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Reversing the Baby Bust

Why is it so hard to raise kids in America today? We keep choosing to have fewer and fewer of them—less than 1.8 per woman, down from 2.5 or so in the 1970s. Studies persistently find that parents are less happy than non-parents. The costs can’t help—raising a kid to age 18 will now run you more than $230,000, and that’s before the exorbitant expense of even the most budget-conscious of colleges.

These facts are by no means unique to the United States—fertility rates are dropping across developed countries with few exceptions, especially as the cost of education and other child-rearing requirements soar. Challenging child rearing might just be a fact of life in the high-skill, slow-life-strategy 21st century.

What is different is how well equipped the United States is to cope with these challenges. We spend less as a percentage of GDP on family benefits than any other OECD country besides Turkey. This reflects in part the United States’s historic—and justified—dependence on the family as a safety net. But now, as that institution struggles under the weight of new challenges, there is little support coming from the opposite direction.

Policymakers have started to take notice. A conversation is happening—on Capitol Hill, in think tanks, and even on Twitter—about what can be done to shore up American families. It can be heard on both sides of the aisle, as conservatives—who have at times preferred cutting taxes to funding families—take a second look at how the state might serve the institution on which it so long depended. Indeed, in a world after Donald Trump’s brand of blue-collar populism shook the nation, conservatives are now beginning to ask themselves: how might we build a more pro-family state?

The Kiddie Crisis

Today’s American families face three intersecting challenges. The first is exorbitant child-rearing costs, especially amid middle-class wage stagnation. The second is a child poverty rate, which, while down in recent years, remains well above the OECD norm. The third is the cratering fertility rate. None of these problems is prior to the other; rather, they interact to produce an America that is increasingly hostile to children.

American families used to have a lot of kids—in 1850, for example, the mean number was 3.3, and a quarter of families had five or more (today, the mean is 1.8 and less than 2 percent have more than five). In a more agrarian age, with a far smaller welfare state and higher child mortality, kids were a vital source of labor. They could work from a young age and continue to support a parent into his dotage, long before Social Security promised the same.

Times, technology, government, and child labor laws all changed. In modern times, Nobel Prize winning economist Gary Becker argued in a 1960 essay, kids are primarily a “source of psychic income or satisfaction” for their parents—a “consumption good”—and only “sometimes” a source of income—a “production good.” What productive value children now have, Becker notes, comes only after great time and investment in education. The result is that where parents once invested in quantity, having a lot of kids at relatively low cost, today they invest in “quality,” pouring more and more resources into fewer and fewer kids.

But have these investments grown too expensive? A recent survey from Merrill Lynch found that 63 percent of parents report having sacrificed their financial security for the sake of their children; 90 percent of new parents were surprised how much they spend. These impressions are reflected in hard numbers: the most recent data from the USDA indicate that raising a child through age 17 costs just over $233,000 dollars, an inflation-adjusted increase of 16 percent since 1960. That figure is expected to increase further, such that the lifetime cost of raising a child born in 2015 to a middle-class couple is expected to total $284,000 all said and done (and that’s before college!).

The plurality of these costs—29 percent—come from housing, but food (18 percent), transportation (15 percent), and childcare (16 percent) all play a role. This last factor is of particular importance to the 80 percent of dads and 60 percent of moms who are employed, especially when working moms predominate among the hard-pressed middle class. The left-leaning Economic Policy Institute has estimated that childcare costs exceed 10 percent of the median family’s income—the federal threshold for affordability—in every state in the union.

These prices take their toll: recent research based on the Eurobarometer survey confirms the traditional finding that ceteris paribus, parents are slightly less happy than childless couples, but also finds that those with kids are more happy once you control for anxiety about paying the bills. In other words, the inequality in happiness between couples with and without kids comes down to the economic inequality between them.

Kids don’t just make parents less happy—they also put them at risk for living in poverty. Even after modernizing its threshold and adjusting for transfers, the Census Bureau finds that 15.6 percent of kids lived in poverty as of 2017. That’s down, using the same measure, by about 13 percentage points from 50 years ago. But it’s higher than 27 other OECD countries, and still means that 3 to 5 percent of children live in “deep poverty,” below 50 percent of the poverty line.

