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Family Opportunity Guarantee
- 1. Family Opportunity Guarantee Introduction Sincethe 1980s, economic inequality in the United States has skyrocketed while social mobility has steadily declined. A Canadian child born to poor parents today has a 14 percent chance of becoming a top earner--twice the odds of an American child. New York’s 12th congressional district is one of the wealthiest but most unequal districts in America, with a higher Gini coefficient than Chile. In order to increase upward mobility and lay the foundation for a new 1 American Dream, we must provide our families with economic security and level the playing field by investing in our children. The current structure of our economy and government punishes families simply for having children, as parents have to choose between working and caregiving. This particularly hurts single mothers and low- and middle-income communities. Likewise, child poverty disproportionately affects Black and Hispanic children. Structural, reforms are needed to transform our economy in order to level the playing field for families, restore upward mobility, and create a new American Dream. The set of policies we propose is robust: it provides health insurance to every child; expands the supply, quality, and affordability of caregiving; invests in early childhood development and education; and provides families with a child dividend. This proposal also represents a major shift in budget priorities, as currently only 10% of the federal budget is spent on children. If the fundamental promise of America is that a child born into any family can reach her potential, policies that help families with children flourish are the necessary foundation. The Problems Using the Supplemental Poverty Measure (SPM), 15.67% or 12,242,411 children in the United States currently live in poverty. In New York, 18.95% or 3,221,842 children currently live in 2 poverty. Nationally, 41% of children can be considered low-income. Put bluntly, 4 in 10 3 children live in families that can barely afford to meet their basic needs. Even more appalling, nearly 300,000 children spent time in a homeless shelter in 2017, while a million were forced to move in with family and friends. The United States has one of the highest child poverty rates 4 amongst Organisation for Economic Co-Operation and Development (OECD) member 1 DePietro, 2018 2 SPM 3 SPM 4 CBPP
- 2. countries despite beingone of the richest countries in the world. This is absolutely 5 unacceptable. Moreover, a tightening labor market is not enough to solve this problem: over half of low-income children live with at least one parent who works full time. Economically, 6 child poverty costs the US $800 billion to $1.1 trillion every year due to higher crime, poor health outcomes, and lower income levels when poor kids grow up. But it is the human cost 7 that is really shameful. Poor children are less likely to have access to affordable quality health coverage, have more severe health problems, and fare worse than higher-income children with the same pre-existing conditions. A poor child with asthma is more likely to be reported in poor health, spend more days in bed, and have more hospital episodes than a high-income child with asthma. When children are exposed to violence, lack quality educational experiences, and are impoverished, it harms their development and dramatically decreases their prospects for future success. More than any other time in life, childhood poverty dramatically reduces a person’s chance to succeed. Indeed, 90% of a child’s brain develops in the first 5 years. It is crucial that our children are safe, financially secure, and crucially, 8 immersed in stimulating environments during this time period. Eliminating child poverty is not only an economic but a moral imperative. I. Child Care and Early Childhood Education Child care in the US is disproportionately expensive relative to its peers in the OECD--only child care in the UK costs more. Not coincidentally, our government spends a mere 0.6% of 9 GDP on support for children and families, a quarter of the OECD average and a sixth of global leaders like Sweden. 64 percent of Americans between the ages of 20 and 45 surveyed 10 recently cited the costs of child care as a factor preventing them from having the number of children they wanted. Alarmingly, infant care in 28 US states is more expensive than in-state college tuition. For poor families, finding affordable child care is even more of a challenge. On average, families living below the federal poverty line spend 3 of every 10 dollars of their income on child care. By contrast, families earning twice the poverty line spend about 7 percent on average. Costs like child care contribute substantially to poverty and inequality. 11 Nearly 40% of poor households would not be poor if they did not have children. When child care needs are taken care of, parents are more likely to be stably employed--helping grow the economy and offset the cost of child care policy. But most importantly, improving access to child care and pre-K education would ensure a fairer starting-point for poor children in America. For example, even simply reducing childhood hunger via such programs would improve reading and math proficiency and reduce the incidence of mental and physical health 5 OECD 6 NCCP 7 McLaughlin and Rank, 2018 8 CBPP 9 https://stats.oecd.org/Index.aspx?DataSetCode=NCC 10 https://data.oecd.org/socialexp/family-benefits-public-spending.htm 11 CBPP
