The Biden administration recently released its 2022 budget proposal, which includes key pieces of the president’s American Families Plan. The Families Plan is a set of far-reaching proposals, billed as investing in American children and families through a $1.8 trillion package of new and expanded federal subsidies for everything from childcare to postsecondary education.
For the past several years, the Joint Economic Committee’s Social Capital Project has documented trends and proposed policy solutions to address many of the same cultural and economic forces that animate the Families Plan. While the Social Capital Project may agree on some of the issues, our solutions for increasing family stability and affordability, and improving effective investments in youth and young adults, diverge from the Families Plan.
The Families Plan would expand federal involvement in youth education by funding universal preschool for three- and four-year olds, two years of community college, and other new programs to cover the cost of college. The plan would cap lower-income families’ child care expenses and fully subsidize care “for the most hard-pressed families.” It creates a federal family and medical leave program that would guarantee three months of paid leave of up to $4,000 per month.
The plan would make permanent some of the American Rescue Plan’s temporarily larger tax credits. It would make permanent the temporary Child Tax Credit expansion from $2,000 to $3,000 per child ($3,600 per child under six) and make the credit fully refundable for qualifying parents, eliminating the previous work requirement. It would also make permanent the expansion of the Child and Dependent Care Tax Credit and solidify the roughly tripled maximum Earned Income Tax Credit benefit for childless workers.
In a report outlining the Social Capital Project’s areas of focus, we observed that any policy agenda must confront two important constraints: “the inadvisability of government intervention in many cases, and its frequent incompetence.” Each of the Administration’s proposals reaches too readily for federal subsidies and intervention. Instead, focusing on a renewed sense of connectedness, building stable, happy families, and promoting effective youth-education will likely require local solutions, local institutions, and less—rather than more—federal involvement.
Much of the Social Capital Project’s work has focused on developing policy proposals to advance the goals of making it more affordable to raise a family, increasing the number of children raised by happily married parents, and improving the effectiveness of investments in youth and young adults.
A few of these proposals include:
- Increase educational pluralism through multiple avenues, including broadening access to education savings accounts, 529 plans, tax credits, and vouchers for alternative education options, increasing local control over school policies—instead of increasing federal involvement—and safeguarding private religious schools and homeschooling.
- Create universal savings accounts (USAs) for after-tax contributions. USAs would provide a flexible and accessible option for families to invest and build wealth, improving their ability to support their families as they see fit.
- Repurpose the permanent Child and Dependent Care Tax Credit as a $1,500 supplement to the Child Tax Credit for young children ages zero to five. The current credit is biased toward the preferences of dual-earner and high-income families who tend to use formal childcare. Expanding the credit, as proposed by the Families Plan, would make the lopsided preference worse.
- Reform residential zoning restrictions to improving access to educational opportunity. Minimizing zoning restrictions can increase student access to high-quality public schools and improve housing affordability for families with children.
- Make permanent or expand the limitation on housing-related itemized deductions, such as the mortgage interest deduction, enacted as part of the 2017 tax cuts. A permanent limit would especially benefit younger families by slowing the growth of home prices and making home-ownership more attainable for young, growing families who generally have less savings.
- Promote family stability through public or private programs that can amplify messages to advance the goal of stable home life and teach the tools necessary for healthy, long-lasting relationships. Children raised by married parents in stable families do better on a wide array of social and economic outcomes.
- Remove disincentives to marry in income and work requirements across all safety net programs. The U.S. safety net consists of programs providing cash, food, housing, medical care, and social services to low-income Americans and nearly all of them contain marriage penalties, or incentives that deter marriage.
The Social Capital Project’s research and policy proposals seek first to identify the underlying drivers of trends affecting family stability, family affordability, and education, and then propose well-tailored solutions. Our policies prioritize removing or reforming current government policies that may cause affordability issues or poor educational outcomes, as in the case of housing itemized deductions or restrictive school and residential zoning. We also prioritize flexibility for American families by proposing policies that allow for more personal choice, such as reforming the tax code so that tax credits for families are not biased in favor of center-based professional child care and against in-home or less formal care arrangements.
In many cases, the Biden administration’s approach does not seek to address the underlying issues and instead proposes a temporary fix that includes expanding federal involvement. The desire to provide greater financial support to current and future generations must be balanced against the perverse incentives and negative long-term consequences of expanded federal subsidies without offsetting reforms.
In the coming months, the Social Capital Project will continue to produce research and policy proposals that dig deeper into issues of higher education and family formation, the importance of connecting more people to work, specific safety net reforms, and other topics of interest to those seeking to improve the health and wellbeing of American families.