Addressing Inaccurate Claims and Misconceptions about the Build Back Better Act’s Child Care Plan
As Congress works to finalize a framework that turns President Biden’s Build Back Better Agenda into a bill that can get signed into law, child care providers, parent-advocates, moderate and progressive lawmakers, and economists alike have enthusiastically supported major investments proposed for America’s child care infrastructure. This is because, 50 years after President Nixon vetoed the bipartisan Comprehensive Child Development Act, the pandemic has put a spotlight on the devastating consequences of failing to invest in early learning — an early educator workforce that makes $12.24 an hour, providers going out of business, and families struggling to find or afford child care. Thankfully, federal leaders are finally stepping up and taking the child care crisis seriously. The BBB Act’s child care provisions, as passed by the House Education and Labor Committee, would invest $450 Billion over ten years in universal PreK for three- and four-year-olds and ultimately make child care free or affordable for more than 80 percent of working families with young children, while raising compensation for early educators. This will also help grow the supply of quality child care and early learning options for all families.
Then this week, a misleading inaccurate report tried to suggest that the bill’s transition — taking us from our current Hunger Games-like system to one that guarantees the overwhelming majority of families in America can afford child care — was poorly designed and would somehow increase costs for middle-class families. The author of this analysis made sweeping errors in their interpretation of the bill, and even goes on to suggest that these investments would have perverse work incentives for parents.
This analysis is flat out wrong. In fact, it probably couldn’t be further from the truth.
Remember, costs are already outpacing inflation
Let’s start with a reminder that child care costs have been rising for the middle class for decades, with the real (inflation-adjusted) price of child care increasing by more than 50 percent since 1993 (See Freddie Mac report linked below). For most families, child care is already much too expensive. My research into family child care expenses shows that only half of working families making between $50–100k could access the child care system pre-pandemic, and for those who could, the cost typically ate up about 14 percent of the family’s income (and 35 percent for low-income families).
By contrast, during the first three years of the Build Back Better child care plan, a majority of America’s families would become eligible for free- or reduced-cost child care, and states and the federal government would partner to build more child care supply and support educators’ ability to enter and remain in the industry. It does this by providing states and territories with grants and flexible funding to ensure that middle-class households do not see their child care expenses go up. Under this proposal, a family with an income of $60–75k, who may currently be paying 15 percent of their income to child care would likely see their child care expenses drop significantly. Once the phase-in period is complete, they could see their expenses reduced to nothing or a nominal amount such as $10–15 per week, a cost that would likely be offset by having a more stable and higher-quality child care system at large.
Of course, it’s reasonable to ask what the effect would be on those who make a little too much to qualify for the new benefit. As I’ve already mentioned, there are policy levers that can be used during the phase-in years that will protect against “price spikes,” as the system builds up capacity by licensing more child care providers, hiring more early educators, and offering more generous subsidies to millions of new families. But what about those whose income would not qualify them for child care subsidies once the program is fully implemented? Well, here it is important to consider the reality already facing this small subset of families. If the BBB Act income eligibility comes in at 200 percent of SMI, as most recent drafts suggest, then we are mostly talking about families that make more than $180,000 per year. So, let’s review how much access families like these have to child care under our current system — and how much do they pay? Should we be concerned about price increases for them under the BBB child care proposal?
The answer to this question is illuminating. You could even say it validates the design of the entire plan. See, the child care system has already been working for these families. They enroll their kids at much higher rates than middle- and working-class families, and while they invest a lot of resources into their children’s early care and education, as a share of their income many tend to be near the affordability benchmark of 7 percent. Using the 2018 Survey of Income and Program Participation, I looked at the average child care expenditures for working families that earned more than $180,000 — their average spending was around $475 per week, or about $25,000 per year. That’s a lot of money, to be sure, and higher than the 7 percent benchmark, but I’ll get back to that in a moment.
Does this hurt families with $200k+ incomes?
The reason that high-income families invest heavily in early care and education is that they are, in most cases, seeking the highest quality provider that they can find. They may not often get their preferred choice, but they pay for quality. And at the levels they are currently paying, that corresponds to better pay for the early educators that care for and teach their young children. We would hope that over time the investments in the overall supply and quality of the system will also benefit them, but for now, they have the most access to quality child care out there.
The Center for American Progress cost of quality calculator shows this quite plainly. Let’s use the example of Ohio, whose median family income matches the national median of about $95,000 for a family of four. If we plug in Ohio to the calculator at www.costofchildcare.org, we find that, if all the positive investments in quality are ticked for an infant in center-base care, the annual cost per child comes to… about $25,000 per year. Remember that the data show families making more than twice the median income (around $180,000–200,000/year) spent an average of $25,000 on child care.
So, the same families who would be ineligible for subsidies under Build Back Better are already paying for the kind of quality that we want to expand access to for everyone. They will not see their prices spike once the program has been fully implemented, since they are already financing a functioning system with better wages and quality. It’s why the eligibility for child care subsidies was set to go up to 200% of state median income. This is evidence of smart design and fair trade-offs; far from the messy design described in recent inaccurate reports.
And then there is another policy in the BBB Act that will help these families: the expanded Child and Dependent Care Tax Credit (CDCTC). Families making more than $180k may not be eligible for subsidies, but this refundable tax credit could, depending on how many children they have in care, give them back thousands of dollars in their tax return. The CDCTC already blunts the burden of child care expenses for these high-income households and would continue to do so under the BBB Act. And once their kids reach preschool age, they can enroll them in the BBB Act’s proposed universal preschool program. Eventually this country could have an entire continuum of quality, affordable care and education for children from birth to five!
ACA comparisons are ridiculous
Finally, a lot of pundits and analysts have been getting their income acronyms mixed up — or at least conflating them. They’ve been pointing to the Affordable Care Act as point of comparison, suggesting that the BBB child care proposals will leave out the middle class. The ACA phased out at 400% of FPL (Federal Poverty Level), which for an individual is less than $50k. This is not even close to the same ballpark as 200% of SMI (State Median Income). There are differing opinions on what constitutes the “middle-class” — but I don’t think many would include a Wyoming family of four making $200,000 a year, nor a Colorado family bringing in nearly a quarter million per year, nor a Tennessee family earning $172,000 a year.
By covering families up to 200% of the SMI, this program would eventually guarantee free or affordable, quality child care for more than 80% of young children. Ultimately, we hope that we can achieve universal benefits and access to quality care. But this policy ensures that those who would benefit most from a stabilized market that provides quality, affordable early childhood education will be the first to receive benefits, and it takes measured but ambitious steps to build the supply we lack as we expand eligibility.
Hopefully this analysis sets the record straight during an historic moment for Congress, America’s children, and working families all over the country who could see their child care costs go down between $5,000 and $6,500 under the proposal. For those closely following the development of this policy, it would be wise to view 11th hour reports predicting large unintended consequences with a healthy dose of skepticism. Particularly when their author’s preferred policy prescription is a more expensive, immediate program that would overwhelm our fragile child care system, without any planning or ramp-up.
We will build back a better child care and preschool system, and it will not be easy. But with hard work, commitment, trust, and collaboration, it can be done. Millions of working families — and the employers who rely on America’s child care industry to help parents remain on the job — are counting on it.
