It's very expensive to raise a child in the US.
I knew it was going to be expensive, but I didn't know
it was going to be that expensive.
The free market works well in many different sectors,
but child care is not one of them.
Sending an infant to daycare in many places
across the country is actually more expensive than
in-state public tuition to send them to college.
When we looked it up, it turned out our daughter's
daycare was more than Stanford's tuition.
We didn't really start to dig into it until we had a
baby and I was on maternity leave.
And then the numbers really started to hit home and it
was like, how are we going to do this?
Many Americans are struggling to make ends
meet. More than 12.5 million children in the U.S.
live in poverty. Even middle-class families are
increasingly struggling to pay for everyday expenses.
We stopped saving any money altogether.
We were living paycheck to paycheck every month to pay
rent in the Bay Area and pay for child care.
In this country, we don't have comprehensive policies
and so that means we are working with piecemeal
programs to try to help people make ends meet.
I think the United States has just been very
reluctant, very conservative, when it comes
to these kind of family policies.
Improving the social safety net, lowering the overall
cost of raising children in this country is both the
right thing to do for American families and the
smart thing to do for our entire American economy.
The fundamental issue is not that we don't know what to
do. We know the children need stability.
The way to get to stability is making sure families have
sufficient resources and sufficient time.
If we know what to do, how do we pay for it?
Here's why it's so expensive to raise kids in the U.S.
and which policies could help Americans.
My name is Jeniece.
I am a mother of two children, a four-year-old
and a two-year-old.
And we live right outside San Francisco.
I'm Darren Geeter. I'm a producer for CNBC and
recently just had my first kid, my daughter Alma.
Basically, I've been on paternity leave for the last
eight weeks, so I'm halfway through.
Everything is very expensive in New Jersey.
People always warn you there's going to be a ton of
stuff that you need to buy for the baby, whether it
comes with diapers or wipes.
And we didn't necessarily understand how much we have
to buy.
If we had had two kids in full time daycare, it would
have been a lot more than rent.
So that's why it just absolutely wasn't an option.
And when we looked at the numbers for full-time
nannies in the San Francisco area, they all
charge about 80 grand a year.
We don't have concrete plans of what we're going to do
with child care because we know that child care can
range anywhere from $1,000 a month or some where it
could be like paying a double rent.
The average family with at least one child under the
age of five typically spends around 13% of the
family's income on child care, according to a
September 2021 Treasury Department report.
That's about one out of every $8.
That's more than what the average household spends on
groceries and nearly double what the government
considers affordable for low-income families.
Even before the COVID-19 pandemic, the median black
family with two kids was spending roughly 56% of
their annual income on child care, a bigger share
than any other racial group.
And of course, we know during COVID, for all
families, child care centers, school closures
were forcing parents to pay for child care in ways that
they never had had to before.
For over 20 years, the Economic Policy Institute
has produced something called the Family Budget
Calculator. And in that, we look at basic expenses
across the country: housing, child care if you
have kids, healthcare, transportation, food, other
incidentals, like household items, and your taxes.
One of the things we noticed when we were doing
this about four or five years ago is that child care
became more expensive than rent in many places across
the country.
The most recent report released by the Department
of Agriculture in 2015 estimated that for a
middle-income household with two parents and two
children, it would cost more than $233,600 to raise
a child from birth through age 17.
And that's in 2015 dollars.
With inflation, that number translates to almost
$286,000 in 2022.
The report calculated it would cost the hypothetical
family of four anywhere from $9,330 to $23,380 per
child in one year.
This range depends on the age of the child and income
of the parents. Adjusting for inflation, that range in
2022 would be between about $11,400 and $28,600.
But adjusting for inflation may not be enough.
Child care costs have actually outpaced inflation.
Child care prices surpassed annual inflation by nearly
4 percentage points in 2020, and that was before
the worst of the pandemic inflation woes.
And that data is based on middle-class, two-parent
households. Just think about what that cost looks
like when we're talking about single parents, or if
we're talking about families of color on the
struggling end of the racial wealth gap in this
country.
I'd say we're middle class for the area we're living
in. I actually am not sure how some people get by
living in the Bay Area that make less than my husband
and I do. We cannot wait until next year because one
of our children is going to public school next year and
we might finally be able to start saving some money
again.
Families that are right on the poverty line on average,
if they're white in this country, have $18,000 of net
worth. Families at the poverty line, if they're
black in this country, on average have at or below $0
in net worth. Just think about what that $18,000
difference means to parents when their second-grader
falls off the monkey bars and they're facing
unanticipated medical costs.
Policymakers acted very swiftly in the pandemic and
enacted policies that had tangible positive results
for workers and their families.
We do a lot of family supports through the tax
code, and the most prominent example here is
something called the Child Tax Credit.
The Child Tax Credit allows parents to deduct a certain
amount of money from their taxes at the end of each
year. That amount depends on several factors:
household income, how many children someone has, and
the age of the children.
The Child Tax Credit, enacted in 1997 with broad
bipartisan support, was enacted in response to slow
wage growth, higher cost of living, and a growing tax
burden for average households. It was enacted
to help reduce the tax burden on families with
children. To help reduce the cost of raising kids.
