The Trumps’ Mistargeted Child Care Proposal

Sadly, there’s a growing bipartisan consensus for more extensive federal involvement in child care policy. Recently, presidential candidate Elizabeth Warren proposed extensive new demand-side subsidies. Now today’s Budget from President Trump proposes additional resources for the Child Care and Develop Block Grant program to “increase the supply of child care to underserved populations.” Ivanka Trump is championing this new proposal.

Child care can be extraordinarily expensive. There are big problems with lack of availability in poorer neighborhoods. Ivanka Trump is to be commended for recognizing this is a supply-side problem, rather than just proposing throwing money at it. But that problem is generated in large part by misguided regulations in the form of staff-child ratios and occupational licensing requirements at state level that make it more expensive to provide care. Efforts to formalize the sector as more educational raises costs and so increases prices, with the inevitable regressive consequences. The Trump budget plan only works at the margins to improve affordability and availability, with big potential drawbacks. It is mistargeted.

Under Trump’s proposal, $1 billion extra would be temporarily put into the Child Care and Development Block Grant program. States could apply for funding to be used to encourage employers to invest in child care as they saw fit. But the quid pro quo is that to get the extra money, states would have to show commitments to reducing regulation or requirements that raise the cost of care.

This sounds promising, at first glance. But the White House has clarified this means things such as abolishing zoning requirements that don’t allow new centers in residential districts, rather than insisting states reform child care-specific staffing regulations, which we know drive up prices and worsen availability in poor areas.

Zoning reforms could help deliver more centers, particularly if the temporary extra funds lead to permanently entrenched liberalized land-use policies. But the effect is likely much smaller than the impact of states’ removing regulations on child care providers. A de-regulation brought about through the carrot of one-time funding will also be difficult to enforce and is highly susceptible to moral hazard and being undone over time.

Using federal funds to achieve deregulation also normalizes the idea of federal subsidies for child care with greater prescriptive conditional control. Given the current zeitgeist is for greater formalization of the sector (usually dubbed “improving quality”), it is quite likely such an approach will, over time, lead to more restricted supply and compensatory demand-side subsidies rather than the much-needed deregulatory state-level agenda.

For more on child care, read the relevant section in my paper Government and the Cost of Living.  For more on other recent developments in the debates on this policy area, read: here, here, and here.