Why focusing on the price of the reconciliation bill is a bad idea, in four examples
If there’s one thing we know about the budget reconciliation bill that the Biden administration and the Congressional Democrats aim to pass, it’s that it costs $ 3.5 trillion. Or, according to its supporters, it’s free, that is, because they define “cost” as meaning the net effect on the national debt. (President Biden himself tweeted, “My rebuilding program costs zero dollars. Or, according to its critics, that works out to $ 5.5 trillion over 10 years when honestly calculated based on real 10 years of spending, because various gadgets artificially underestimate spending. Either way, House Democrats are calling for a quick vote on a bill that has yet to receive a CBO score, so neither the American public nor, quite frankly, its supporters know the true cost of this plan.
But the provisions of the bill are presented, time and again, as a mass of undifferentiated spending, characterized simply as various ways of improving the well-being of Americans, the only real question under debate being whether this will amount to more than badly than good because of the impact on debt, on inflation and on the economy in general.
It is a mistake.
Earlier this week, I outlined a new mandate for employers to provide pension plans or arrange for IRA payroll deductions, applicable even to all employers, with as few as 5 employees. . How exactly does it work, whether these employers will struggle to abide by the new rules, how successfully the new bureaucracy is managing to guide employers and employees to the IRAs that work for them – no one knows, and if the project law is passed, all of this being in the hands of a government agency responsible for interpreting the law by making rules.
Last week I explained the family leave plan in the reconciliation bill – a plan that, unlike any reasonable social insurance proposition, is either deficit-funded or tax-funded of the rich.
And let’s not forget the Biden Medicare dental plan, in which – totally ignoring the fact that the Medicare Part A trust fund is set to become insolvent in 5 years – the administration plans to add a new benefit for dental, vision and hearing. , and, what’s more, unlike Parts B and D for medical services and drugs, plans to do so without even the modest cost compensation of charging 25% of costs as participant premiums.
But here’s another part of the monster bill that over and over again only gets a bullet in the report that now focuses on the overall price and degree of deficit spending: a subsidized child care program. (See the Committee’s Reconciliation Tracker for a Responsible Federal Budget for links to the texts of bills, including this one.
It seems trivial: no middle-class family will pay more than 7% of the salary for childcare expenses. But behind this statement lies a massive agenda that has not come under scrutiny.
Consider, in contrast, the design of the Affordable Care Act – below a given income cap, individuals received income-based grants based on a plan design template, and they could research the plan that best suited their needs and pay more. for a more generous plan design, a larger network, or an insurance company they believed to provide better customer service, or pay less for a plan with a lower price for these reasons and pocket the difference.
There is no such thing as the child care subsidy. Instead, each state will calculate a “cost of child care” based solely on levels for the differences in quality. Then, each participating daycare will accept these vouchers and the parental contribution as full payment; they can’t charge more for better services, nor can they charge less and save families the difference. And those costs are expected to be much higher than the cost of child care today; on the one hand, the bill calls for a “sufficient salary” and a “living wage” as well as a salary “equivalent to the salary of primary school educators with similar qualifications and experience”. These kinds of “costing models” already exist; to take an example, in 2019, the state of illinois contracted with researchers at northern illinois university, who calculated that by adding higher salaries, more staff, and more specialist staff, in In a daycare center, for “high quality” centers, child care would cost $ 31,827 per year in the Chicago metro area and $ 28,996 in the rest of the state. Even a family / home daycare has been determined to cost $ 22,460 in the Chicago area and $ 19,960 elsewhere. For comparison, the state of Illinois, when it currently provides subsidies to poor families for child care, pays a maximum of $ 12,602 per year for infants, more than doubling the cost.
These are incredibly high numbers – and even at these rates, families with less than 75% of median state income adjusted for family size would pay nothing, rising to 2% to 100% of median income, 4 % to 125%, 7% to 150%, and a very clear cut that at 200% of the median income, families go from a fixed share of 7% to full coverage of the cost of daycare at rates that will have exploded because of the new calculations of the “cost” for government subsidies. (Note that the “median income adjusted for family size” is an artificial construction which takes the true median income and adds an adjustment to the cost of living, since, of course, in the real world the number of children that you have does not actually affect your salary.) How will this impact education decisions for children from below-median families who would otherwise have had a parent chosen to stay home or work part-time, or high-income families who suddenly find childcare is more affordable, so can they find a nanny?
And that’s not even the worst part of this bill: The worst part is that, as it is written, the subsidies are phased in, covering families up to 100% of the median income in 2022, rising to 200% in 2025. And then, in 2028, it all ends. This is nonsense, of course – the Democrats drafting this bill have no intention of ending the subsidies after 2027; they simply set this threshold in order to claim a “10-year cost” much lower than what is actually the case, relying on public pressure to extend the program after its implementation and the public is finding out that in indeed, it was written as a temporary program.
Absolutely none of these programs should be passed through a reconciliation bill. Covering dental treatments in Medicare can be helpful, but not without addressing larger Medicare funding issues. There is broad support for creating a family leave program, but it is crucial that it is a genuine social insurance program. Expanding workers’ access to retirement savings has been the subject of long discussions, but bipartite proposals abound. The creation of a child care subsidy that looks set to create a one-stop-shop, with unintended consequences in spades, could do far more harm than good. I suspect that if I delved into other elements of the bill I would find even more details like this, all passed without the American public, and perhaps even Congress itself, knowing the first thing to do. their subject, because the sum total of the discussion is about the price.
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