Why universal day care is terrible public policy

Photo by Alexandr Podvalny

It is somewhat amusing to watch Hillbilly Elegy author J.D. Vance emerge as the post-Trump cultural observer most reliably capable of driving the political left insane.

Unlike Trump, Vance does not lend himself to ad hominem attacks. When Vance questions the efficacy of welfare programs, he brings with him a multi-generational connection to the epicenter of Lyndon B. Johnson’s War on Poverty – Appalachia. Appalachia is also the perfect case study in why most anti-poverty policy ultimately fails, how it is defined by rent-seeking behavior, fraud, and inertia.

According to the Cato Institute, American taxpayers have spent upwards of $20 trillion on over 100 anti-poverty programs since the War on Poverty was launched in the 1960s. (That figure excludes Social Security and Medicare, which are also considered safety nets, but are not exclusively utilized by the poor and funded differently.) Rather than ending poverty, economic inequality has only skyrocketed. There are arguably fewer opportunities for social mobility now than there were back then, as many great American cities have become catastrophically unaffordable for large swaths of people.

Appalachian counties in particular have been on the receiving end of a lot of that investment. It is a worthwhile question to ask how a region that gets showered with billions of dollars on a regular basis remains not only in poverty, but in an abject level of poverty that most Americans – even those living in inner cities – will never experience. Rampant drug use. Large populations of children living with their grandparents or homeless because both of their parents are dead or incarcerated. Starvation and suicide. I will never forget touring a high school in Hazard, Kentucky, and meeting a homeless student who slept in the town’s cemetery at night. The principal was giving the boy money for food. He would get so (justifiably) angry discussing the conditions his students were living in that he physically shook as he spoke. “There is never enough,” he lamented, a grown man on the verge of tears.

Residents of Appalachia could all be sitting on multi-million-dollar stock portfolios for the money that has been spent there on a per capita basis ostensibly trying to transform their economic situation. That’s what is sickening about our system of trying to engineer “solutions” for social ills through token incremental support. While driving around backwoods Appalachia, I can tell you it is not at all difficult to see where the government contractors and lobbyists live. In a region of crumbling doublewides and junkyards, government contractors have the mansions on the hill – shiny beacons announcing the power of rent-seeking behavior in an era of wanton government bloat. But they are nothing compared to what government bloat has accomplished in enriching the suburbs of Washington D.C.

While Vance seemingly blames hillbilly culture for Appalachia’s social rot – and there is perhaps something to that – there is a more basic truth underlying all this: Government will never be a substitute for having an actual economy. Never.The short-term financial benefits from welfare will never replace opportunities to save and build wealth and make bona fide investments in one’s future. Whatever temporary comfort welfare provides will not replace the lifelong dignity of professional success and seeing one’s kids thoroughly better off than you were. Economic development grants will never turn rural hollows into bustling centers of commerce and generally pad the bottom lines of corporations that want the cheapest of cheap labor – whose main alternative is sending production to countries with literal slavery, something approximately no one in D.C. will ever hold them accountable for. Vance did not find relief from his circumstances through welfare. He found relief by leaving, and leaving is a difficult and expensive thing to pull off – not to mention it involves abandoning the networks of care you have built in the course of your life.

The Biden administration has now proposed upwards of $6 trillion in new spending (essentially tripling the federal budget of normal years) and largely echoes the logic of the War on Poverty – that blindly dropping vast sums of (borrowed/printed) money on communities through additional layers of government programs (never mind that hundreds of existing anti-poverty programs are not sufficient) will somehow reduce economic inequality over the long-term. This dovetails with the Biden administration’s quietly lunatic embrace of Modern Monetary Theory (MMT), which assumes the federal government can run unlimited deficits to fund its political priorities without crowding out private investment, then control inflation by levying extreme taxes on less-favored constituencies (likewise without adverse consequences, it’s an economic miracle). It’s the economic mentality of developing countries being practiced in a developed nation, and will likely yield predictable results. But you can’t reason with policymakers who think they have discovered a magic money machine, especially ones that are in their 70s and 80s and frankly don’t care how the story ends.

