Biden's Boondoggle

COMMENTARY Budget and Spending

Biden's Boondoggle

Nov 19th, 2021 6 min read
COMMENTARY BY
Rachel Greszler

Research Fellow in Economics, Budget and Entitlements

Rachel researches and analyzes taxes, Social Security, disability insurance, and pensions to promote economic growth.
U.S. President Joe Biden arrives at the East Room at the White House November 18, 2021 in Washington, D.C. Alex Wong / Getty Images

Key Takeaways

President Joe Biden and congressional Democrats promise that their $3.5 trillion spending bill will “transform our economy.”

Universal government Pre-K programs have produced little, if any, lasting positive results and have sometimes had adverse effects on children.

The problem with making community college universally “free” is that it would almost certainly exacerbate lackluster outcomes.

President Joe Biden and congressional Democrats promise that their $3.5 trillion spending bill will “transform our economy.” Few would argue with that claim, although not everyone is on board with the notion that concentrating more resources and power in the federal government and moving deeper into the socialist camp is a desirable transformation.

Central to the left’s sales pitch for this massive bill is the claim that the new spending and entitlement programs will benefit families and children. But transforming the largest and most prosperous economy in the history of civilization will not be without significant cost and consequence—even, or perhaps especially, for those to whom the proposal promises the most benefits.

All the new benefits come with significant strings attached, and those requirements could push families to make choices that aren’t actually best for them. Moreover, all this money that’s being dangled in front of families will have to be repaid at some point, and taxing corporations and the “rich” won’t come close to paying the bills. In reality, many kids will end up paying for their own childcare and monthly expenses—with interest—through higher taxes on their future earnings.

If made permanent, this socialist vision for America would spend up to $164,000 of taxpayers’ dollars on every child in America. Sen. Elizabeth Warren (D–MA) and other politicians have cited studies estimating that government-run early childhood programs pay huge dividends, generating between $4 and $9 in returns for every dollar spent. Thus, they claim, “these programs pay for themselves by the time children become adults” and are “a smart investment that will yield positive returns for our country’s future.”

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While it is possible for targeted spending on particularly at-risk or disadvantaged children to yield high returns, there is zero evidence that spending up to $164,000 on every middle-income child in America would provide positive returns. In order for such enormous sums of spending to be worthwhile, every child who is a recipient of those taxpayer dollars would have to earn an extra $18,600 per year over a 40-year career, or an additional $746,000 over a lifetime.

That’s an incredibly high hurdle even for programs with proven positive track records, but the evidence suggests that most of the programs hailed by the left will produce, at best, marginal benefits among middle- and upper-income families. Meanwhile, the childcare subsidies propping up these programs could actually harm the well-being of children and families.

Let’s look at four of the apparent freebies offered to families: heavily subsidized childcare, universal Pre-K, monthly child payments, and “free” community college.

Free and heavily subsidized childcare can sound really appealing to families with young children because it’s hard for parents to find the type of childcare they want at a cost they can afford. So a program that would provide $73,100 worth of childcare and Pre-K subsidies for each child in a median-income family seems like a huge help.

But that money wouldn’t be there for families to use on the childcare they want. It would be sent directly to government-approved childcare centers that are able to keep pace with all the planned government regulations deemed necessary to become a “top tier” childcare provider. As it is, only 14 percent of parents say that full-time, center-based childcare is their ideal, while 70 percent say family care is their ideal.

Parents typically prioritize finding a loving (rather than a government-certificated) provider. Often, they desire their child be cared for in a family-setting. But government bureaucrats will prioritize caregivers holding college degrees and union membership cards while seeking settings that extend the public K-12 education environment down to infants and toddlers.

Politicians who want to push more parents into the workforce and more kids into government-directed childcare and Pre-K should heed the advice of the economist they so frequently cite when implying that childcare subsidies and universal PreK will be “smart investments.”

