Why Uncle Sam Would Make a Bad Nanny

COMMENTARY Education

Why Uncle Sam Would Make a Bad Nanny

Mar 1st, 2019 3 min read

Commentary By

Rachel Greszler

Research Fellow in Economics, Budget and Entitlements

Lindsey M. Burke, Ph.D. @lindseymburke

Director, Center for Education Policy

Enabling families to keep more of their hard-earned money certainly beats hiring Uncle Sam to play nanny. Annie Otzen/Getty Images

Many families have difficulty finding affordable, quality child care. So it's understandable that a new proposal by Sen. Elizabeth Warren guaranteeing "high-quality child care and early education for every child in America from birth to school age" sounds appealing.

Plus, it would be "free to millions of American families." What's not to like?

Plenty. For one thing, it doesn't pass the fairness test.

Why should taxpayers pay for the child care costs of families with two working spouses, but not pay parents who stay home and care for their children themselves? And why should people without children have to pay for the child care of those with children?

Warren's proposal would subsidize even wealthy taxpayers. Here's why. Parents using federally sanctioned care providers would pay no more than 7 percent of their income - a somewhat arbitrary percentage presumably based on what the U.S. Department of Health and Human Services determines "affordable" child care.

So consider a family with three young children and $500,000 of income. They could choose a high-quality program that costs $20,000 per year for each child and pay only $35,000 of the total $60,000 cost, leaving other taxpayers to pick up the remaining $25,000 cost. That hardly seems a good use of limited taxpayer resources.

And the price tag is sure to grow. Given how many families would be eligible and the high cost of care, Warren's proposal could easily balloon.

The senator claims that her plan would cost $700 billion over 10 years, but that assumes only 12 million of the current 23.9 million children ages 5 and under in the U.S. use the program and that child care costs don't skyrocket under her new requirements.

If 90 percent of children ages 5 and under were to receive just a $5,000 subsidy (less than half the average $11,000 per year cost for infant care in the U.S.), the program would cost $108 billion in just one year.

Warren references an oft-used talking point: "Today, in more than half the states in the country, a year of child care costs more than a year of in-state college tuition." But her plan to add more government-imposed rules and regulations would drive child care costs closer to that of private college tuition.

Take Warren's intention to pay child care workers as much as public school teachers. According to salary.com, the average salary for daycare teachers is $31,915, while the average salary for teachers is $56,471. Teachers also receive significant non-salary compensation from generous health and pension benefits. Bringing child care compensation on par with that of teachers would roughly double employee costs and drastically increase the price of child care (not to mention that it would cause existing child care workers to lose their jobs to overqualified workers seeking the new, higher child care salaries).

The senator implies that costs are not a concern because wealthy taxpayers will foot the bill. But Warren's wealth tax to fund universal day care (and many other new spending programs) assumes that wealthy individuals such as Bill Gates, Jeff Bezos, Warren Buffet and Mark Zuckerberg are willing to pay between $1.8 billion and $4.8 billion in new taxes every year just to keep living in the U.S.

In her argument for why the federal government needs to takeover early childhood care in the U.S., Warren brings up the lack of supply of child care, noting that half of families live in "child care deserts" without an "adequate number of licensed child care options.". Perhaps that's because licensing is a burdensome and expensive process that prohibits market entry and drives up the cost of care.

A big factor behind the significant difference in child care costs is licensing requirements. The District of Columbia, which requires child care providers to have a bachelor's degree in early education and which requires a 2:1 infant-to-teacher ratio, has an average cost of $35,782 per year for one infant and one toddler.

Mississippi, on the other hand, only requires that providers have a high-school diploma or related child-care training or experience and it has a 4:1 infant-to-teacher ratio. Consequently, the average costs for an infant and toddler are only $7,981 per year in Mississippi.

The solution to the current shortage of affordable care is not to drive costs higher and then make people who do not benefit from the high-cost services pay for them through higher taxes.

Instead, federal lawmakers should reduce marginal tax rates (which are disproportionately high for second-earners) so that parents can afford child care of their own choosing. In addition, state lawmakers should reduce excessive regulations that contribute to the high costs of child-care.

Enabling families to keep more of their hard-earned money certainly beats hiring Uncle Sam to play nanny.

This piece originally appeared in Lincoln Journal Star

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