(Incidentally, if you are ever a non-partisan staffer in public finance, cranks who think they have discovered magic money machines abound. I remember a nutty business school professor who toured the country trying to convince state legislators that all of their problems could be solved by borrowing long-term using only zero-coupon bonds. I am not kidding. He truly thought he had the world figured out. He had the Democrats in our legislature at the time absolutely hypnotized – you mean we could borrow unlimited amounts of money to spend on whatever we want, and the state doesn’t have to pay it back for decades? – leaving me in the awkward position of having to explain to people with zero financial background – let alone a background in the esoteric debt structures of high finance – that zero coupon bonds are original issue discount bonds, there are federal laws about arbitraging bond proceeds, and there’s no such thing as an infinite debt capacity. There is an endless stream of charlatans and even well-meaning public policy tourists who believe with all their heart that they have found some miraculous loophole in economics. In fact, the drunker they are on what could be done with the money, the more cult-like these folks get. That’s what I think of when I listen to MMT people. I just roll my eyes and thank God my days of testifying before committees is over.)

The intellectual conceit of the left, however, when discussing the issues surrounding poverty is that you can do so while making obvious topics like culture, financial infrastructure, and motives off-limits. One can never suggest that the poor have played a role in their own poverty. One can never suggest that the administration of government benefits can perversely become a profit center or rent-seeking goldmine. Or that subsidies unnecessarily inflate the costs of essential services, thus exacerbating the social problems they seek to improve. They want to see the poor as adorable puppies abandoned in a box along the side of the road, looking for a more benevolent master – not human beings with agency and and a complicated universe of responsibilities and values. If you disagree with them, it’s because of your own moral failings and lack of compassion, not because of basic economics and centuries of empirical evidence.

Thus they came unglued when Vance tweeted this about Biden’s proposal to have federal taxpayers subsidize the cost of daycare:

Many people responding to him pointed out that the chart above actually suggests the affluent (apparently now used interchangeably with “educated,” though I am not sure that is the case) regard a single-income household with one parent taking care of the children as the ideal division of labor/care. Indeed, I have been astounded by how many of my well-educated and prosperous female peers are opting out of the rat race to raise their children – a phenomenon described in this month’s Atlantic as “leaning out” – even before the pandemic. Forget the Boomer ideal of “having it all,” being able to see your kid’s first steps and teach them the alphabet is now a status symbol. Furthermore, the ones who are still working are probably more likely to enroll their children in private schools or hire a nanny.

So where is Vance even going with this argument? How does subsidizing welfare benefit the affluent? What kind of person in their right mind argues against helping the poor with their childcare bills?

The latter, of course, is mischaracterizing what Vance was saying. Vance agrees that the federal government should support parents and children, he is simply saying that Biden’s plan is an awful way to do it. And he’s right.

Biden’s plan – which you can read about here – involves offsetting the costs of daycare along a sliding scale according to income. This means low-wage workers will receive a larger subsidy because daycare costs will necessarily represent larger shares of their incomes:

For the most hard-pressed working families, child care costs for their young children would be fully covered and families earning 1.5 times their state median income will pay no more than 7 percent of their income. The plan will also provide families with a range of options to choose from for their child, from child care centers to family child care providers, Early Head Start, and public schools that are inclusive and accessible to all children.

A lot of subsidies are structured this way, and from an economic perspective, it’s an idiotic way of structuring benefits. You want to know how to end up with the most expensive daycare costs in the entire world? Have the government pick up 100% of the tab in millions of cases, with no corrective market forces at work. This is the same reason our health care expenses are bonkers, tuition at colleges and universities increases exponentially, why affordable housing projects somehow manage to increase surrounding rents – no one has skin in the game. Then advocates claim the problem is even more of an emergency so we should throw more money at it. As with many things in public policy, the response becomes the problem.

(It’s also a nice touch that the funds can be used to pay private daycares, but not private schools. Wouldn’t want the kids to spend their days at the same places politicians send their children to, now would we? Really thoughtful and not at all racist of them.)

Vance’s argument is essentially, hey, if you are going to be paying people to take care of kids, why not let the parents do it themselves? Why subsidize daycares instead of parenthood? If you believe that caring for children is a kind of labor, why not subsidize that labor rather than institutions? Instead of forcing the working poor into two-income households and all the chaos and sacrifice that involves, why not let a parent work less and be there to raise their child instead of paying someone else to do it? Why does the money have to go to a third party at all? This is the position of someone who has grown up watching assistance for the poor trickle through a litany of institutions until it becomes personally insignificant. Essentially, Vance is arguing for a form of universal basic income – not historically a conservative position – which in a different context folks on the left would embrace.

