Learn from Canada’s failed federal day care program

Expensive federal programs in the name of social engineering are the norm for left-leaning governments. That these programs backfire in some ways and do nothing in other ways is also totally predictable.

The only unknown in such cases is exactly how these best-laid plans of planners will fail.

Canada’s federally subsidized “$10 a day” child care program is the latest demonstration of these eternal truths. The program has driven many child care centers out of business, put others on the brink, and induced record waiting lists on which parents languish. It has subsidized the wealthy and arguably harmed the poor.

Canadian day care centers complain the government money comes in so late that they need to borrow cash to stay afloat. Many have shut down under the weight of the rules, regulations, and red tape.

It was a bad execution of a bad idea. Policymakers in the United States should learn from this error. This lesson is especially important for those in the Biden administration and the media who seem to think Uncle Sam needs to subsidize, and often run, child care.

Canada’s subsidy is a complex one with unclear aims. The federal government is spending $6 billion a year to subsidize day cares, which, in turn, are required to cut their prices dramatically. The provinces actually distribute the aid and determine eligibility.

The details of the subsidy and the distortions it caused are not the most important lesson for U.S. policymakers. We ought to reject the entire idea.

Subsidizing child care makes no sense.

Given stubbornly high inflation and record budget deficits, the U.S. cannot afford a new spending program. To the extent the federal government can afford to help parents of young children, it ought to do so by cutting taxes, such as modestly expanding the child tax credit, or giving limited grant aid, such as a “refundable” child tax credit, to working parents. If parents wish to spend this money at a child care center, that’s their choice. If parents wish to use this money for informal child care (a grandmother or the next-door neighbor), that’s just as valid. And if a mother uses the tax break to dial back her hours so she’s home when the school bus drops off, more power to her.

Some Democrats explicitly reject this reasoning, though, because they don’t support parental choice — they support institutional child care and two full-time working parents.

“Don’t give people 25 bucks a week to blow on beer and popcorn,” one spokesman said when Canada was discussing cash aid to parents a few decades back. “Give them child care spaces that work.” 

Crucially, subsidizing child care is not subsidizing family. It’s subsidizing work. Canadian leaders make that clear: When trying to claim success these days, they point to tiny upticks in GDP and women’s labor-force participation.

This becomes a subsidy for the rich. “Higher-income families are disproportionately benefiting from the subsidy,” one Canadian analysis noted. This is what nearly all child care subsidies do because day care is more valuable for people whose income is higher.

It’s also not clear that “increased women’s labor-force participation” is a valuable goal to pursue.

For starters, 49.9% of all employed Americans are women. If, in this economy, you subsidize day care in an effort to get more mothers to work, you are saying that taxpayers should pay to ensure the employed workforce is majority female. Someone should explain why that’s a policy priority.

Secondly, subsidizing child care has a very mixed record when it comes to helping families. The province of Quebec, for instance, rolled out low-cost universal child care in the 1990s, and economists found pretty damning results in 2015: Teenagers who had been through Quebec’s program were less happy, less healthy, and more criminal than similarly situated teenagers who hadn’t.

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Finally, America and Canada both suffer from low and falling birth rates. Day care subsidies don’t seem to provide any upward effect, statistically speaking, on birth rates.

We can have good debates over child tax credits and allowances, but we should all agree that funneling “family aid” into day care is an awful mistake, and we can thank the Canadian Left for demonstrating that.

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