The “Build Back Better” legislation backed by President Biden features a provision that would make child care more affordable while also creating the opposite effect for middle-class families, a new study reveals.
By tens of thousands of dollars, in fact.
“The new program would act like a $20,000 to $30,000 annual tax on middle-income families,” writes Casey Mulligan, an economics professor at the University of Chicago and a Trump-era adviser in The Wall Street Journal, citing the study.
The economics guru said the effect of offering low-cost child care while also increasing regulations could raise daycare expenditures for middle-income families by between 102-122 percent.
“The bill’s latest draft proposes to reinvent child care with a trifecta of cost-increasing forces,” Mulligan wrote in a little-noticed piece published last week.
“First, it would remove much of the incentive to offer lower-cost care. Millions of families would have their child-care expenses capped by statute, which means they’d pay the same at an expensive facility as at a cheaper one,” he noted.
Mulligan said that providers would “quickly discover” that lower rates would no longer serve as a “competitive advantage,” adding that providers would get more money for what Congress has deemed “quality.” He then explained that term is just “a euphemism for having more staff per child,” a “rate regulation” “cost-plus” scheme that would most likely lead to higher prices for consumers but not much quality improvement, as well as “needless waste.”
The provision also would not reimburse church- and faith-based child care centers that have a natural cost advantage by using facilities that normally sit empty through the week.
“Second, providers would need extra staff to comprehend and comply with all the new statutes, certifications and agency rules,’ Mulligan writes. “Just as physicians complain about paperwork eating up time that could be spent with patients, child-care providers will lose time they could be spending with kids.
“Third, the bill imposes ‘living wage’ regulations on staff pay. In a study for the Committee to Unleash Prosperity, I estimate these regulations alone would add 80% to child-care costs,” Mulligan added.
Just by adding “bloated” staffing as called for by the measure’s “first two planks,” the bill is liable to increase costs to providers by 120 percent, Mulligan predicted.
“For a family with an infant and a 4-year old, that would be an additional annual expense of up to $27,000 if they don’t qualify for subsidies,” he wrote. “In 2022, when the subsidy is only available to those earning no more than their state’s median income, that would be half of families currently using child care.
“Even in 2024 when the subsidies would be more generous, more than a quarter of families using such child care would be paying more than double of what they do now,” he continued.
The economics expert also noted that former President Barack Obama’s “Affordable Care Act” used just two of those “approaches” — a raft of new regulations as well as caps on premiums “for a subset of consumers” that began in 2014.
Though Obama and his allies pledged repeatedly that his bill would save families an average of $2,500 a year on health insurance premiums, in fact, they increased on the individual market by about 102 percent between 2013 and 2018.
“The same thing has happened in higher education: Government aid, grants and loans haven’t lowered tuition but substantially increased it for millions of families,” he added.
The best way to help American earners “is to cut their tax bills,” Mulligan argued, “which helps not only families using child-care facilities but also those providing the best care available—at home with mom or dad.”
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