal will almost certainly lead market prices to skyrocket, increasing federal spending for those covered and dramatically raising costs for those not covered by the subsidies.
Worse yet, these subsidies unnecessarily risk cultural resentment by excluding childcare arrangements adopted outside elite progressive bubbles. For example, many working-class households, especially immigrant households, disproportionately have one parent staying home to care for the children. Many others have extended family members who care for their kids or send them to church or religious-based daycare. Instead of embracing childcare pluralism, the Democrat childcare proposal would exclude these arrangements from the subsidy, implying that only they can discern “high-quality” childcare.
Ultimately, one has to conclude that while the Democratic party sees itself as the more serious governing party, it is not effectively addressing its mandate to address pressing social problems. One can only hope this serves as a wake-up call to the GOP (who, in the post-Trump era, has not had the discipline to lay out concrete policy ideas) to seize the opportunity and the pent-up demand for applying market principles to these problems. Only time will tell if they respond.