- 3. problems later inlife, including obesity. Placing poor children in safe and stimulating 12 environments would also provide advantages often not found in the home. As a widely-cited study found, a three-year-old born to a poor family has a vocabulary of 500 words, half the size of her richer peers. Interacting with trained teachers as well as children from all backgrounds 13 would help reduce such inequalities. Inequality in early childhood persists through the life of a child: children who were poor for half of their childhood were nearly 90 percent more likely to enter their 20s without completing high school than children who never experienced poverty. 14 In fact, the US government provided universal child care before in its history; during WWII, a family could send a 2- to 5-year-old child to daycare for a mere $7 per day in today’s dollars, or $2,500 annually. Although the program ended after the war, recent work analyzing its impact showed both an increase in employment for women as well as an improvement in outcomes for children. Policies like nationwide pre-k and a public option for child care would go a long way 15 towards mitigating the large and persistent disadvantages poor children, and moreover poor adults, face in their search for the American Dream. II. Children’s Healthcare In 2018, 4 million children were uninsured in the United States. The Children’s Health Insurance Program (CHIP) was created in 1997 to provide federal matching funds to state governments for children’s health insurance. Nearly all low-income children are eligible for CHIP or Medicaid - the challenge is in enrolling eligible children and keeping them enrolled. Furthermore, CHIP, 16 along with Medicaid has been subject to budget cuts in red states like Tennessee and Texas. In 2018, 800,000 children lost health coverage from CHIP and Medicaid. Healthcare 17 expenditures for children are typically routine checkups and preventative medicine such as vaccines. States that did not expand Medicaid under the Affordable Care Act (ACA) have 18 nearly triple the uninsured rates compared to those that did expand under the ACA. Health 19 insurance expenditures are an enormous cost to parents; removing this expenditure can dramatically reduce poverty and increase disposable income for families across income brackets. III. Family and Medical Leave US workers can currently take 12 weeks of leave for family or medical purposes under the Family and Medical Leave Act, however, the leave is unpaid. This forces many workers to 20 12 Nord, 2009 13 Heckman, p. 25 14 Edelman, 2014 15 Cohen, 2015 16 Galewitz, 2018 17 Medlock and McAuliffe, 2019 18 Medlock and McAuliffe, 2019 19 Galewitz, 2018 20 DOL
- 4. make a choice:forego wages or forego time spent with a newborn or addressing a medical concern. The harsh reality is that many workers in the US lack the economic security to take unpaid leave. Mothers can’t return to work immediately after having a baby meaning they lose income. Many choose to return to work earlier than they prefer, giving up time they would spend raising and nurturing a newborn. This also affects fathers, who are often forced to not take any time off and potentially work overtime in order to secure more wages while the mother is on maternity leave. The US is the only advanced economy in the world to not offer paid family and medical leave. Only 17% of workers have paid family and medical leave. 21 22 Only 39% of workers have short term disability coverage. Low wage workers are less likely to 23 have paid leave. IV. In-Kind Transfers In-kind benefits often fail to meet the unique needs of individuals and families. Cash is fungible and can be exchanged for whatever goods or services are needed. 63 percent of families in the United States do not have the money needed to cover a $500 dollar emergency. Moreover, 24 in-kind benefits have a high administrative burden - they often cost more to deliver than cash transfers. Our current system of in-kind benefits is paternalistic in nature and causes rent-seeking by third parties who benefit off of these programs. For example, The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) comes with stringent requirements. Consider the requirements for purchasing breakfast cereals with WIC: 25 ● Must contain a minimum of 28 milligrams of Iron per 100 grams of dry cereal (e.g., iron = 45% U.S. RDA for adults per 1 ounce dry cereal). ● Must contain no more than 21.2 grams of sucrose and other sugars per 100 grams of dry cereal (i.e., not more than 6 grams of sucrose and other sugars per 1 dry ounce). ● At least one half of the total number of breakfast cereals on a state agency’s authorized food list must have whole grain as the primary ingredient by weight AND meet FDA labeling requirements for making a health claim* as a "whole grain food with moderate fat content.” Mothers who are using WIC in New York cannot buy reduced fat milk, flavored yogurt, canned baked beans, or peanut butter with added minerals like heart healthy Omega-3 fatty acids. 26 Misusing benefits like SNAP and WIC could result in benefits being taken away, hefty fines, and even jail time. The process to apply for these benefits is time consuming and confusing. The 27 rules and regulations on what one is allowed to purchase are also confusing and stringent, 21 Livingston and Thomas, 2019 22 BLS 23 BLS 24 McGrath, 2016 25 USDA 26 NYS Department of Health 27 FAS
