U.S. child care system is failing families, says Treasury

U.S. child care system is failing families, says Treasury

The Treasury Department has determined that the country’s child care system is “unsustainable,” saying it suffers from market failures that put quality care beyond the reach of many families.

In a report to be released on Wednesday, the Treasury details the struggle many parents struggle to care for children, especially as the bills pile up before their peak earning years.

At the same time, the Treasury found that many workers in the industry are paid low wages, face a high turnover rate and face discrimination.

Treasury Advocates Federal Government Support For Paid Family Leave, Universal Kindergarten And Significant Tax Credits For Parents And Dependents As Democrats In Congress Work To Draft Bill on social spending. Which could total $ 3.5 trillion.

Treasury Secretary Janet Yellen and Vice President Kamala Harris will highlight these initiatives in a joint address Wednesday afternoon at the department.

Individual families should not shoulder the responsibility for funding quality care that benefits the economy more broadly, the Treasury argued in the report – adding that the system is failing to “adequately serve many families. “. Used to be.

“This is not just one phenomenon – sound economics explains why the use of private finance to care for children is less common,” the report says.

Katherine Wolfram, Acting Assistant Secretary of State to the Treasury for Economic Policy, said: “A well-functioning child care sector is good for working families. It’s good for the kids. I would also like to point out that it is good for those of us. So much the better for the rest. “” It’s vital for a well-functioning economy. “

These programs come at a high price. House Democrats estimate the two pillars of the agenda – universal preschool and child care grants for low-income families – will cost $ 450 billion. A national paid vacation program could cost around $ 500 billion.

Democrats are also proposing a permanent extension of the dependent tax credit of around $ 100 billion. The most important item is the extension of the child tax credit until 2025. The Joint Committee on Taxation has estimated that it will cost $ 550 billion over a decade – and many Democrats pledge never to let it stop.

“This money has allowed people to have a roof over their heads, to put food on the table and to pay for diapers, medicine and school supplies,” the president of the Ways and Means Committee said on Tuesday. of the House, Richard Neill. While his committee debated the law.

The scale and cost of the programs have attracted attacks from Republicans, who accuse Democrats of trying to exert more government control and influence than Americans were born with.

Virginia Foxx, a leading member of the House Education and Labor Committee, said: “We need to focus on making sure hard-working taxpayers can get the best possible care for their children, without spending blindly. money on the problem. ” To throw it away and fix it. , said during the debate on the bill.

The Treasury report found that the average family with a child under 5 would have to spend 13% of their income on care, which is not possible for many families. Inability to pay what economists call a “cash shortage”: Parents can’t spend more on child care than they earn at work, and they can’t borrow from future earnings to cover costs .

At the same time, leaving the labor market comes with its own penalties. The report cites a study by Harvard economists Claudia Goldin and Larry Katz, which found that an 18-month break from work was associated with a 41% reduction in earnings for women with MBAs.

Nevertheless, the report shows that the participation of women in the labor market has declined over the past 20 years. Other advanced economies like the UK, France and Canada now have higher participation rates than the US.

Part of the problem lies in the fragmented child care industry itself, according to the report. He cites research showing that most for-profit providers in the $ 60 billion region have margins below 1%. The median salary for a child care worker is $ 24,230, so more than 15% of them live below the poverty line in 41 states.

Child care provisions are very popular in Democrats’ spending plans, recent polls show. Almost three-quarters of registered voters support paid family leave, according to a Morning Consult / Politico poll last month. A separate poll of potential voters by Data for Progress found that 60% approve of Universal Pre-K, of which 41% are Republicans.

“During this period of important negotiations, convincing economic arguments must be presented that it is in the best interest to reduce costs for working families,” said Rohini Kosoglu, domestic policy adviser to the vice president.

On Wednesday, the House committee will finish debating the proposals and then compile them into a single law. Senate Democrats also want a chance to weigh in, and there is still no consensus on the size or scope of the final package.

But the main senators pledged Tuesday to ensure that childcare provisions are not spared.

Patty Murray, D-Wash. Said, “We are leaving our workers in the balance in this country and we are choking our economy.” “And this is unacceptable.”

– CNBC’s Karen James Sloan contributed to this article.

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