How the child care cliff could yank back the labor market

A looming deadline this fall could jeopardize much of the economic progress made since the pandemic — and it’s not the government shutdown.

A $24 billion infusion of funds that kept 8 in 10 child care centers afloat through the pandemic could come to an abrupt halt on Sept. 30, when government spending is slated to expire. The lapse could force more than 3 million children out of child care, according to the left-leaning Century Foundation — pushing many parents from their jobs and weakening a labor market that has so far withstood an aggressive series of rate hikes from the Federal Reserve.

“It’s going to feel more like a slow roll, but then when the cumulative effect is in place, we’ll see that more women dropped out of the labor force; more businesses struggle to find people to hire; more children and families cannot find a slot,” said Melissa Boteach, vice president for child care at the National Women’s Law Center.

Why? “We didn’t invest in child care,” she said.

Congressional Democrats are clamoring for more cash for the industry. Rep. Suzanne Bonamici of Oregon and Sen. Tim Kaine of Virginia are leading a longshot bicameral push to include $16 billion for child care — i n line with what NWLC and other advocates have requested — in a supplemental spending package even after the White House left the sum out of its request.

“This is an emergency. We need this funding. It’s critical to the economy,” Bonamici said in an interview.

Sens. Elizabeth Warren (D-Mass.) and Tina Smith (D-Minn.), who also signed onto the effort, reiterated the call in an editorial earlier this month.

Meanwhile, others are working on standalone legislation to “fill this impending gap,” House Democratic whip Rep. Katherine Clark (D-Mass.) said. Senate Appropriations Chair Patty Murray said she is also exploring her own bill.

“I’m in conversations with anybody that will look at me about this,” Murray said.

It’s unclear how much GOP support the legislation can garner. Several Republicans have expressed skepticism about spending more money on child care without more information about how it’s spent, its effect on prices and more — making an extra $16 billion improbable in any form.

“I have to be honest, that’s unlikely to happen,” House Appropriations Chair Rosa DeLauro (D-Conn.) said. “You have to have a working partner. And we don’t.”

One potential compromise: a tax package. Advocates including the First Five Years Fund are pushing for tax provisions that could incentivize employers to help fill the gap — a solution that groups like the U.S. Chamber of Commerce favor over additional spending. Reps. Salud Carbajal (D-Calif.) and Lori Chavez-DeRemer (R-Ore.) introduced a related bill last month.

That’s “where we’re hoping to get some more broad support outside of our industry,” First Five Years Fund Executive Director Sarah Rittling said.

1. Monday … The National Association for Business Economics hosts an event on its policy survey at 3 p.m.
2. Tuesday … Existing home sales data for July will be released at 10 a.m. … Federal Reserve Gov. Michelle Bowman will participate in a Chicago Fed forum on youth employment
3. Wednesday … New home sales for July will be released at 10 a.m.
4. Thursday … Bipartisan Policy Center hosts an event on housing policy at 1 p.m.
5. Friday … The Commodity Futures Trading Commission has a closed meeting at 9 a.m. … University of Michigan consumer sentiment survey will be released at 10 a.m. … Fed Chair Jerome Powell will deliver the opening remarks at the Jackson Hole summit at 10:05 a.m.

End of an era — The WSJ’s Nick Timiraos: “Despite the Federal Reserve’s raising interest rates to a 22-year high, the economy remains surprisingly resilient, with estimates putting third-quarter growth on pace to easily exceed its 2% trend. It is one of the factors leading some economists to question whether rates politico.com

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