Congress temporarily expanded the policy during
the pandemic.
Bill, as amended, is passed.
The tax credit was raised to $3,000 a year for children
between six and 17 years old and jumped to $3,600 a
year for children five and under.
And for at least half of the year it was paid out
monthly. So both a kind of substantial boost in value
and this monthly payment.
So you're not waiting till the end of when you file
taxes the next year to get it.
And that provided a solid safety net to try to help
families really make ends meet during those tough
times. And it helped reduce hunger in families, very
tangible results of those kinds of programs.
In 2021 alone, the expanded Child Tax Credit was
estimated to lift 4.1 million children above the
poverty line and to reduce the number of children in
poverty by more than 40%.
People who have children, you know, that's work that
families are doing and it's work that they're doing on
behalf of all of us.
So this is a way to try to support families doing that
work that allows them to choose for themselves how
best to spend the money to invest in their children.
The pandemic's expanded legislation expired in 2021.
As of 2022, the tax credit is back to its pre-pandemic
levels, which maxes out at $2,000 per child with the
parents of younger children receiving a larger subsidy.
It's kind of a way to subsidize or support
parents, but it typically has not included very low
income parents. We've excluded parents who don't
have earnings, parents with disabilities or, for other
reasons that aren't in the labor force.
From the time it was enacted until last year's temporary
expansion, the Child Tax Credit was actually not made
available in full to 50% of black children and families
because their family's income were too low.
It's important to me, I think, that we have a Child
Tax Credit that is not connected to a work
requirement. To me, the Child Tax Credit is paying
for the work of being a parent, which is work that
benefits us all.
To attach additional work requirements to that, sort
of undermines this intent of helping families in a way
that makes sense for them.
There are two other policies that economists and other
experts advocate for when it comes to helping
families: subsidized child care and paid family leave.
These policies go hand in hand because paid family
leave means parents can stay home and take care of
their children themselves.
The U.S. is the only OECD country that does not have a
federal paid leave program.
Less than a quarter of U.S.
workers have access to paid family leave by their
employer.
There is a law on the books at the federal level that
requires employers to allow parents to take unpaid leave
up to 12 weeks as long as the private employer has 50
or more employees.
When it's unpaid, it's not really an option.
It's not really a choice that many families can take
across this country.
And it's not just low-income families.
There are many middle-income families that
are living paycheck to paycheck that simply can't
afford to take leave how it is now.
What we see is that black families, Latino families,
Native American families, workers are less likely to
be able to afford unpaid leave from work than white
workers, again reflecting and enhancing racial
economic disparities across the board.
There are some states and localities that have passed
paid family and medical leave, and that provides for
paid parental leave as one component of that, to make
sure that workers actually have the option to take that
leave.
Each state with paid family and medical leave sets its
laws up differently. But typically, the law requires
employers to provide workers with up to 12 weeks
of fully or partially paid leave per year.
The programs are often funded by payroll taxes from
workers, with some states also requiring employers to
contribute.
Paternity leave, for me, was 16 weeks and that's full
100% salary.
I wouldn't be able to do what we're doing without any
kind of leave.
One of the issues with childcare in the U.S.
is it's a patchwork system.
We have programs that fully subsidize for eligible
children at child care programs like Head Start and
some state preschool.
We have tax credits that subsidize a portion of child
care costs for higher income families.
And when we also have block grants to states to help
them expand access.
And the problem with all of these systems is that with
this multitude of approaches, we're not
getting close to universality or
affordability, we're not helping the workers in these
sectors, and we're not doing enough on quality.
There's a lot of value in having states move forward
and do these kind of programs, but ultimately to
have it be something that's available to everybody
everywhere, you need the federal government to be
willing to make these kind of investments in care
infrastructures.
There are so many moments that I would have missed if
it was back in the day where fathers would get like
two weeks. And those are some things that I will
cherish for the rest of my life.
Now we get a break.
President Biden tried to address all of these
policies at the federal level with his Build Back
Better infrastructure bill that he proposed even before
he entered the White House.
The president doesn't talk a lot about the Build Back
Better bill, but that was his proposal that included
things like an expanded Child Tax Credit, like a
near universal child care program that would have
capped the amount of income people had to pay toward
child care. It included a paid leave type program,
really included these big building blocks of a better
family support program that ran into opposition from one
key Democrat, Senator Joe Manchin, in West Virginia.
One of the things that I think is important is that
we think about rebalancing our investments toward
children because it pays for itself.
If we were to rebalance federal investments away
from senior citizens and toward children, not only
would raising a child be more affordable in the U.S.,
but the children would have sufficient resources, their
parents would be better able to think about how they
want to spend their time, whether it's that extra hour
at work or an extra hour playing with their kids.
All of those things become possible if we rebalance
federal spending toward kids.
We know that investing in our children has a
multiplier effect.
What it means for those children's families, what it
means for those children in adulthood, and what it means
for the entire economy just have incredible ripple
effects. And so investing in children actually impacts
Americans of all ages in addition to our entire
economy.