The Economy Can’t Run Without Child Care

The Pitch: Economic Update for March 24th, 2022

(The Pitch is a weekly economics newsletter written by Zach Silk. Follow here on Medium or sign up for free on Substack to receive a new issue in your inbox every Thursday.)

Friends,

If you want to get a sense of where we’re headed, you should always look to the historians. Capital and Main this week featured an interview with historian Nancy MacLean about the alarm bells she’s been sounding for the perilous state of American democracy. (If you haven’t yet read MacLean’s bracing history of the rise of the extreme right-wing in America, Democracy in Chains, it was required reading around the Civic Ventures offices on its release and I urge you to buy it or take it out from your local library as soon as you can.)

MacLean argues that wealthy donors like Charles Koch are more than willing to spend their dark-money millions to support candidates who subvert democracy. While they may find seditious candidates to be personally distasteful, they don’t care about the means as long as they’re able to achieve their end goal of tax cuts and extreme deregulation. (She also notes that Koch’s is one of the few companies that continues to do business with Russia despite overwhelming international support for sanctions.)

MacLean warns that the anti-democratic forces are closer than ever to achieving their goal. But she also notes that voter turnout has been tremendous in the past few elections, indicating that the importance of this moment is not lost on the American people. She concludes, “hopefully, if people recognize the seriousness of the situation and go door to door and do all the ground-game work needed to prevail in the 2022 midterms, then maybe we could get some serious democracy reform that would help us going forward.” I couldn’t have put it better myself: The people have to continually remind our leaders that voting rights — combating gerrymandering, ensuring racial and gender equity in voting access, removing all barriers to the ballot box — are our priority. We can’t build a better country if we lose the right to vote, so we had better shore up our democracy first.

The Latest Economic News and Updates

To build a strong economy, affordable childcare is not optional

It’s quite possible that when the heat of the pandemic has faded into memory, we will see that one of the biggest shifts in American political thinking has been the widespread realization that affordable child care is not an option, it’s a necessity. When lockdowns began and schools, daycare facilities, and preschools closed for public health reasons, the American workforce basically ground to a halt as parents working from home had to care for their children and become full-time virtual teachers’ assistants. Quality, affordable child care isn’t a bonus or a premium that only wealthy workers can enjoy — it’s an essential part of a working economy.

It seems quite likely that voters in coming months and years will favor leaders who prioritize affordable child care policies. With that in mind, the Center for American Progress has put together five essential strategies for the equitable implementation of public child care policies, including paying the child care workforce more to ensure quality care, building data infrastructure to assess the needs of families on a neighborhood-by-neighborhood basis, and targeting investments directly to the communities that need it most.

Perhaps most importantly, CAP makes the case that the American Rescue Plan essentially saved American child care in its worst moment of crisis — and it did so in an equitable way:

…more than 75,000 providers were saved from permanent closure, amounting to more than 3 million child care spots across the country. For minority-owned care facilities, this impact was felt even more deeply: Nationally, approximately 42 percent of providers say they would likely have shuttered without emergency relief, rising to 55 percent when looking specifically at minority-owned businesses.

We now have a gameplan for how to fix American childcare. It’s incumbent on our leaders to follow through, learn from the lessons of the recent past, and build for the future.

Is the housing crisis about to get worse?

The New York Times’s Glenn Thrush notes that the Biden Administration has moved $377 million in federal pandemic housing funds to New York, California, Illinois, and New Jersey. Thrush writes that those four states, which are “home to roughly a third of the nation’s low-income renters, have already spent billions in emergency aid paying back rent for tenants at risk of eviction, and they have requested more funding, citing affordable housing shortages and rising rents.”

Just as the onset of the pandemic exacerbated many of our economy’s biggest weaknesses, the receding of federal emergency funding will also spotlight the greatest weaknesses in our safety net. Specifically, with the end of eviction bans and pandemic assistance programs, America’s housing crisis seems poised to worsen. Housing prices are skyrocketing around the country and rents are climbing just as fast. Shelter is a necessity that is priced like a luxury.

Without further investments in building abundant affordable housing, our unhoused population could explode in the months to come. I wrote at length about housing in a special edition of this newsletter last month; I hope you’ll take the time to read it if you haven’t already.

Have retirement funds become another tax shelter for the wealthy?