This invites a lot of inconvenient truths, doesn’t it? And the left was quick to say the silent part out loud: They don’t want to incentivize household formation. This shouldn’t be about the nuclear family. We need those parents (and particularly women) to find “fulfillment” as workers in “careers” that would leave them destitute without government intervention. Taxpayers must borrow/print money to front the bill to keep low-wage workers in low-wage jobs, forever. What would we do without them?

Social mobility is not their policy objective. The preservation of wage slavery is. When journalists cheekily note that Corporate America is leaning toward the left instead of politicians like Vance, there are good reasons that have nothing to do with being woke.

If you are an educated person who has the option of working from home and being present for your children, you have a pretty sweet gig now. You need lunch? Just dial up your electronic serf and she will ferry take-out from your favorite restaurant to your home. You want to buy anything you want from anywhere in the world – don’t even walk away from your Netflix, just log on to Amazon and your electronic serf will bring it to you. We can only have things like this cheaply if there is somewhere for the electronic serfs to warehouse their children cheaply. Ditto for brick-and-mortar employers who want to suppress personnel costs.

Government-sponsored daycare is a rad deal for corporations, isn’t it? They don’t need to pay wages sufficient for employees to meet their basic needs or compete in the labor market. Like pretty much every other welfare program that serves the working poor, taxpayers end up funding that gap. The government picks up the tab on their employees’ health care. It pays for their kids’ dental work. It pays for their food. It pays for their education and workforce training. Now it can pay for their child care. The government incentivizes corporations to leave wages at 1990s levels, and these corporations supply a lot of dark money in election cycles to convince people that if they disagree with substituting welfare for wages they lack compassion and are horrible human beings. This is the decades-long dynamic that built behemoths like Amazon and Walmart.

This may sound like a cynical take, but it’s hardly a new phenomenon. The Soviet Union also highly subsidized daycare to establish and indoctrinate a permanent class of working poor households to serve elites, but marketed it as reducing economic inequality (which it demonstrably did not do). Sure, you’re still living in poverty, but look at how much we are doing to help you out! Maybe after several decades you will have been “helped” as much as the people in Appalachia! Isn’t the magic money machine fantastic?

This is an article from 1974 in the New York Times. See if you can identify any common patterns of reasoning between the Soviet system and the Biden administration / lefty hot-takes:

KIEV, Soviet Union—Zoya Idenko is the model of the young Soviet mother liberated by a local day care center that permits her to hold a job. With her 3‐year‐old son in a state nursery, she works as a guide for Intourist and sometimes also teaches English at a night school.

Under the highly subsidized Soviet day care system, Mrs. Idenko pays a modest 10.50 rubles ($13.86) per month—about one‐tenth of her pay—for six days a week of child care. She drops her boy off at about 8 A.M. and picks him up at 7 P.M. He gets three meals and a snack daily.

From 8 am to 7 pm – her son is in state-subsidized daycare for all of his waking hours. He’s essentially going through his childhood not even knowing his own mother, all so she could spend her days ushering tourists around. It takes a village, right? Why even bother to have a child at all?

Child‐rearing, never had much attraction for Mrs. Idenko.

“I went back to work three months after my son was born,” she said. “I could have waited a year legally and still kept my job, but it was difficult for me to bring up the baby and I wanted to get out of the house. My mother‐in-law lives with us and she took care of him.”

The very idea that some American women want to stay at home and raise their own children astonished this 30‐year‐old woman. For her, work was the only satisfying outlet. And despite her frequent contact with English speaking foreign tourists, she knew nothing about the range of voluntary and community activities done by nonworking American women.

“Don’t American women want to get out of the house?” she asked one recent visitor to this Ukrainian city. Don’t you want to work? Don’t you want to earn money and get some independence?”

Alas, it would seem that not all Soviet women liked the idea of their children spending all of their waking hours in state-sponsored daycares. You know who didn’t want to drop their kids off at daycare? Educated, economically better-off women. Even within a radically different political system heavy on propaganda (not that ours isn’t), the same demographic that supports a single-income household in America today also wanted it in the Soviet Union:

Privately, many educated Soviet mothers take a much more skeptical view of the Soviet day care system and regard the competence of most day care workers as below desirable standards.

But among the mass of working women, a more common complaint, judging by articles and letters in the Soviet press, is that there are still not enough day care centers to satisfy demand.

The Soviet network of nurseries (for ages of 6 months to 3 years) and kindergartens (4 to 6) is far more extensive than in most Western countries, including the United States. Here, they have long been an economic necessity for the state and the family.

