Hillary Clinton, if elected, has pledged to cap childcare spending at 10 percent of family income, most likely through a combination of new tax credits and direct subsidies to childcare providers. This comes on the heels of her call to make preschool universal for every 4-year-old in America.
Clinton’s approach is modeled after the child care systems of European countries, where the public has historically accepted a much greater role for state involvement. It’s doubtful that this model translates to the North American context. When it has been tried, it has failed.
{mosads}In 1997, the Canadian province of Quebec (which has traditionally been the North American protégé of European-style welfare states) took up the experiment. With the help of aggressive government subsidies, the cost of daycare was reduced to a flat $5 a day for all children aged four and under. The first program of its kind, it fueled a national debate about the merits of a federal day care scheme along the same lines.
But as the early results of the experiment came in, it quickly became clear that Quebec had made a grave mistake. A comprehensive 2005 study revealed that the program caused a disturbing deterioration in outcomes relative to the rest of Canada. Child aggressiveness and anxiety jumped, parental mental health declined, and the home environment become more hostile. Most alarmingly, a follow-up study published last year found the damage persisted well into adolescence, with the teenagers who used the program exhibiting higher crime rates and lower overall life satisfaction.
At the center of this disastrous experiment was a government that thought it knew the needs of children better than their parents did. This is troublingly an experiment Clinton appears to want to replicate.
The federal government already spends over $300 billion on children every year, dispersed across a maze of nearly one hundred bureaucratic programs of limited or unknown effectiveness. Most of the programs are “in-kind” — providing tangible goods or services. School lunches are a good example. Only instead of one federal school nutrition program, we have five, propped up by the lobbying heft of food industry giants that cash in on school’s captive customer base.
In a new study for the Niskanen Center, I ask a simple question: instead of expanding federal bureaucracies, why not consolidate the current mess and convert it into cash? A $2,000 fully refundable child tax credit for every child under 18 could be paid for by consolidating half a dozen of the most wasteful programs, improving the lives of children by putting parents back in control.
Proponents of in-kind benefits worry that a cash supplement to parents will be spent on things other than their children. Yet the there is evidence that this ancillary spending is precisely why cash is so effective.
When a 2015 study of Canada’s Universal Child Benefit looked at consumption patterns before and after expansions to the benefit, researchers found that outcomes for children improved through two distinct channels: by increasing direct expenditures on inputs like education and health, and by helping pay for general household items that reduced stress and improved family stability—what the authors refer to as “household stability items.” The cash supplement even caused a significant drop in the consumption of tobacco and alcohol products. It appears reducing a household’s financial stress also reduces the need for stress relief!
Earlier this year, the Canadian government saw the light and consolidated a set of smaller programs to make the Canada Child Benefit much more generous — up to $6,400 (~$4800 USD) per child under the age of six, sent in monthly installments. This means virtually all of Canada’s federal child care spending is now in the form of cash transfers, either directly to parents or to provinces, reflecting their strong commitment to federalism. Limited government and pro-family conservatives in the United States should learn from Canada’s example.
Clinton has also proposed an expansion to the Child Tax Credit (CTC) that would help supplement the incomes of low-income households with children. However, the expansion, by design, fails to reach the country’s most vulnerable children, who will be funneled instead into Clinton’s preferred model of federally regulated child care centers.
This simply preserves the indignity of the current system: while higher income families are entrusted with direct cash transfers and indirect tax expenditures, in Clinton’s world no and low-income families will continue to rely disproportionately on in-kind benefits that reduce parental autonomy and undermine household stability.
Consolidating federal programs to remake the CTC into a genuine child benefit is an opportunity for conservative reformers to promote fairness and transparency while offering a strong alternative to Clinton’s dubious childcare agenda. Let’s not waste it.
Samuel Hammond is a poverty and welfare analyst at the libertarian Niskanen Center.
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