What Biden’s presidency could mean for childcare

Childcare is in a crisis that has been brewing for a long time. Nationally, childcare is becoming scarcer and more expensive, a trend that has been made worse by the COVID-19 pandemic.

Particularly, lockdown and social distancing orders raised costs for providers while reducing their revenue, forcing many to close. Additionally, parents chose to let their children stay at home as working from home became more common.

What lawmakers choose to do about the rising cost of childcare going forward, therefore, matters a great deal.  So, what has President Biden proposed to do when it comes to childcare, and what would it mean for parents?

The Biden plan

Biden unveiled his plan for childcare in July 2020, which included, in summary, the following proposals:

• Provide all three- and four-year-olds with free pre-kindergarten.
• Offer a refundable tax credit covering 50 percent of childcare costs up to $8,000 per child and $16,000 for two or more children. This credit would phase out completely for households with an income of $400,000.
• Increase funding for the Child Care Development Block Grant (CCDBG) program to enroll more children in after-school care, offer a sliding scale of assistance to families with children ages five and under and incomes below 150 percent of the median, and cap childcare costs at 7 percent of annual income families under 150 percent of the median.
• Regulate childcare providers to ensure “high-quality” care, using the government to ensure: “a developmentally appropriate curriculum, small class sizes, and support positive interactions between educators and children that promote children’s socio-emotional development”.
• Provide bonuses to childcare providers who offer hard-to-find care, such as nontraditional hours, care for children with special needs, and care in rural areas.
• Offer a construction tax credit to businesses that build childcare facilities at places of work, as well as funding new childcare facilities and upgrades to existing facilities.
• Pay childcare workers more.

Just recently, Joe Biden announced a sweeping $1.9 trillion stimulus package, which includes increased funding to make childcare more affordable. With his inauguration coming closer, some of the proposals he outlined may start to come to life once he is in office.

So, what should Minnesotans expect to happen to the childcare industry under Biden’s plan? Research evidence warns that increased public subsidies will likely not improve affordability or shortages, but merely saddle taxpayers with costs. Subsidies could also worsen shortages by increasing demand.

Will the new plan improve shortages and affordability?

Parents in Minnesota are especially troubled by shortages, mainly due to the exit of family childcare providers from the industry.  This trend, in a lot of ways, can be blamed on the state’s complex regulatory environment.  Changes at the federal level, particularly through the reauthorization of the Child Care and Development Block Grant (CCDBG), have also increased regulatory requirements — such as training hours —  for providers, causing them to leave the market.

Biden’s plan, unfortunately, does nothing to improve the childcare regulatory landscape, at least not in a positive direction. The plan would merely add new rules, likely worsening shortages.

Secondly,  the subsidy program that Biden’s plan will expand highly favors high-priced center care, which is neither preferable nor widely available in most rural areas. This plan is, therefore, unhelpful and could even drive out small providers that parents in greater Minnesota rely on.

What to keep in mind

While it is true that childcare is in a crisis, increasing government outreach and transferring costs to taxpayers won’t make it affordable nor address shortages.

During the pandemic, we saw states loosen laws in order to ensure that working parents had access to childcare. This partly affirms the idea that leaders are aware of the negative impact that strict regulations have on supply. It also means state legislators are more suited to individually tackle childcare issues in their jurisdictions.

State regulations usually differ among states, with highly regulated states facing higher costs compared to less regulated states. Outside of expanding childcare tax credits, there is little that increasing the federal government’s role in the childcare industry can do to improve access and affordability.