Because of labor shortages, especially after World War II, women were pressed into many industrial and agricultural jobs. In 1972, for example, 48.7 million women were working in industry, or 83 per cent of the women between 20 and 55. They comprised slightly more than half of the entire work force—outnumbering men.

Not long ago, however, the armed forces newspaper, Krasnaya Zvezda reported that pre‐school day care centers can handle about 10 million children—only one‐third of the children in the under‐7 age group.

Big cities such as Moscow tend to be favored. People in the countryside and medium-sized factory towns are left more to fend for themselves. Some women report having to quit their jobs in order to raise their children at least until they are old enough to go to kindergarten. Others resort to the traditional Russian method of having a live-in grandmother take over.

The vast majority of Soviet families require the salary of a working wife to make ends meet. Repeatedly, Soviet citizens express astonishment when they learn that an American father can support a family of two, three or four children without his wife’s working. Many are also surprised that American women would willingly have more than one child.

“That is suicide,” said one 40‐year‐old mother, “even with a pre‐school group for our daughter, we have a hard time coping.”

Others have little choice in the matter for financial reasons. One young father reported putting an 8‐monthold baby into a nursery rather than waiting until it was a year or more, as originally planned, because the financial strain was too great without his wife’s return to work. This man earned roughly double the average factory worker’s salary of 140 rubles, or $186 a month.

So among the poor you have two parents working like good comrades and the opportunity to outsource parenthood for most of the day, yet they all remain at low standards of living and are not any happier for it.

Geographically speaking, the ideal situation is at Kindergarten‐Nursery No. 104 in the Belyaevo ‐ Bogorodskoy region in southwest Moscow, where a 360‐place nursery kindergarten has been placed in the midst of a sea of workers’ five ‐ story apartment buildings that it serves.

Lydia Agareva, the friendly director of this showplace day care center, exudes enthusiasm about its cleanliness, the quality of the staff, and the benefits of children being able to grow up in a collective rather than being spoiled by doting parents and grandparents.

One of her prides as an “upbringer” is Zoya Lissner, a Communist party member who worked for 18 years in the metal casting works of the big Likhachev automobile factory, before giving up a $265‐a‐month job when her son was born in 1970. For three years she raised him at home and then came to work at the day care center as a nanny at: $100 a month because the crosstown bus ride was too wearing and inconvenient.

Now, Mrs. Lissner, a cheerful blonde, is finishing night schdol training at a pedagogical center to complete her, qualification as an “upbringer.” She is making $113.20 a month and misses the bigger paychecks of the factory.

She talks with satisfaction about her own son’s experience in that same day care center, but not all mothers are so satisfied.

Another mother of a 7‐year‐old girl said she had found a privately run play group, which was technically semi‐illegal, for her daughter because she felt the “upbringers” in the state institutions were poorly qualified. Their salary levels are among the lowest in the Soviet Union, she complained.

Another mother, with three children, said she objected to extensive indoctrination in state nurseries and kindergartens with their songs about the Motherland, Lenin, and border guards on watch against hostile foreigners Still others said they disltked having children raised so much of the time by people outside of the family during the early, formative years.

But some of these women conceded that their concerns were those of a tiny minority of educated, middle‐class intellectuals.

“The great majority of working class women,” observed a woman lawyer, “are delighted to have nurseries and kindergartens. They complain when the nurseries are too far away or do not have enough space for their children. Moreover, they feel that by sending their children to these institutions, they are providing the children with the beginnings of an education.”

Imagine deliberately creating an economy where having a family life is considered a luxury or even a bourgeois fetish. That’s where we are folks.

This kind of social environment did not develop by accident. There was an entire architecture of lies surrounding family life in this and other 20th century authoritarian regimes. All because it was useful to elites.

It is trendy now on the left to dismiss the concept of the nuclear family, although there is significant economic consensus that early and durable household formation is a key element of financial success. Simply put, it is easier to get along in this world economically if you have a family and work to be a positive influence on your children.

But Friedrich Engels’s arguments against the nuclear family in The Origin of the Family, Private Property, and the State are making quite the fashionable comeback with the socialist-chic cohort in politics lately. Nothing makes a good worker like agreeing to treat your family members as commodities. And that’s why it is politically verboten to suggest that maybe economic mobility starts in the home.

I feel like cutting it short at this point, but another worthwhile read is Four Myths and One Truth about French Childcare, which also gets into how universal childcare programs tend not to be universal at all.

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