For decades, Americans have invested percentages of their paychecks into 401Ks and IRA accounts intended to secure a financially stable retirement. Retirement tax incentives allow ordinary Americans to invest in their future, and our leaders justify the loss of revenue from those tax cuts with the idea that it’s sound economic sense to have a stable class of retired Americans who have disposable income to spend in their communities.

But the Washington Center on Equitable Growth has issued a new report showing that wealthy Americans are using those retirement tax incentives as tax shelters for their fortunes. They’re growing their wealth by exploiting a policy that was intended for ordinary Americans to supplement Social Security benefits.

And while this wealthy tax sheltering is going on, real retirees are suffering under inflation. Abha Bhattari writes in the Washington Post that seniors are struggling to meet expenses on a fixed income, cutting back on food, energy, and other essential expenses. Part of the problem is that the current Social Security system doesn’t adjust fast enough for inflation: Last year, she writes, “Social Security recipients received a 5.9 percent bump in their monthly checks — based on annual inflation calculations from July to September 2021 — even though overall prices have grown 7.9 percent in the past year.”

Obviously, the system is not working in the way it was intended to work, and the Center estimates that the government is missing out on $400 billion in annual revenue from the money in these retirement accounts — much of which is benefiting wealthy people who do not have to worry about financial security. Just look at this chart showing how much the wealthiest decile of all Americans have socked away in retirement funds compared to everyone else:

The Center has plenty of policy ideas for discouraging the sheltering of millions — even billions — in tax-free retirement accounts and encouraging a wider spectrum of Americans to invest in their futures, including an expansion of Social Security. “Even with the explosion of tax-preferred retirement savings at the top of the wealth and income ladders documented above, most Americans still rely on Social Security for the vast majority of their retirement income,” the Center notes. Why not take some of that sheltered wealth and invest it in the people who really need it?

The justice system is sentencing poor Americans to life in debt

“For decades, the onus of generating revenue for states and municipalities with strained budgets — most famously Ferguson, Mo. — has been shifted by several states onto those accused and convicted of crimes,” writes Ruqaiyah Zarook in The Nation. “This is done through criminal justice fines, fees, and debt, sometimes called ‘legal financial obligations’ or ‘monetary sanction’: all the court costs, restitution debts, and bail forfeitures levied on individuals who have been accused or convicted of crimes.”

Zarook is calling for an end to the so-called “Debt Sentence,” in which Americans who enter the criminal justice system, often due to crimes of poverty like shoplifting food and other necessities, are frequently forced to take on a ridiculous amount of debt. These fees and penalties add to the high cost of being poor in America, and even people who are found innocent suffer a serious blow to their income. Those who are found guilty will often leave prison in much worse financial shape than when they went in, increasing the chances of recidivism.

“The carceral system is a shakedown operation, from first to last,” an expert tells Zarook, which sounds to me like a violation of the Eighth Amendment’s prohibition of cruel and unusual punishment. There needs to be a system of punishment and rehabilitation for criminal offenders, but economic devastation as a fundraising technique for local government is bad for people and bad for our economy.

The fertilizer industry isn’t safe from corporate greed

On top of all the other crises going on in the world today, did you know that we’re currently in the middle of history’s first recorded global fertilizer shortage? Lee Harris at the American Prospect dishes the dirt on why fertilizer prices are skyrocketing. Some of the global shortage is because of typical supply-chain issues we’ve seen in every industry through the pandemic. Some of it is because of the international sanctions on Russia, which is a leading producer of fertilizer, in the wake of their invasion of Ukraine.

But corporate greed figures into the rising demand and prices of fertilizer, too. An American firm called Mosaic has been cashing in: “On an earnings call in February, executives emphasized that they are currently “prioritizing share repurchases over other uses of capital.” Last month, the firm entered an accelerated share repurchase agreement with Goldman Sachs, buying back $400 million of its own stock.”

That’s more than a third of a billion dollars that could have gone to strengthening America’s fertilizer infrastructure in a time of crisis, or expanding distribution to parts of the world that are sacrificing in order to uphold the righteous sanctions against Russia, or keeping costs low for American farmers. Instead, it’s being handed off to shareholders and executives. We’ve seen this happen again and again across the American economy, but it’s particularly jarring to see this kind of exploitative greed happen in agriculture, where world hunger is at stake.

