Elizabeth Warren. Picture credit to: Vox
Childcare in America is amongst the highest in the world. For typical middle-class families (two working parents with two children), it sits at just about 30% of the family’s earnings, according to an OECD study which places it as the 5th more expensive in the world. For low-income single parents the result is even more severe, with childcare cost representing about 32% of the earnings, and pushing the USA to the second most expensive country in the world (only supplanted by Ireland). That seems to be related with the lack of state support for childcare (as opposed to that of the UK, for instance, where this last population bracket may get refunded for up to 85% of their childcare costs), joined with staggering rises in prices for these services, which have risen 1000 % in 30 years.
Despite this grim scenario for working parents, especially those on low incomes in the USA, childcare has not often been on the political agenda. Republican dominated governments have always been contrary to large federal spending programs, and Democrats initiatives along the years (e.g.: Obama, Bernie Sanders, Hillary Clinton) have gotten little attention, both from media and voters. However, the issue is regaining traction among Democratic leaders, and Elizabeth Warren’s initiative to go for universal child care (UCC), as part of her presidential candidacy agenda for 2020, is getting some media attention.
The policy is set to guarantee that no family gets to spend more than 7% (official Department of Health and Human Services figure for what is considered “affordable”) of their income on childcare. If implemented, the policy will also exempt families earning less than twice the poverty line from paying any related childcare cost. Of course, this represents a large increase in governmental spending, estimated in 700 billion $ in 10 years, and Warren proposes to tax it from the super-rich. This new tax represents a 2% levy on fortunes worth at least 50 million $, and a 3% on those surpassing 1 billion $. According to economic consultants (Emmanuel Saez and Gabriel Zucman, former Thomas Piketty collaborators) working with Warren, this new tax could generate 2,75 trillion $ in the same 10-year period.
The universality of the proposed policy is an important feature of it, even though it is tied to childcare alone. On the other hand, and unlike a basic income type of policy, it is given as a subsidy for children care centres, as a cap on costs at 7% would be installed for parents. So, all parents (and their children) would potentially benefit from it, depending on the percentage that their childcare costs represent on their total income. In other words, Warren’s idea is not to boost citizen’s earnings, and create a secure financial floor under which they cannot go – as a basic income would do – but to universally reduce childcare costs for all families, capping those costs as a percentage of their earnings.
More information at:
Reality Check Team, “Childcare: Do UK parents pay the most in the world?”, BBC News, February 13th 2018
Sarah Kliff, “Elizabeth Warren’s universal child care plan, explained”, Vox, February 22nd 2019
Matthew Yglesias, “Elizabeth Warren’s proposed tax on enormous fortunes, explained”, Vox, February 24th, 2019
Mark Zandi and Sophia Koropeckyj, “Universal Child Care and Early Learning Act: Helping Families and the Economy”, Moody’s Analytics, February 2019