- 5. discouraging individuals whoare eligible for these in-kind benefits from actually applying for and using them. For example, a third of poor children did not receive SNAP benefits in 2016 even though they were eligible. As the recent actions of this Administration prove, targeted 28 in-kind benefits are also vulnerable to cuts by politicians. Unconditional cash transfers are superior to in-kind transfers. V. Work Requirements, Phase-Ins, and Phase-Outs Work requirements don’t work. They increase costs, reduce flexibility, and increase the stigma associated with welfare recipients. Additionally, work requirements don’t actually increase 29 employment. The closest semblances of a child allowance in the United States are the Child Tax Credit (CTC), Earned Income Tax Credit (EITC), and Child and Dependent Care Tax Credit (CDCTC). All of these benefits are phased in, meaning the beneficiary must have a minimum income to receive them. Many individuals living in poverty do not earn an income for various 30 reasons, so the current structure often ignores the needs of the most impoverished. Furthermore, these tax credits are paid out once a year and only the EITC is fully refundable, meaning that if the credit is greater than the amount of taxes owed, the difference is paid as a refund. The CTC is only partially refundable. Finally, these credits are paid out once a year 31 32 as opposed to monthly. This particularly harms families living on tight budgets who would greatly benefit from additional monthly income to cover expenses such as housing and groceries. These tax credits also phase-out as income increases. The biggest unintended consequence of phase outs is when individuals start to forego income to keep their benefits or choose to work off of the books. Moreover, phase-outs do not account for the cost of living, harming individuals from expensive cities such as New York and San Francisco the most. The Solutions ● Universal Child Dividend: ○ $500 per child per month ages 0-5; $350 per child per month ages 6-17 A universal child dividend would eliminate the hoops that individuals have to jump through to receive benefits, reduce administrative burden, and allow families and individuals to make purchases that are best for their unique needs. The universality of the child dividend eliminates the stigma of the program, eliminates welfare cliffs, and reduces the likelihood of being subject to budgetary cuts. Moreover, the unconditionality of the dividend eliminates captured rents by third parties such as the agricultural industry, who currently benefit from recipients of programs SNAP and WIC being forced to only purchase specific items. The Universal Child Dividend would consolidate tax credits and exemptions such as the CTC, CDCTC, parts of the 28 NCCP 29 Neuert, et. al, 2019 30 Maag, 2018 31 TPC 32 TPC
- 6. EITC, and thedependent exemption. The dividend would not replace SNAP or WIC but we anticipate that families will no longer need these programs over time. USA Pre-Dividend Post-Dividend Children living in Poverty 12,243,411 4,884,650 Child Poverty Rate 15.7% 6.3% New York Pre-Dividend Post-Dividend Children living in Poverty 892,080 426,704 Child Poverty Rate 20.3% 9.8% USA Pre-Dividend Post-Dividend Population living in Poverty 41,302,246 30,515,432 Asian 2,678,526 2,237,596 Black 8,110,133 5,358,108 Hispanic 1,278,712 797,770 Mixed & Other 1,458,012 985,757 White (Non-Hispanic) 16,876,863 14,136,200 NEW YORK Pre-Dividend Post-Dividend Population living in Poverty 2,720,576 2,212,411 Asian 489,312 387,788 Black 536,269 376,646 Hispanic 789,199 653,395
- 7. Mixed & Other 36,923 21,016 White (Non-Hispanic) 868,871 773,563 Analysis above provided by Samuel Hammond and Robert Orr of the Niskanen Center ● National Pre-K ○ Establish a federal-state partnership for states to establish preschools for every 3 and 4 year old in the country. ● Public Option for Child care ○ Establish a federal-state partnership to create a robust public option for child care. ● Medicare-for-Kids ○ Enrolling every child in Medicare would cover an additional 4 million children with health insurance and put us on the fastest track to achieving full universal coverage. ● Paid Family and Medical Leave ○ Provide 12 weeks of paid leave so workers can spend time to recover from illness, bond with their baby, or care for a sick family member without having to forgo all of their wages. Conclusion For far too long, children have been left out of public policy and families have been sold out to corporate interests. Programs targeted at children generally pay for themselves or even have a positive return on investment. For every dollar spent on addressing programs tailored towards children, $7 dollars is saved down the line. Our child poverty rate is a moral disgrace and an economic drag. Ending child poverty is not hard - the policy prescriptions here will put us on the path to eradicating child poverty, politics allowing. The Universal Child Dividend alone can slash our childhood poverty in half in just one year, while Medicare-for-kids, nationwide pre-k, a public option for child care, and paid family and medical leave provide our economy and society with much needed structural reforms to address child poverty and the economic security of American families. Eradicating child poverty and increasing economic security for families is a moral imperative that will result in increased economic growth, decreased economic inequality, and increased social mobility. References Bureau of Labor Statistics, www.bls.gov/ncs/ebs/benefits/2018/ownership/civilian/table32a.htm. Cohen, R. (2015, November 18). Who Took Care of Rosie the Riveter's Kids. The Atlantic. Retrieved from
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