Democrats Advance Proposed Cap on Child Care Costs

Number of the Day: The most relevant or interesting figure in personal finance

7%

The Balance

That’s the maximum share of household income that a low- or middle-income family would have to devote to child care costs under a government spending proposal that Senate Democrats advanced on Monday.

While far from a done deal, the measure would use government funds to ensure that working families can afford child care, Vermont Sen. Bernie Sanders, who chairs the Senate Budget Committee, said in a statement. No specifics were given about the 7% maximum, but if it referred to pre-tax income for all children needing care, that’s equivalent to about $400 a month for a household making the 2019 median income of $68,703, the most recent estimate available.

The child care measure is one of many subsidies proposed in the American Families Plan, a set of sweeping reforms President Joe Biden outlined in April to overhaul the U.S. social safety net and tax code. Sanders and Sen. Majority Leader Chuck Schumer of New York introduced a $3.5 trillion budget resolution Monday in hopes of eventually passing the plan. 

The resolution instructs lawmakers to write legislation they plan to pass using a procedure called budget reconciliation to avoid needing 60 votes in the Senate. At best, Democrats have a 51-50 majority in the Senate and control the House of Representatives by a slightly more comfortable eight-vote margin.

Some economists and administration officials blame a lack of affordable child care for keeping people, especially women, out of the workforce and contributing to a labor shortage that’s led to record job openings. In addition to subsidizing child care, Democratic legislators said the law will extend an increased child tax credit beyond 2021, provide universal prekindergarten for 3- and 4-year-olds, and guarantee paid family and medical leave, among other reforms.

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