The Child Tax Credit deal is great, but it’s not a solution to the childcare crisis

Amid bitter cold and bitter division, a surprising bloom has appeared: the possibility of a bipartisan deal that would help America’s children and families. While imperfect, the proposed expansion of the Child Tax Credit would help stabilize hardworking families and lift hundreds of thousands of children out of poverty. Given current political conditions, that’s a win. But while the deal is to be applauded, it’s important that policymakers and the public understand a simple fact: child tax credits are not a childcare policy, and this deal does nothing to change the need for major Congressional action on childcare.

What the child tax credit is and isn’t

The logic behind a child tax credit, which is one form of what scholars consider a child allowance or child benefit, is simple. Bringing children into the world increases a family’s budgetary expenses—food, clothes, toys—without increasing their income. This is what Matt Bruenig, founder of the left-leaning People’s Policy Project, calls the “mere addition problem,” explaining that “because income is paid out to the factors of production without any regard for its final family-level distribution, families with children wind up in dramatically worse financial circumstances than families without children, even when the families are otherwise identical.”

Since societies benefit from healthy children and families, governments commonly pay out some form of child benefit to help families deal with these general child-rearing costs. Over 100 countries have some form of cash benefit for families.

The childcare policy America needs

Childcare policy, on the other hand, exists to ensure that families have access to regular, high-quality caregiving for their children that lets the family—and, in turn, communities—thrive. This is needed most commonly while all available parents are working, but childcare policy can also support stay-at-home parents. 

Related: U.S. families are spending 24% of their annual income on childcare

External childcare, such as center-based care, is a (rightly) expensive service to provide mainly because of (importantly) low adult-to-child ratios. Personnel frequently takes up 70% or more of a program’s budget. As a result, even though programs charge parents an arm and a leg, they must pay educators a pittance and many have trouble keeping the lights on. The only solution—the one America has no problem implementing in other socially beneficial but high-labor areas like public education and fire departments—is robust public funding that takes the burden off the individual.

Why we need both child tax child tax credit and a childcare policy

Thus, treating the Child Tax Credit (CTC) as a childcare policy is ineffective on both counts. Forcing parents to use the CTC to defray massive childcare costs means they can’t use it for general essentials like food and clothing. And, since the CTC amount is not nearly enough to fund a sustainable, high-quality childcare system that gives parents the options they deserve, it fails utterly as a childcare intervention. (“just give parents money” might be a different conversation if the CTC was a fully refundable $15,000 or more per child, but that’s not reality.)

This is why most high-income nations have both a child allowance and a publicly funded childcare system. In Canada, for instance, the country has been rolling out a nationwide “$10 a day” childcare system backed by billions in federal funds. At the same time, Canada has had a form of child allowance since 1945, currently consolidated as the Canada Child Benefit, which (depending on income) can be worth over U.S.$5,000 per child. Similarly, France has one of the better-regarded childcare systems in the world, yet also provides families with a series of child benefits. Child benefits and childcare are simply two distinct areas of family policy.

So while Congress should be cheered if they can get the CTC expansion over the finish line, their work is not done. As childcare programs continue to struggle from major staffing shortages and the expiration of pandemic-era stabilization grants, there is still a desperate need for Congress to pass the $16 billion requested for a domestic supplemental bill. Families do not experience needs in a vacuum: they deserve support that allows them to keep food on the table when there’s another mouth to feed, and they deserve a childcare system that allows them to find the care they want and need to flourish.