The Biden Agenda: What He Might Do for Working Families
His message of ‘I care’ is loud, clear, and believable, but his proposals come at a cost.
|Abby M. McCloskey||Sep 10, 2020||20||81|
Welcome to the latest in our series, “The Biden Agenda.” We've invited some of the smartest thinkers and subject-matter experts we know to contribute to what will become an occasional series on what a Biden presidency might look like. Abby McCloskey, an economist and adviser to several GOP presidential campaigns, examines what policies Biden might implement to alleviate the stress and worry faced by working families since the beginning of the pandemic. She also looks at the downsides of some of his more progressive ideas, like universal preschool.
The 2020 presidential election comes at a time when America’s working families are under extreme duress. Democrat nominee and former Vice President Joe Biden brings compassion and policy reforms to provide relief and opportunity to families, but his proposals are not without downsides.
Families are facing a shattered labor market: Unemployment rates reached a historic peak of 16.2 percent for women in April 2020 and 13.5 percent for men. Mothers are disproportionately represented in low-wage and service jobs that leave few options for balancing demands of family and work in normal times, but those sectors have been devastated by COVID-19, making things worse. In a recent Bipartisan Policy Center poll, unemployed parents not looking for work cited caregiving as the primary reason. The unemployment rate has improved somewhat but remains at peak Great Recession levels, and the Congressional Budget Offices projects elevated unemployment for years to come, with accompanying financial, social, and emotional pressures.
Furthermore, school and childcare closures alongside experiments in remote learning have created tremendous uncertainty about the well-being of children and stymied educational progress and rising socioeconomic disparities. While our immediate focus has been on protecting vulnerable populations and essentially workers, children increasingly are the ones facing generational loss from forgone education opportunities and financial investments.
Biden has a plan to address the challenges facing working families—both those exacerbated by the current crisis and those that predated it. There are three major areas of his agenda to consider: 1) childcare, 2) paid leave, 3) taxation and work, which we will take in turn.
In July, Biden released his $775 billion childcare plan, the cornerstone of which is free universal preschool for all 3 and 4 year olds. This comes alongside: a refundable tax credit covering 50 percent of childcare costs up to $8,000 (or $16,000 for two children or more); increased funding for the Child Care Development Block Grant to cap the share of income spent by low-income families on childcare; a construction tax credit to businesses that build on-site childcare facilities; increasing childcare worker pay to $15 per hour, his proposed federal minimum wage, and; increased government regulation of childcare including of class size and curriculum.
To be sure, childcare is in need of reform. According to the Bureau of Labor Statistics, two thirds of mothers with children under the age 6 work as do 95 percent of fathers. Childcare is often the largest expense for families, higher than public college tuition, food, health care, and sometimes housing. According to a recent Care.com survey, three-quarters of working families spend more than 10 percent of their income on childcare. In the same survey, half of respondents reported being more concerned about the cost of childcare now than they were pre-pandemic, and the majority are concerned about sending their children back to center-based care in the midst of COVID-19.
Importantly, childcare is a significant barrier to work for low-income households in particular, for whom the alternative is often public assistance. It’s here that the case for reform is the strongest, not as a general middle-class entitlement but removing a roadblock to economic opportunity for parents and children. Research reveals that low-income parents who receive childcare assistance are more likely to be employed and have better family financial health. Furthermore, childcare subsidies support enhanced child development for low-income children by helping to offset the cost of high-quality care linked with better child outcomes.
As such, the most promising part of Biden’s childcare plan is the refundable tax credit, which would allow families to pick a childcare provider of their choosing, be it the local church’s “Mom’s Day out,” Montessori program, nanny, or a formal daycare facility. Such flexibility is particularly important for the pandemic environment and concerns about the safety of center-based care. For conservatives, this can be thought of as a voucher program, or even a massive preschool choice program, that empowers families to pick an institution best suited for their children and their schedules, while targeting support at the neediest due to scaling by income (the credit phases out for earners above $400,000, although it could be structured to begin phasing out sooner). I, along with former AEI colleagues Angela Rachidi and Aparna Mathur, have made similar recommendations for expanding the existing Child and Dependent Tax Credit and making it refundable.
These same features raise significant questions about the need for and outcomes of universal pre-K. While research shows significant gains from early childhood programs for at-risk and low-income children, the results of universal programs are more decidedly mixed. For example, a recent study (co-authored by Jonathan Gruber, the architect of the Affordable Care Act) revealed children in Quebec’s universal childcare program—the largest in North America—experienced negative cognitive and emotional outcomes that persisted over time, including worse health, increased crime, and less life satisfaction.