Child poverty can indirectly affect adults too. Of the 28 million people in poverty with kids, fully half would not be below the poverty line if they did not have to bear the burden of childrearing. In other words, the crushing costs of childrearing are a major factor driving low-income Americans into poverty.

Even for those not living near the poverty line, the rising cost of childcare is linked to another growing challenge: fewer babies. The U.S. total fertility rate (the number of children born per woman 15 to 49, an estimate of the average number of children a woman can expect in her lifetime) hit its lowest point on record in 2018, about 1.73 children per woman.

The relationship between cost and fertility is complicated, mediated by innumerable cultural and personal factors. Still, it clearly plays a role—a much-cited New York Times survey found that cost was the number one reason young adults intended to have fewer kids than they wanted, and the third most common reason they are having no children in the first place. Factors like exorbitant rents are linked both to high childcare costs and to lower fertility, especially among younger women.

Declining fertility translates into worse outcomes, both socially and personally. A nation below replacement fertility (about 2.1 in the developed world) will face a shrinking workforce, surging support costs for a greying population, and a dearth of new, native-born talent. (Immigration, even at its current high levels, would need to more than quadruple to make up for falling births.) What is more, demographer Lyman Stone has shown a “desired fertility gap,” as surveys consistently find American women want more children than they are eventually able to have.

The family is the foundation of society, but that foundation is growing dangerously shaky. The sources of its instability—high costs, high poverty rates, low fertility—are things almost everyone, Left and Right, can agree are problems that need to be addressed. The question remains: what are we going to do about it?

What Is to Be Done?

With all of these challenges, it should be little surprise that politicians in Washington are starting to pay attention. Among Republicans, the loudest voice in favor of a family fix has been a perhaps surprising one: presidential advisor and first daughter Ivanka Trump. Trump is responsible for a portfolio of policies supporting working families, and front and center in that portfolio is an idea now commanding bipartisan support: paid family leave.

Under the Family and Medical Leave Act of 1993, Americans are entitled to up to three months of time off work following the birth or adoption of a child. But the United States remains the only one of 41 developed countries identified by the Pew Research Center to not provide some sort of income replacement in that time. In fact, the United States is one of just eight countries in the entire world to not require paid leave for new mothers, and the only developed nation on that list.

Instead, just 14 percent of U.S. workers—disproportionately the highly educated and skilled—have access to paid leave. Research shows that PFL is linked to better bonding and better child health in the vital first year of life; it also eases mothers’ transition back into the labor force.

Thanks in large part to the work of Ivanka and a number of pro-family Republicans, PFL is now acknowledged as a bipartisan goal—it’s the policy idea discussed here that’s most likely to make it into law in the next several years. But one big challenge stands in the way: how do we pay for it?

How you answer depends on which side of the aisle you’re on. After huddling with Trump, Republicans are working on competing proposals. Senator Marco Rubio’s and Representative Ann Wagner’s, first introduced last session and reintroduced in March, would allow individuals to pay for family leave by drawing on their Social Security benefits early for up to three months after birth or adoption, then “paying it back” by retiring an equivalent amount of time later or with a slightly smaller payment for the first five years. Senators Mike Lee’s and Joni Ernst’s CRADLE Act would use the same mechanism (although it would “charge” two months of retirement per month of paid leave, and would not, unlike Rubio’s bill, allow parents to draw on Social Security while still working). A third bill, from Senator Bill Cassidy, is expected in the near future.

Republicans like this model because it is budget-neutral and “voluntary,” i.e. not obliging childless workers to pay for those with children. This seems designed to placate fiscal hawks, who have long resisted PFL over cost concerns. But critics from the Left argue that this approach would “punish” families by forcing them to cut their retirement rather than forcing other Americans to fund children who will eventually benefit them.