As that economist, James Heckman, said:

I have never supported universal pre-school. The benefits of public preschool programs are the greatest for the most disadvantaged children. More advantaged children generally have encouraging early family lives. The “intervention” that a loving, resourceful family gives to its children has huge benefits that, unfortunately, have never been measured well. Public preschool programs can potentially compensate for the home environments of disadvantaged children. No public preschool program can provide the environments and the parental love and care of a functioning family and the lifetime benefits that ensue.

Since children’s home and family environments are the greatest determinant of their well-being and outcomes, shifting kids from family-based care and into center-based care is more likely to impose a burden on children than to serve as an investment in them. That has been the case in Quebec, where highly subsidized childcare led to children experiencing greater aggression, reduced motor and social skills, more hostile and less consistent parenting, lower-quality family relationships, and increased rates of crime and anxiety in their teenage years.

Universal government Pre-K programs, such as Head Start and Tennessee’s Voluntary Pre-K initiative, have also produced little, if any, lasting positive results and have sometimes had adverse effects on children. Considering the weak evidence of positive impacts from large-scale government childcare and Pre-K programs, it is highly unlikely that the very costly proposed programs could pay for themselves by creating more “productive” children and families.

But they would drive up costs, crowd out private and religious providers, and disproportionately benefit wealthy and affluent families. For example, taxpayers would subsidize childcare for a Massachusetts family with two children and $200,000 in income to the tune of $31,100 per year. Meanwhile, childcare subsidies for a two-child family earning $50,000 in Mississippi would total “only” $17,500. The subsidy falls to $0 for any family in which one parent gives up work to stay home with children.

In addition to subsidies for government-approved childcare, one of the seemingly most popular proposals is nearly universal monthly payments of $250 or $300 per child, regardless of whether or not parents work and with little regard for families’ needs.

Since work is the only long-term path out of poverty, removing work requirements would revert to the failed welfare policies that increased single-parent households and exacerbated the cycles of poverty prior to the bipartisan 1996 welfare reforms.

While studies show that additional income generally leads to improved outcomes for children, the effects are modest or negligible for middle- and upper-income households. It’s hard to believe that payments to families with incomes up to $480,000 per year will lead to safer housing, an improved diet, or a better school for their children.

However, it is likely that repaying all that money—$55,800 in total per child—will lead to fewer opportunities and lower after-tax incomes.

Finally, there’s the offer of “free” community college. The problem with making community college universally “free” is that it would almost certainly exacerbate lackluster outcomes. Federal, state, and local taxpayers already heavily subsidize community colleges, and the fact that so many students and families lack meaningful “skin in the game” helps explain the poor performance of community colleges. Only 28 percent of students who begin community college earn a two-year degree within three years.

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Moreover, the proposal would drive up community college costs (by imposing a federalized fee on states) and further weaken incentives in the K–12 public school system to produce college-ready students.

Children born today already face the burden of a large federal government limiting their future opportunities and an enormous federal deficit threatening their future incomes. Helpful as some of these proposals like monthly child payments and new childcare entitlements may seem, they aren’t worth the burden of children needing to earn an additional $746,000 over their lifetimes to make all those taxpayer “investments” worthwhile.

Rather than create a multitude of one-size-fits-all unfunded entitlement programs, policymakers should focus on providing greater flexibility within the existing resources provided to families in need. For example, Congress should allow families to use existing childcare subsidies—including the roughly $10,000 per year spent on each child in Head Start—at a childcare provider of their choice. Moreover, lawmakers should pare down—instead of pile on—unhelpful childcare regulations that currently restrict the supply of more flexible and affordable childcare options.

Finally, rather than raise taxes in ways that will lead to lower incomes and higher prices for everyone—and then redistributing those taxes based on what politicians believe is best for children and families—lawmakers should enact policies that increase income opportunities and that allow everyone to keep more of the money they earn to spend on what they decide is best for them.

This piece originally appeared in Eagle Forum