Universal preschool dilutes resources for the neediest children by making programs free for middle- and upper-income parents who would have otherwise paid and by reducing parents’ choices by grouping preschool with the public K-12 system, which already faces significant challenges for student achievement. Upon reviewing the early childhood education literature, Princeton economist Janet Currie instead proposed fully funding Head Start for poor children as well as those who face other educational vulnerabilities, such as non-English speakers. Head Start provides an alternative to universal preschool, directing support to the most vulnerable while still providing government oversight, (though a refundable tax credit would in theory reduce the need for a public pre-K option regardless of income-level).
Lastly, Biden’s plan does little to address the cost side of childcare and indeed would likely make it much worse by increasing costs and requirements on childcare providers. This moves in the opposite direction of what’s needed, which is examining the current requirements and eliminating those that do not markedly improve children’s outcomes. As Rachidi recently noted, “government regulations place onerous requirements on childcare providers, which many family-based arrangements cannot meet, resulting in fewer overall childcare options.”
Nearly every Democrat presidential contender embraced the FAMILY Act, which provides 12 weeks of federally funded parental, family, and medical leave. Biden is no exception.
Paid leave has long been a critical social safety-net gap in the U.S., where we are an international outlier on parental leave in particular. In every other developed country, a new mother is guaranteed paid time off to care for a newborn. But not in America, where only 17 percent of new parents have access to paid family leave from their employers, dropping to single digits for low-income parents. Lack of paid parental leave has well-documented negative economic and health outcomes for mothers and children in particular, with increased infant mortality, less breastfeeding, worse health and financial outcomes for mothers, and increased government welfare usage, such as food stamps.
The FAMILY Act seeks to rectify that while also providing paid leave for a wide variety of other uses, including healing for one’s own illness and caring for elderly relatives. Because it is so generous in its coverage, its cost is upward of $100 billion annually and will result in higher payroll taxes, which are paid for by all workers, not just the wealthiest. When the bipartisan AEI-Brookings Working Group (a group I was part of) examined the case for varying types of public paid leave, the potential for fraud and abuse, business interruption, taxation, and wide variability of eligibility prevented the group from endorsing a broad 12-week medical and family leave plan such as the FAMILY Act, at least not without more research on the effects of such a program. The same group conclusively recommended an eight-week public paid parental leave program, which could more easily be paid for in part out of repurposed existing spending and whose effects would be more straight-forward to anticipate.
Paid leave reform polls well on both sides of the political aisle and is an issue of particular interest to swing and women voters. As such, paid leave reform should generate substantial bipartisan support. Yet the FAMILY Act has failed to generate conservative support because of its price tag, reliance on higher taxes, and potential for fraud and business disruption. Meanwhile, multiple bipartisan solutions for paid leave exist in Congress and policy groups in Washington, including a plan by Sens. Kyrsten Simena and Bill Cassidy, the aforementioned AEI-Brookings approach, and numerous proposals by conservatives that target parental leave and explore pay-fors aside from higher taxes. It would be preferable to move forward with a paid leave plan that can outlast a Democratic administration instead of doubling down on an approach that’s partisan.
Taxation and Work
Taxation reduces the rewards of work, and as such, is a necessary part of any conversation about how policies impact working parents. Biden’s proposed tax hike over the next decade—$4 trillion—dwarfs those of his predecessors. The vast majority of the increase in taxes comes from upper-income households, but importantly all income cohorts would see their after-tax income go down. This might be easier to stomach in “normal times” than in the current economic collapse we are experiencing.
The two largest parts of his tax proposal directly impact working families. The first is to raise the corporate tax rate from 21 percent to —28 percent, transferring $1.3 trillion. It is widely recognized that workers—not companies—bear a significant share of the corporate tax incidence, and as such workers wages would likely fall. It further burdens business at a time when many are struggling, and so it is not impossible to imagine knock-on employment effects, especially if combined with increased regulation.
