The Texas Public Policy Foundation’s Chief Economist Vance Ginn and economist E.J. Antoni break down the massive spending proposals in President Biden’s recent address to Congress.
$225 billion toward high-quality childcare and ensuring families pay only a portion of their income toward child-care services, based on a sliding scale
Raising taxes from one pocket to put money in the other is just shuffling dollars. The subsidies will also increase the overall cost of child care for those who need it.
$225 billion to create a national comprehensive paid family and medical leave program
Americans should be free to negotiate compensation packages like paid leave as they see fit; it shouldn’t be dictated by a bureaucrat. The consequence of a government-mandated paid family and medical leave will be lower wages and less opportunities for those with less skill and experience.
$200 billion for free universal preschool for all 3- and 4-year-olds, offered through a national partnership with states
Parents want valuable schooling options for their kids, especially during critical years of early development, not rhetorical fallacies that something is free. Instead of creating another spendthrift program with a profligate bureaucracy behind it that will reduce the quality of preschool like government has to K-12 education, government should focus on removing imposed barriers of high taxes and marriage penalties that reduce parents’ resources to meet their child’s unique needs.
$109 billion toward ensuring two years of free community college for all students
College, including community college, is not always the right fit. Some people enter trade or technical schools or begin their careers right after high school. This is especially true among those with lower lifetime earnings. “Free” college programs just take tax money from those with lower earnings to pay for the tuition of those who will likely have higher potential lifetime earnings. Government-guaranteed funding for higher education will also further inflate costs and reduce quality as things are rationed without market prices.
About $85 billion toward Pell Grants, and increasing the maximum award by about $1,400 for low-income students
Pell Grants, like many subsidies for higher education, benefit school administrators more than students. As subsidies increase, so does tuition, and so do administrative costs. Students eligible for Pell Grants often take out student loans to cover the remainder of their education expenses and they graduate with heavy debt burdens. To help make higher education more affordable, government should remove demand subsidies and supply restrictions, forcing schools to compete for students by slimming down their bloated administrative departments and by increasing access to lower tuition.
A $62 billion grant program to increase college retention and completion rates
There is no evidence that a lack of funding is causing retention problems at colleges and universities. There is, however, substantial evidence that low-quality government-run primary and secondary schools have failed to provide students with the knowledge and skills to succeed at the college level. The solution is not more government spending, but more educational choice throughout the education system.
A $39 billion program that gives two years of subsidized tuition for students from families earning less than $125,000 enrolled in a four-year historically Black college or university, tribal college or university, or minority-serving institution
Subsidies in higher education is what’s leading to the rapid increases in tuition, so doubling down on that is poor policy rather than finding ways to increase competition and lower prices while improving quality.
$45 billion toward meeting child nutritional needs, including by expanding access to the summer EBT program, which helps some low-income families with children buy food outside the school year
This is another government program that is fraught with waste and inefficiency. We would do better to lift burdensome regulations and taxes off the backs of small business, stimulating development, investment, and job growth. A parent with a well-paying job can afford to feed his or her own children.
$200 billion to make permanent the $1.9 trillion COVID-19 stimulus plan’s provision lowering health insurance premiums for those who buy coverage on their own
This sounds like a subsidy for those buying health insurance, but it is actually a subsidy for the insurance companies. After the implementation of the Affordable Care Act, which would supposedly reign in profits of the insurance companies, those profits reached record highs. People want more choices for healthcare, not handouts to insurance companies.
Extending through 2025, and making permanently fully refundable, the child tax credit expansion that was included in the COVID-19 relief bill
As Ronald Reagan said, nothing is so close to eternity as a temporary government program. The justification for transitory COVID-19 relief was the pandemic, which is now far past its peak as we approach herd immunity. There is no reason to continue these temporary relief measures going forward.
Making permanent the recent expansion of the child and dependent care tax credit
These tax credits are accomplishing the opposite of the bipartisan welfare reforms of the 1990s. Instead of rewarding work, they reward idleness. These government handouts will serve to trap people in a cycle of poverty and dependency.
Making permanent the earned income tax credit for childless workers
This is another example of a government program taking on a life of its own. The American Rescue Plan Act (ARPA) tripled the credit and gave benefits to childless workers that were previously reserved to working parents. The justification for this ill-conceived measure was the temporary hardship from government-imposed lockdowns; there is no reason to make them permanent but rather open their economies so people can find jobs and prosper. The effect of these government handouts is to keep people in low-wage jobs because the tax credit is quickly phased out as income rises. Once again, these programs cause dependency on government instead of letting people prosper.
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Vance Ginn, Ph.D.