Democrats have their own PFL proposal—the FAMILY Act, written by 2020 hopeful Senator Kirsten Gillibrand and Representative Rosa DeLauro. Like the Republican bills, it would partially replace income for up to three months after a birth; unlike the Republican bills, it would pay for the new benefit by increasing the payroll tax by 0.2 percent for employers and employees.

This seems like a boring question of revenue. But it also stands in for a bigger question, one which may prompt divides not only between the parties but within them: what is the proper role of government in relation to the family?

Many Democrats—especially those contending for their party’s presidential nomination—seem to think the state a capable replacement for family life. Both 2020 candidate Julian Castro and Democratic kingmaker Tom Steyer, for example, have supported universal pre-kindergarten. Senator Elizabeth Warren, meanwhile, has rolled out an ambitious universal daycare program, offsetting the exorbitant cost of early childcare with revenue from her proposed wealth tax.

Such proposals sound appealing, but the experimental evidence shows less than stellar results. Analysis from the Brookings Institution found no statistically significant association between state-level access to pre-K and later educational success, while Head Start’s cognitive benefits fade out after just a few years.

Universal daycare fares even worse: analysis of Quebec’s universal childcare guarantee found that while it did get moms back into the workforce, it also caused children to grow more anxious, lose out on social- and motor-skill development, and even commit crimes at increased rates. Even those labor-force gains are not unproblematic—as Warren herself argues in her bookThe Two-Income Trap, the general increase in mothers working has actually exacerbated middle-class families’ risk of bankruptcy.

These poor outcomes highlight the basic problem with the Democrats’ approach: where the state seeks to actively replace the family, it tends to do a pretty poor job. The challenge for conservatives is, as always, threading the needle: how can the government support parents and kids without crushing them beneath its weight?

Bigger Families Mean Bigger Thinking

Although they may be a big move for Congress, PFL and universal daycare are, ironically, baby steps. The former especially is a way for America to catch up with the rest of the world in pro-child policy-making. But, with the indicators as dire as they are, what if something bigger is needed?

Basically all developed countries spend more on family policy than the United States currently does. Although we already offer a bevy of transfer programs, many of these are targeted primarily at low-income families—meaning that their explicit goal is poverty alleviation, not strong support for families per se. What might a more comprehensive system of family support look like?

One answer comes from Matt Bruenig, a policy analyst who runs the crowd-funded People’s Policy Project. Bruenig is emphatically on the Left, but also a numbers guy, preoccupied with measuring and alleviating poverty regardless of ideological priors. That may be why he attracted attention, from both Left and Right, when in February he rolled out the quirkily named “Family Fun Pack,” a report which proposes a suite of policies that would be a corrective for what Bruenig sees as capitalism’s corrosive effects on the family.

Bruenig thinks that couples with kids are disadvantaged in two ways. Firstly, because kids earn no wages, a family will always be worse off, ceteris paribus, than a couple that makes the same amount without kids. Secondly, he identifies a mismatch between when Americans are most likely to have kids (their late 20s and early 30s) and when they hit their peak earnings potential (late 40s to early 50s). The result, he contends, is that families are unjustly penalized by an economic structure that rewards market productivity over homemaking.

To alleviate these concerns, Bruenig proposes a stable of policies drawn largely from Nordic social democracies’ family benefits packages. These start at birth with parental leave and a “baby box,” a government-provided box of newborn necessities which doubles as a bassinet. Then there’s free childcare—or a cash equivalent for stay-at-home parents—free pre-K, universal children’s health insurance coverage up through age 26, and a $3,600 per year per child payment on top.

If this sounds like a lot, that’s because it is; Bruenig’s policy predilections mean he doesn’t feel constrained by concerns about big government, or worry about the potentially corrosive effects that such an expansion would have on the family as an institution. As conservative family policy researcher Patrick T. Brown put it in an analysis of the FFP, “an expansion of federal power this broad would radically transform the state’s role into provider rather than preserver, and remake the relationship between families and the state.”