The second is his proposal to increase payroll taxes on households earning above $400,000. These households are disproportionately made up of dual earners, the secondary earner of which is often the woman. This means her income is taxed at a higher marginal rate, and we know that women’s employment is especially sensitive to heightened tax rates. Economist Nada Eissa examined the impact of the 1986 tax reform on the labor supply of married women. She found that reducing the top marginal tax rate from 50 percent to 28 percent increased their labor supply by as much as 18 percent. Increasing tax rates would have the opposite effect, which would work against increasing women’s labor force participation rates, which still lags with respect to men’s. At a minimum, there should be changes to make such a policy less punitive on dual earning households.
The tax hike would also have macroeconomic effects that would trickle down to working families. According to the Tax Foundation, Biden’s tax plan would reduce the economy’s size by 1.51 percent in the long run. The plan would reduce the overall wage rate by 0.98 percent, leading to 585,000 fewer full-time equivalent jobs. Given that unemployment is expected to remain high, this is particularly punitive.
So too would the increase in business mandates and regulations, such as a $15 minimum wage proposed by the Biden campaign. The Congressional Budget Office has modeled that such a move would result in 1.3 million workers losing their jobs. Those most likely to lose their jobs are low-skilled, low-wage workers, which disproportionately tend to be women and mothers. A far better way to boost wages of low wage workers is the Earned Income Tax Credit, as it has none of the employment downsides and rather is associated with increased labor force participation, especially for women. EITC reform could encourage advance payments and apply on an earner-by-earner basis as I proposed in National Affairs“Beyond Growth” to reduce the inherent marriage penalty. For working families, boosting wages by keeping taxes low and wage subsidy has the added benefit of making it easier to allow one parent more time to devote to childcare if they so choose. Biden has proposed expanding the EITC to help workers caring for elderly relatives, but not a broad expansion.
What About Trump?
With the GOP declining to write a platform for 2020, President Trump is positioning himself on first term accomplishments. This is one area where there have been significant advancements for working families: federal workers receiving 12 weeks of paid parental leave for the first time in history; the 2017 tax bill that provided pilot tax credits for companies that offer paid family leave as well as tax relief for middle-income families, including an expansion of the Child Tax Credit; and increasing the size of the Child Care Development Block Grant, which provides support to states for low-income families.
President Trump has made the Republican party more open to reforms that would benefit working families. But policies like the separation of children and parents at the border, the response to racial injustice, and downplaying the pandemic’s danger throw into question the administration’s seriousness about supporting families. Additionally, the lack of forward-looking proposals does little to assuage a fearful public that someone has their back in this historic crisis.
Which leads us to Biden’ biggest advantage when it comes to working families: His message of “I care” is loud and clear, from his life experience as a single father, being married to an educator, and the language and tone he employs across the campaign. The experience of COVID-19 from working families has largely been one of going it alone, making decisions without knowing who to trust. And it is natural to ask the question heading into November—who sees what I am going through and cares enough to do something about it? On this question, Biden decisively holds an edge.
Of course, there’s such a thing as caring too much. Biden has proposed expansive programs not just for working families but for every other policy vertical including health care and energy. It is unclear what prioritization will given to each and ignores the tremendous debt burden that exists for the next generation (though to his credit, he proposes a pay-for, albeit an astronomical one, unlike Trump for whom the tax bill and paid leave proposal were not paid). The federal government-centric approach he employs would concentrate more control in Washington at a time when government trust is at rock bottom, instead of increasing flexibility, innovation, and choice. And for many people, caring for working families begins by protecting the youngest children, the unborn, on which Biden has moved away from long-held convictions.
Which brings us back to where we started. The 2020 presidential election comes at a time when America’s working families are under extreme duress. Biden’s campaign seems very attuned to this fact, with a general stance of listening and empathy. His proposals touch on areas very much in need of reform and are comprehensive, but they often veer too far left.
A more targeted plan that would still pack a punch for working families would include: an income-based refundable tax credit to offset childcare and early childhood education expenses at a place of parents’ choosing; guaranteed access to paid leave upon the birth of a child, an extension of protecting early life; and a wage subsidy for low-wage workers to encourage a return to work, alongside an economic environment conducive to growth and innovation and not stymied by massive new regulations, payroll taxes, and policy uncertainty. On that front, the 2020 presidential election leaves much to be desired.
But one has a feeling that the 2020 presidential election is bigger than policy, and the power of compassion should not be underestimated.
Previous articles from “The Biden Agenda”:
Abby M. McCloskey is an economist and founder of McCloskey Policy LLC. She has advised multiple presidential campaigns.
Photograph by Liz Hafalia/San Francisco Chronicle/Getty Images.