The Democrats’ plan to model childcare after Obamacare is a disaster
Napoleon said, “Never interrupt your enemy if they make a mistake,” but I cannot resist.
Progressives in Congress are planning massive childcare Funding scheme as part of the Build Back Better package for human infrastructure, but unfortunately this subsidy regime is a cut and paste of another poorly designed program: Obamacare.
This will be a mistake because, like Obamacare for health insurance, it will ultimately add to childcare costs and hurt many American families. It will also have other unintended consequences for the quality and availability of childcare.
How does the proposed structure of the childcare grant work? It’s central planning at its finest: government planners have decided what portion of American income we should spend on childcare. After this limit, well 7 percent the government stands up to pay the additional costs for families who reach 150 percent of the federal poverty line or more.
Anyone familiar with Obamacare health insurance exchanges knows that the government has set a maximum amount that subsidized customers can pay out of their premiums: 8.5 percent of their income.
One has to wonder what comes next: will the government step in and tell me what part of my income I can use for housing? Transport? Eat? The whole premise is silly; Things cost what they cost. State subsidies do nothing to change that.
Or do they do it? Government subsidies can actually increase the cost of whatever is subsidized as they skew market signals by pouring more and more money into healthcare, colleges, and now maybe childcare. Subsidies change who pays.
As Peter Nelson recently wrote about the Aid under the Affordable Care Act“Since premium increases are fully funded by government subsidies, issuers have little incentive to control premium growth.”
But it is not only the demand-side subsidies for childcare that increase costs. The child care plan increases the wages for educators up to what elementary school teachers earn. Regardless of what you think of it (legitimate or not), it adds to the cost of childcare. Much. Just like Obamacare increased health insurance costs. Much.
Unfortunately, the childcare plan currently under consideration is copying another design flaw by Obamacare, at least in its introduction: Many families will not eligible for subsidies in full before 2025. This means many families can expect a $ 13,000 increase in childcare costs under this plan.
This figure comes from an analysis by Popular political project, a group that is critical of the childcare plan because it is not progressive enough from their point of view. To continue the analogy with healthcare reform, these would be like the people who want Medicare for All instead of Obamacare.
Bottom Line: Rather than creating a truly universal government childcare system or going the other way around and making the private childcare market more competitive and affordable, the proposal currently before Congress puts complicated government subsidies and requirements on top of the existing system. This will dramatically increase the cost of childcare, but it promises to offer phased subsidies to some people at some point in the future. Sound familiar?
And just as Obamacare was followed by culture wars (for example, on birth control), culture wars will follow this childcare proposal into the classrooms where the youngest Americans are supposed to learn their numbers and colors.
This is because when government funding is involved, government rules and requirements are involved. It is nonsense to think that 330 million Americans can all agree on what health insurance should cover. Likewise, it is nonsense to believe that we want the same type of childcare for our children.
Today, many Americans have resigned themselves to living with Obamacare and whatever it entails. This may be because they fail to see some of the behind-the-scenes problems Americans face in the individual (rather than professional) insurance market in the stock exchanges.
In response to Obamacare’s restrictions on premium pricing, insurers created plans with higher co-payment and closer networks. What use is it to parents if there are no day-care centers open within 80 kilometers, if childcare costs are lower? Or what if these daycare centers have a 24-month waiting list to get a child into a classroom? Market realities, though not through higher prices, can surface for consumers in other uncomfortable ways, such as implicit rationing.
And once the government subsidizes something, it’s never enough. As part of the Build Back Better plan, legislators are already trying to make the “extended” Obamacare subsidies caused by a pandemic permanent. Just as Obamacare was a chaotic move towards single-paying health care, we can expect today’s childcare proposal to follow a similar path.
We shouldn’t go this way. Obamacare had its advantages, but Americans certainly recognize that the promise to cut health insurance premiums has been broken and the opposite has happened. The real mistake here would be to trust the same people with the childcare system now.
Hadley Heath Manning is Policy Director of the Independent Women’s Forum (www.iwf.org).