Late last month, the CBO released its estimate of the federal cost of the Build Back Better (BBB) child care and pre-k provisions. The agency concluded that, during the programs’ six years, the total cost would be $383 billion. Democrats were aiming to get the cost of these two provisions at or below $400 billion and so they succeeded at that.
Unfortunately, the CBO did not provide any details about how it generated its $383 billion figure. In the first three years of each program, the costs are spelled out in dollar amounts in the bill. So no estimate is needed. But in the last three years of each program, the federal government is covering a percentage of each state’s costs. To determine how those percentages shake out in dollar terms, you need to first figure how many states are actually going to participate in the program, how many eligible kids in participating states will actually enroll, and what the unsubsidized cost of child care and pre-k will be under the plan.
Of particular interest to me is the question of state participation. BBB’s child care and pre-k provisions don’t actually set up any child care services or pay out any child care subsidies. Instead, they create monetary incentives for states to do so. This means that, for any of the promises being made about these plans to actually materialize, the bill has to be approved, not just by the house, senate, and president, but also by each state’s lower house, upper house, and governor. Previous experience with similarly-designed legislation indicates that many states wont participate, which will mean that a large percentage of the nation’s children will not actually receive any of the child care and pre-k benefits currently being promised.
Designing a program like this is, on the merits, extremely stupid and indefensible. But it has one very technical benefit: if the CBO allows you to factor state non-participation into the cost estimate of the program, you can bring that estimate way down and stay within the $400 billion ceiling for the child care and pre-k plans.
According to an internal CBO document that has not been previously released, this is exactly what has happened.
When scoring these two provisions, CBO assumed that 34 percent of kids live in states that will not participate in the child care plan and that 40 percent of kids live in states that will not participate in the pre-k plan. These numbers are similar to the non-participation estimates I produced early last month.
If the CBO had not factored non-participation into its estimates, then the reported costs for the last three years of the programs, which are much more expensive than the first three years of the programs, would have been around 50 percent higher and this would have caused the overall price tag to rise well above the $400 billion cap.
When I started highlighting this non-participation problem a few months ago, and explaining how to fix it, many people would ask me why the Democrats would do something so seemingly dumb when the fix is so seemingly simple. With this document, I think we now have a fairly definitive answer: Democratic leaders do not want to fix the non-participation problem, e.g. by administering the program federally in non-participating states, because they need non-participation to hit their budget targets. Excluding kids in Texas, Alabama, Tennessee, Florida, the Carolinas, and other similar states from universal pre-k and child care subsidies is an intentional strategy to keep the cost down.
But it’s a strategy they don’t want to admit to for obvious reasons. When Paul McLeod asked Senator Patty Murray about state non-participation last week, she replied:
“I believe that it would be very hard for states to not allow access,” said Senate Health Committee chair Patty Murray. “Why would a governor not want childcare for their kids? They will have to answer to their own citizens.”
Senator Murray is a smart person and so there is very little chance that she believes what she is saying here. After all, if she is right that all or almost all states will participate, then the CBO has dramatically underestimated the cost of the child care and pre-k provisions. And Murray doesn’t believe that, does she?
Overall, the game Democrats seem to be playing on this is to publicly mislead people about how many kids will actually be reached by these programs while privately urging the CBO to take a more realistic view about state non-participation in order to keep the cost down. This seems like a politically dangerous game to me.