Former Secretary of Education under Obama calls for elimination of student debt

An important new voice has joined the chorus of leaders calling on President Biden to forgive all student loan debt: Former Obama Secretary of Education John King, who told CBS that Biden should be “addressing the crushing burden of student debt that so many young people feel today and fixing the problem going forward by committing to debt-free college in the United States.”

Ezekiel J. Walker at the Black Wall Street Times reports that King says forgiving student debt wouldn’t be a new event in American history: “the federal government paid roughly 80% of the cost of college for students through its Pell grant program in the 1980s. But the government’s move in recent decades to cut its investment in higher education has left many students deeply in debt, with today’s Pell program covering less than a third of annual tuition for grant recipients.”

At the time of this writing, student loan repayments which were paused during the pandemic are set to resume on May 1st. I expect to see reports in the next few weeks that will help dimensionalize how these payments will affect an American workforce already strapped by high prices and shelter costs. With his experience and credentials, King’s voice is an important addition to the discussion.

Real-Time Economic Analysis

Civic Ventures provides regular commentary on our content channels, including analysis of the trickle-down policies that have dramatically expanded inequality over the last 40 years, and explanations of policies that will build a stronger and more inclusive economy. Every week I provide a roundup of some of our work here, but you can also subscribe to our podcast, Pitchfork Economics; sign up for the email list of our political action allies at Civic Action; subscribe to our Medium publication, Civic Skunk Works; and follow us on Twitter and Facebook.

• I wanted to draw your attention to this great Twitter thread posted yesterday by Civic Ventures founder Nick Hanauer. The thread is in direct response to the news that a handful of Washington state’s wealthiest citizens are trying to repeal a capital gains tax by initiative, but the points that Nick makes about taxation, wealth, and society are salient no matter what state you live in: “We, the super rich, have to do our part. That means paying our effin’ taxes,” he wrote. (Although Nick, true to form, didn’t censor himself.)
• On Friday, 10:30 am Seattle time, join us for Civic Action Live, where we’ll be discussing the importance of child care, why it’s so crucial that society’s wealthiest people pay their taxes, the continuing push to unionize spaces that have not traditionally unionized, and why it’s a big deal that Obama’s Secretary of Education has come out in favor of forgiving student debt.
• The Pitchfork Economics podcast this week features a meaty conversation with Rakeen Mabud, who co-wrote an amazing piece in The American Prospect about how corporate greed is responsible for the supply chain woes that have plagued the global economy for the last year. If you’re a little hazy on the origins of the current inflation crisis, you should definitely give this episode a listen.
• And in Business Insider, Paul picks apart the incredibly specious idea that CEOs are paid what they’re worth. This is a good overview of how CEO pay went wrong in America, and how encouraging executives to think like shareholders is a great way to maximize short-term profits and minimize responsible growth.

Closing Thoughts

Here in my home of Seattle, a Starbucks store voted unanimously to unionize this week. It’s the seventh American Starbucks to vote for a union, the first Starbucks on the west coast to do so, and the only store in Starbucks’ corporate home city. A shift supervisor at the Starbucks, asked if they had any advice for returning CEO Howard Schultz, told the Times that “if he’s going to come in, expecting his old tactics to work, he’s going to find a whole new reality that is extremely different.”

Those are some bold words — and they’re entirely true. The labor contract in America is changing, and both employers and unions are going to need to adjust to reflect this new reality. Retired labor organizer Ellen David Friedman writes at Labor Notes that unions “have a great chance to learn from workers who are now organizing themselves without much assistance from paid union staff, and who are finding ways to amplify, extend, and consolidate their newfound expertise.” She offers multiple strategies for unions to honor and expand upon this grassroots approach, in order to amplify existing union wins and widen the network of pro-labor sentiment that’s spreading from coast to coast.

At the same time, leaders at the National Employment Law Project just issued a policy paper explaining how to improve outcomes for contract workers who don’t enjoy the same rights and protections that hourly workers do. It’s a dense paper and any encapsulation I could do here wouldn’t do it justice, but it’s important to note that NELP’s policy suggestions include both unionization and enhanced government protections for workers more broadly. The definition of work has dramatically changed over the past two decades, and our understanding of what it means to be an employee has not changed with it. It’s going to take both public and private leadership to finally drag the idea of dignified work into the 21st century, so workers need to keep pushing on all fronts — and lawmakers need to be leading the charge.

Be kind. Be brave. Get vaccinated — and don’t forget your booster.

Zach