How to fix America’s broken child-care industry
Without a measure of government intervention, the child-care crisis will almost certainly worsen. Currently, public spending on child care is fragmented, inconsistent and relatively meager: The U.S. government spends about $500 on child care per toddler annually, while the average for the Organization for Economic Cooperation and Development is $14,436. The pandemic relief packages, particularly the American Rescue Plan, were lifelines for the industry at a desperate moment. But those funds are set to lapse in September 2024, leaving states and D.C. with a fiscal cliff of nearly $50 billion. If we do not want American families to bear the financial burden for a sinking industry, government will have to step in.
This could take several forms. The most politically feasible option would be for Congress to bolster the Child Care and Development Block Grant program, which supports low-income families. That would alleviate pressure on the most vulnerable households but would not address the labor shortages. Other possibilities include expanding the Child and Dependent Care Credit — or extending and strengthening the child tax credit for all families. Both would help more families pay close to the real cost of child care, allowing providers to increase wages.
And it should not all fall on the federal government. New Mexico, for example, announced in April that it would provide a year of free child care to families earning up to 400 percent of the federal poverty level, using funds from taxes on fossil-fuel production. Though it would be difficult to make that sort of expansive model permanent or replicate it elsewhere, states have room to get creative with revenue streams.
