Recap  

Between a Covid-battered economy and trillions in stimulus spending, it will take years to shrink the federal debt back to a manageable size. In the meantime, the Bold Centrist still wants to fix this country, focusing on six problem areas: healthcare, infrastructure, poverty, social mobility, housing, and threats to the biosphere. The challenge is how to fund the repair job without adding to the public debt or zapping economic growth.  

Short answer: increase tax revenue, which has hovered around 25% of GDP for decades. Let’s increase that to 36.3% of GDP, which is a bit more than what Canada collects (33.8% of GDP) but less than Germany (38.8% of GDP). This would generate an extra $2.6 trillion a year in tax revenues (based on 2020 GDP and ignoring GDP growth and inflation for now).  

So far I’ve spent $574 billion a year to achieve universal healthcare, reduce poverty, increase social mobility, and combat climate change.  For details, see The Bold Centrist: How Much Would It Cost to Decarbonize the US Economy by 2050?,  The Bold Centrist: A Responsible Budget for Fixing This Country, The Bold Centrist, Part VII: How to Pay for Universal Health Care on a Budget, The Bold Centrist: Why an Adult Student Basic Income is Better than Pell Grants (and What the Danes Have); The Bold Centrist: Here's How the US could fund an Adult Student Basic Income on Less than $2 a Day per Capita in New Taxes; and, The Beauty of an Adult School Basic Income.

That leaves a bit more than $2 trillion a year to address housing and infrastructure, plus I’m not yet done with poverty, social mobility, and threats to the biosphere.

Today’s Challenge: Childcare

In Part I of this series (What is Affordable Childcare and Whose Childcare Should Be Subsidized?), I concluded the federal government should fully subsidize childcare for low-income families and partly subsidize the childcare of middle-income families. I defined families as low-income if their income was less than twice the federal poverty threshold and middle-income if their income was between two and four times the poverty threshold. For example, a family of four with two children and an annual income of less than $50,000 would be considered low income; if the same family received an annual income of $50,000 - $100,000, they would be middle-income.

The cost of my proposal? Just four billion a year (or thereabouts). Here are the numbers:

Here’s an example of a middle-income family’s budget, post-childcare subsidy:

Even with a childcare subsidy, this middle-income family’s budget is tight. But without a subsidy, they would struggle to put money aside for emergencies, retirement, or their children’s education after high school.

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References:

“Comparing Characteristics and selected expenditures of dual- and single-income households with children: Average monthly childcare expenditures, by employment status and age of children, 2015–17”, Table 15. Bureau of Labor Statistics September 2020.

How Much Does the Federal Government Spend on Programs Benefiting Children? Urban Institute Authors: Heather Hahn, Cary Lou, and Julia B. Isaacs.  August 2020

“United States Demographics of Low-Income Children” National Center for Children in Poverty

“Working Families Spending Big Money on Child Care” By Rasheed Malik/American Progress June 20, 2019