Vice President J.D. Vance has proposed directing funds from federal child-care subsidies to compensate married couples in which one parent stays home to raise their children. The plan would repurpose money that Congress already appropriates to help low-income families access child care. Regardless of one’s view on the objective—which could gain popularity—the proposal fails every standard we apply to government subsidies.
That is because it does not address any market failure. It remunerates people for choices they are already making. It adds a new class of beneficiaries to a budget that cannot sustain the commitments it already carries. And it does all of this without a credible plan to finance it.
Under a draft regulation circulating within the Department of Health and Human Services, a married couple where one partner works at least 35 hours weekly and the other remains at home would become eligible for the federal child-care subsidy—roughly $9,000 per child per year—as payment for “parent-based childcare.” The funds would derive from the Child Care and Development Fund (CCDF), a $12 billion block grant created in the 1990s to assist low-income families in paying for care while the working parent is employed or pursuing education.
Presently, the CCDF covers about 1.3 million children across around 870,000 families. Four out of five recipient families are headed by a single working parent, typically a mother. The new rule would add no new funding to the fund, would exclude unmarried couples, and would issue checks to households rather than to day-care providers.
Vance aims to address what he views as discrimination against stay-at-home parents, compensating for the income they forgo to care for their children and helping to sustain single-earner, married households. These are debatable goals, but none would be advanced by this proposal.
Let’s begin with the essential question: why should the federal government subsidize families at all, or intervene in how they organize parenting? Raising children is one of humanity’s oldest private activities. The state should not interfere.
If there is a justification for intervention, the standard one is market failure: the market underproduces something society desires—in this case, stay-at-home parents. Each family has its own finances, but there is no market failure preventing a married couple from choosing for one parent to stay at home.
Instead, we are told the problem lies in federal policies, including the CCDF, that subsidize work and, as a result, lead to fewer parents remaining at home than would otherwise be the case. The claim is that providing parents with a similar level of funds to stay at home would enable a parent to quit work without losing subsidies.
Yet for most single mothers benefiting from the current child-care subsidy, not working is not an option, and that $9,000 would not compensate for a lost paycheck. This means that the only people who would benefit are stay-at-home mothers who had already made their choice before government intervention, and those households capable of supporting one parent to stop working.
Cash-for-care programs in Norway and Finland, along with France’s extension of its parental education allowance to a second child in the 1990s, reduced maternal employment more substantially among educated women. In both Norway and France, the earnings losses endured by mothers persisted for several years after eligibility ended.
If Vance’s aim is to increase the number of children rather than reduce working mothers, the record is even less favorable. Pronatalist payments in Hungary, Poland, Japan, and South Korea have resulted in little beyond shifting the timing of births rather than boosting overall fertility.
There are also fiscal concerns. First, is it prudent to disincentivize work when the two largest programs driving our debt—Social Security and Medicare—are funded by working Americans? If entitlement reform is off the table, then paying people to stay home might be the wrong lever to pull.
Second, there already aren’t enough CCDF funds to serve all the parents who want day care subsidies. As noted, those single parents currently benefiting would not be able to quit their jobs. Expanding eligibility to married couples with one stay-at-home spouse would intensify the program’s strain, unless Congress provides more funding. With entitlement pressures and a deficit approaching six percent of GDP, how would this new federal program be financed?
The claim that subsidies like the CCDF discriminate against married couples is also weak. Our tax-and-transfer system already contains many asymmetries. Stay-at-home spouses receive half of their partner’s Social Security benefit, and all of it as a survivor benefit, without paying payroll taxes on their own earnings. Homeowners reap mortgage-interest deductions; renters do not. The appropriate response to an objection to a program is to shrink or eliminate it, not to create a parallel program for those who feel left out.
If the administration truly wants to assist families, it should remove the barriers that make raising children costly for all parents, regardless of their employment status.
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