One of the many villains in my new book (which you can now download in full for free) is the classic Washington move of throwing ever-increasing taxpayer money at groups supposedly failed by the “free market,” without any examination of the existing government policies contributing to the problems these folks face. There may be no group getting more such attention these days than American families, with both parties competing to shower them with government goodies—tax credits, childcare subsidies, mandated employer benefits, etc.—to offset ever-rising bills for the things families need. We learned just yesterday, in fact, that these types of policies will be a big focus of the Biden administration’s 2023 economic agenda and the president’s state of the union address. Yet, as my book details in numerous chapters, policymakers routinely ignore the panoply of state, local, and federal policies that restrict Americans’ access to, and thus raise the prices of, all sorts of essential goods and services in the United States, disproportionately harming working families, especially poorer ones, in the process. Today, I’m going to use two such areas—childcare and consumer necessities (food, clothing, etc.)—to show why the most common government solutions to American families’ real challenges usually fall short.
Why Is Childcare So Expensive in Many Places?
As my Cato colleague Ryan Bourne explains in the book’s childcare chapter, it’s undeniably true that childcare is an ever-increasing burden for many American families—taking up at least 40 percent of a single parent’s median income in many states and thus imposing significant economic harms on workers and their families:
As he explains, some of these price pressures are likely the result of market forces: As Americans get richer, we may demand higher-quality childcare, and the service might also face “Baumol’s cost disease” because it’s a labor‐intensive service that can’t be easily automated.