Still, the FFP should be instructive at least in terms of how much farther a pro-family state could conceivably go. If Bruenig’s envisioned Nordic socialism in America is one end of the spectrum, then being the bottom of the barrel among OECD countries is the other end.

So what about big policy ideas that don’t involve massive government programs, but do make the state put its money where its mouth is on family policy? There’s one approach that has currency among family policy wonks: give cash to parents.

Such a policy is usually called a “child benefit,” and already exists in countries around the world, from Australia to Finland. America already sort of has its own, in the form of the Child Tax Credit (CTC). Since the Tax Cuts and Jobs Act of 2017, parents can now deduct $2,000 per child from their annual tax bill, including $1,400 in partial refundability, assuming that the taxpayer made more than $2,500 in the past year. That may sound complicated, but what it means is that the CTC phases in, and does not benefit the poorest parents—those who are challenged by the poverty burden of having children, that is.

Most supporters of child benefits would do away with phase-in and income thresholds, simply giving a flat payment per child—either yearly or, if administered by the Social Security Administration, monthly—to parents. Such transfers, especially as a replacement for other forms of child-directed welfare, turn decision-making over to mom and dad, giving them liquid capital that they can best spend to suit their unique situations.

There are a number of different pictures of what a more comprehensive benefit might look like. The one with the most traction in Congress is the American Family Act (AFA), which would pay $3,600 annually per kid under six and $3,000 for kids ages six to 16. Other, more conservative approaches usually involve consolidating pre-existing programs to pay for benefits closer to $2,500.

Child benefits are perhaps most appealing because they are a direct route to lifting kids out of poverty—an analysis of the AFA by researchers at Columbia University estimates it would raise four million kids above the poverty line. Canada recently implemented its own payment: estimates indicate that it cut child poverty by 33 percent in just two years.

But child payments also have other benefits—research has linked them to increased test scores, lower abortion rates, and reduced family instability and conflict. It would also likely improve fertility—analysis published by the Institute for Family Studies argued that the AFA would lead to as many as half a million additional births, or about a 0.25 increase to the fertility rate.

The Pro-Family State

Some conservatives, especially those of a libertarian stripe, will doubtless blanch at all of these proposals as untoward government overreach. For decades, conservatives have articulated family policy in the universal language of the post-Reagan consensus: the state ought to get out of the family’s way.

To be sure, there are many burdensome regulations and tax penalties that need to be done away with. But the challenges that animate the current family policy conversation—the soaring cost of childcare, the high child poverty rate, and the equally low fertility rate—are not just a product of government intervention, but of the social and material realities of 21st-century life. What is more, the non-state institutions that might otherwise address these challenges are either decayed to decrepitude or—by dint of their leftist orientation—fundamentally hostile to the family per se.

There is a chicken-and-egg aspect to this: a weaker family leads to weaker civil society, and vice versa. As such, at the moment we most need to mobilize non-state institutions to support the family, those same institutions are themselves most in need of help. But the obverse is also true: policy which supports the family will, indirectly, enliven everything else.

This reality is what has led right-leaning governments in nations like Poland and Hungary to, in both word and deed, put the family at the center of their political agendas. Such a reorientation is not conservative in the laissez-faire sense; but it is conservative in the more fundamental sense of acknowledging the state’s essential subservience to and dependence on the family as the building block of society.

Some conservative lawmakers seem to agree. In announcing his proposal in March, Senator Rubio acknowledged that Republicans weren’t talking about PFL five years ago—now they are. Whether he and colleagues like Lee or Ernst would back a universal child payment of the sort embodied in the American Family Act remains to be seen.

But what is clear is that as conservatives reorient themselves in a world after Donald Trump, they are more open than ever to solutions which, while perhaps not conducive to bathtub-sized government, work to create a society which, in the long run, needs government less. The conservative tradition has long held the family in the highest esteem. Now, when it is clearly ailing, conservatives need to think in bigger, bolder ways than before in order to bring it back to health.  

Charles Fain Lehman is a staff writer for the Washington Free Beacon. He writes about policy, covering crime, law, drugs, immigrations, and social issues.

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