What Elizabeth Warren’s Child Care Plan Is Missing

(Bloomberg Opinion) -- Senator Elizabeth Warren’s proposal for a federally funded network of child care programs that would be available to all American families is breathtaking in both its ambition and cost. The federal government would be better off simply doing more to support parents in their decisions about how best to care for their kids.

There is no doubt that the cost of child care is a significant burden for families with young children, and prevents many mothers who would like to return to work from doing so. Proponents of Warren’s plan, which would cost about a trillion dollars over a decade, argue that by allowing more women with young children to keep working, the plan would boost economic growth.

Yet international studies of government-funded expansions of child care show mixed results. In most cases, the effect on the total hours worked by mothers is negligible. There are two reasons for this.

First, many families (especially lower-income families) already use informal child-care arrangements. These typically involve leaving the children with relatives or neighbors. Expanding formal child care simply causes those families to substitute these informal arrangements for government-funded care.

Second, many mothers from middle-class or affluent backgrounds prefer to work part-time or on a flexible schedule. Before those expansions, the cost of child care was so great that part-time work would barely cover it. Instead, these mothers had to continue working full-time if they wanted to keep working at all. With expanded government-funded child care, however, these mothers could afford to cut back on their hours.

The takeaway: All families are different, and a one-size-fits-all policy can have unpredictable consequences. So instead of using that trillion or so dollars to build a system of universal child care, use it to increase the child tax credit for families with young children — and make it refundable as well.

Doing so would give families far more choice and flexibility. Low-income families, which often face acute and unpredictable cash shortages, might prefer to continue using informal child-care arrangements and use their tax credit to increase savings or pay down debt. Families already using formal child care would get to keep using the service of their choice rather than being shunted into government programs with inevitably uneven quality.

Warren says that a federal program would demand the highest standards, but it’s a promise that will be difficult to keep. Just look at the public education system, where underperforming schools are unfortunately common — yet lower-income and minority families are often forced to use them while they are slowly brought up to standard. In part for this reason, school choice is more popular among minority families than among whites.

Perhaps most important, a child tax credit would allow parents who choose to stay at home with their children to be compensated for the valuable work they do.

This choice is usually thought to be a luxury only middle and upper-income families can afford. This ignores the fact that some mothers stay at home even though they can’t afford to: Stay-at-home mothers are nearly three times as likely as working mothers to be living in poverty (and if you consider only married women with working husbands, it’s five times as likely). This is partly because stay-at-home mothers are much more likely to be minority and/or foreign born than working mothers.

The decision of whether to stay home or return to work is a difficult one, fraught with guilt and social pressure. It should not be compounded by a government program that rewards one choice over another.

Instead, public policy should recognize that child care, whether at home or somewhere else, inevitably involves trade-offs. It should also recognize the virtues of a healthy and growing population. Not only does it help those who will depend on Social Security and Medicaid, but it also contributes to overall economic growth, which benefits folks who plan to retire on their investments or even keep working.

It’s in the national interest to ease the burden on parents. That’s best accomplished by refundable tax credits that families can use as they see fit, rather than the creation of a system of universal child care paid for by the government.

To contact the editor responsible for this story: Michael Newman at mnewman43@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Karl W. Smith is a former assistant professor of economics at the University of North Carolina's school of government and founder of the blog Modeled Behavior.

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