Many people who want to work, can't afford to: child care costs too much. They're trapped on public assistance, or only one parent in the family is able to work. Meanwhile, we have 14 million out of work.
The answer is simple: a massive federally funded day care program, one that puts millions of Americans to work, both directly - working in day care - and indirectly, by making virtually free day care available so that parents see the full gains from taking a job.
By my estimates, such a program could send our unemployment rate to below 4%, with no assumptions about economic growth (seriously, none). For a net cost that is about double what the Department of Defense spends just on weapons research per year.
Head below the fold to see how.
For most working parents, child care is by far the greatest expense. In 2010, the cost of putting two children in child care exceeded median annual rent payments in every state, according to a report by Child Care Aware of America.
Depending on the state you live in, child care costs for a two parent family can range as high as 16% of annual income.
In the last fiscal year, combined state and federal funding for child care assistance fell by 2 percent to $12 billion, according to a 46-state analysis by the National Conference of State Legislatures. Federal stimulus money gave a temporary boost to the subsidies, but nearly all that money stopped in 2011.
In the fiscal year that ended June 30, 22 states reported declines in their budgets for child care subsidies, according to the state legislative group. Some of these declines were huge: 25 percent decline in California, 30 percent in Hawaii and 10 percent in Michigan.
The goal of the programs is to subsidize the cost of day care to help keep poor parents, many of them single mothers, working. Over time, the subsidy is scaled back as parents advance in the labor force and wean themselves off government assistance. The trouble is, that creates a disincentive to get off of government assistance, it essentially punishes success.
Some parents give up jobs and turn to the welfare system if they can't find affordable child care, but that isn't an option for those who have already used up their entitlements, said Danielle Ewen, a past director of child care and early education for the Center for Law and Social Policy.
"For those families, there is absolutely no safety net and we don't know what is happening to their kids, but it is absolutely scary to think," Ewen said. "It becomes a very desperate, horrible cycle for poor families who are doing everything they can possibly do to become self-sufficient."
Kristin Rowe-Finkbeiner, head of the mother's advocacy group MomsRising, says having a baby is a leading cause of temporary poverty. Many women with no maternity leave end up quitting their jobs to care for a baby.
"And when they lose those needed jobs, it's very hard to get back into the labor force," she says, "because all of a sudden, we have a cascading impact of motherhood. Right now, child care costs more than university costs in many states in our nation."
And let's make no mistake: Poverty rate for single moms is astounding. Sources vary, this one puts it at 40% is 2010
( Other sources have very different numbers. Reliable data seems hard to come by in this area, probably because there are no widely accepted definitions and standards, so you can't get an apples to apples. )
Now we do have some assistance for single parents. But its a labrynthine system and navigating it is a joke for someone who is already working full time and trying to take care of kids.
Let's simplify the whole thing. And put America to work. What we need is a massive day care program, one that would both function as a jobs program - putting millions of Americans to work in the day care centers - and a way to free up parents, especially single parents, to go out and take jobs, putting their familie on a true path to prosperity.
This country has approximately 85 million children, about 26% of those raised by single parents.
Let's say we create free (or close to free, nominal fee) daycare for half of them. That's day care for 10 million children.
Looking around at average costs for licensed day care centers, prices run around $8 to $12 per hour per child. Lets price it at the high end of that: $12 per hour per child, and assume we are keeping the child 8 hours per day, 5 days per week, 50 weeks per year.
That gives us a baseline cost of $240 billion dollars.
Sounds like a lot, right? But hold on.
With a staff to child ratio of five to one (easlily supported on this cost model), you have just created 2 million jobs. Congratulations, unemployment just went down by 1.5%.
We've just gotten two million people off of public assistance or unemployment, because we gave them jobs. Even if the person taking the job isn't on public assistance, by their taking the job, they free one up. Their pay are in dollars that are high velocity - poor people spend their money - so you get large knock-on effect. At $12 an hour, you're paying each worker $24,000 a year. Pricing that at 10% return in tax revenue - a pretty modest assumption, since pay to poor people generally has over $1.50 in stimulus value - we get $9.6 billion back in direct tax revenues
Assumung public assistance costs - food stamps, unemployment, housing subsidies, etc. - of a modest $5,000 a year (a very, very low estimate) yields another $20 billion in savings.
Since the average single parent has about 1.5 children at home (not far off from the general population, by the way), day care for 10 million kids frees up 6.5 million parents to go out and work. Assuming a modest $5K in tax revenue, both direct and (via economic activity/growth) indirect, we get another $50 billion in tax reveue.
That in turn is a whopping decrease in the unemployment rate. With fourteen million unemployed now, our day care program reduces unemployment to 12 million, and now with an additional 6.5 million people able to go to work because they're getting free day care, you have now reduced unemployment by more than half - you're at about 3.9%.
That means we've knocked a third off of the cost so far, $80 billion. This, before we even consider the contribution to GDP from putting 8.5 million Americans to work. And economists generally agree that when you get unemployment below 5%, labor markets get tight and wages go up. Which in turn raises tax revenues further.
$160 billion per year sounds like a lot, but let's put that in perspective. The Department of Defense spends $80 billion a year just for research in to new weapons. Just. for. research.
With 11 aircraft carrier groups - each carrier holds 90 fighter planes, each plane is well over $100 million each, we have room to trim, in just the Navy alone. To give one example, there is a tradition that when crews are rotated, it is done by sending the ship back to its home port. Which made sense prior to the invention of the airplane.
If we merely changed to flying crews out to the nearest military port to rotate crews, we could reduce ship count by 30% without reducing patrol coverage in the least. Big hunks of savings, before we even cut the bloated coverage numbers.
And there are plenty of other places to cut. The F-35 JSF plane, a new stealth fighter, runs about $335 million per example. How many of these do we need to fight guys with AK-47s and IEDs?
Time permitting, I'll write a diary digging in to the DOD's budget, showing where we can trim $160 billion with no loss in the ability to defend our interests or project force. In fact, its not hard to configure our forces to be able to respond faster, with greater lethality, and with better-equipped forces, for a whole lot less money. Hint: you have to admit the Cold War is over, and there will be no massive invasion of Europe from the east to repel.
And let's not forget the Bush tax cuts: the amount going to the top 2% is $80 billion a year, or half the net cost of my ambitious day care program.
Some will be ready to declare this proposal heresy: get people off of public assistance? Isn't that a right wing talking point?
Why yes, yes it is. And one they lie about: they don't want to get people in to jobs, which costs money, they just want to kick them off of assistance. This program, though ambitious, frees up parents to go to work, without being crippled by day care costs. It puts people to work, in a scale not seen since the WPA of the New Deal. It actually invests tax dollars in a way that both lowers costs in other areas, and grows the economy.
In short, it puts Americans to work. And while we're at it, provides a healthy, safe environment for 10 million American kids. Whats not to like?