Canucks in the Cradle

Canadian Conservatives successfully championed universal child benefits and have lessons for their neighbors to the south.

Senator Mitt Romney’s proposal for an unconditional and monthly per-child cash transfer has galvanized debate among American conservatives about the proper role of government in supporting families with children. Supporters describe the plan as a major pro-family breakthrough in conservative policymaking while opponents cite potential work disincentives.

Oren Cass has called the forthcoming debate “the right way for conservatism to move forward.” He is right. It represents an exercise in what Yuval Levin has referred to as “applied conservatism,” whereby conservatives must apply fixed principles such as individual choice, pluralism, and subsidiarity to a dynamic set of issues including, but hardly limited to, the costs of raising children.

As conservatives in the GOP work through this process, they can draw on the experiences of their conservative neighbors to the north. Canadian conservatives and the Conservative Party have supported different forms of federal child benefits for decades—most recently the Universal Child Care Benefit (UCCB). It was a signature policy accomplishment of the Conservative government led by Prime Minister Stephen Harper from 2006 to 2015, and it may provide salutary lessons for the current U.S. policy debate.

Canada’s federal child benefits began in the post-war era and have since undergone several iterations, oscillating between universal and more targeted programs. This dynamic has been most pronounced over the past 30 years, in which Canadian conservatives themselves have rethought the proper purpose and role of public policy to support families with children.

Canada had a universal family allowance to recognize the private costs of raising children from 1945 to the early 1990s. Although the so-called “baby bonus” was marginally adjusted over time, the principle of universality endured for nearly half a century.

That changed in 1992 when a center-right, Progressive Conservative government replaced the universal family allowance with a new means-tested, refundable tax credit. The new Child Tax Benefit was primarily designed to better target public spending and reduce the federal budgetary deficit. But, in hindsight, it represented a watershed moment: federal policy would no longer recognize all families but focus instead on a subset of low-income families with children.

A subsequent Liberal government moved further away from universality in 1998 when it enhanced the tax credit and established a supplement for low-income families (for household incomes up to roughly $26,000 at the time) as well as a child disability benefit. These reforms, which culminated in the creation of the Canada Child Tax Benefit, reflected a new political consensus that viewed child benefits as an income-support program rather than a public policy affirmation of the social value of parenting.

This point is worth emphasizing: due to a combination of fiscal consolidation and growing concerns about poverty and inequality, the 1990s saw a shift in how Canadian policymakers (including Conservatives) thought about the role of government in supporting families with children. Federal child benefits became a form of progressive income support policy rather a universal recognition of the positive externalities of producing and raising children.

The bipartisan trend towards means-tested benefits may have achieved better targeting than the old universal allowance, but it had sacrificed the notion that society had a collective interest in children irrespective of family circumstances, family structure, or the number of children in the household.

Around this time, however, there emerged a nascent conservative intellectual interest in rebuilding the principled case for universality, led primarily by conservative policy scholar Ken Boessenkool. He published a series of articles in the late 1990s and early 2000s that advanced the argument that “social policy concerns ha[d] squeezed out tax policy concerns.” According to Boessenkool, Canadians had lost sight of the case for universality including horizontal equity, the non-discretionary costs of child-rearing, and society’s collective interest in families having children.

Indeed, the bipartisan trend towards means-tested benefits may have achieved better targeting than the old universal allowance, but it had sacrificed the notion that society had a collective interest in children irrespective of family circumstances, family structure, or the number of children in the household.

Boessenkool’s main insight could therefore be summed up as “kids are not boats.” The tax and transfer system should not be neutral with regard to children—in particular, it should not treat the children of middle- or upper-income families as if they were the same as disposable or depreciating assets. Boessenkool proposed reintroducing a universal tax deduction for children in order to shift federal policy from a position of neutrality for these families to a clear preference for children.

It is fair to say that this work remained mostly in the realm of policy analysis and intellectual debate for several years. Calls for restoring universality in federal child benefits went unheeded—in fact, federal policy continued to move more in the direction of low-income targeting and away from universality.

As for conservative reactions to these renewed calls for universality, the initial response was also mixed. There was some opposition from deficit hawks who were opposed to increasing federal outlays at a time of large-scale deficits and libertarians who objected in principle to conservative arguments that there was a collective interest in children, and in turn a role for policy to support families with children on a universal basis. But the case for universality was generally supported by social conservatives who saw it as a means of mitigating marriage penalties in the tax and transfer system and improving fairness between single- and dual-earner families.

However insular and detached the debate may have been, it began to crossover into popular politics in the early 2000s for two reasons. The first is the then-Liberal government began to pursue a national system of publicly funded and delivered child care with national standards. The idea had a long pedigree among Canadian progressives dating back to a Royal Commission on the Status of Women in the early 1970s and had gained momentum in the new century as progressives renewed their policy ambitions after several years of fiscal retrenchment.

Conservatives rightly criticized such a statist, anti-federalist, and anti-subsidiarity policy approach. Opposition included both libertarians and social conservatives who may have disagreed on the merits of child benefits but agreed that child care should not primarily come in the form of state-run daycare. The growing salience of the Liberal government’s plan required the conservative coalition to find common ground on an alternative policy that was decentralized, non-statist, and rooted in subsidiarity and parental choice.

Conservatives, according to Harper, needed to bring their ideas to bear on these new and emerging questions – including the child-care question – if they were to win elections and ultimately the contemporary battle of ideas.

The second factor that came to popularize this thinking was the creation of the new Conservative Party of Canada. There is insufficient room to explain the origins of the party: it is a complicated story of the old Progressive Conservative Party splintering along regional as well as populist/conservative lines in the early 1990s and leading to vote-splitting on the Canadian Right for more than a decade.

The Conservative Party, established in 2003, was a new, center-right political vehicle that united a mix of business conservatives, Central Canadian communitarians, Western populists, and Quebec decentralists according to a shared set of values and policy positions. The party’s founding leader, Stephen Harper, was an ideological conservative who personified a unique amalgam of these different intellectual and political persuasions.

In a 2003 speech to a group of conservative intellectuals, Harper outlined the need for conservatives to shift their priorities and policies from conventional macroeconomics to a wider set of matters that he broadly defined as “values issues.” The rise of neoliberalism in the 1980s and 1990s, he argued, had shifted the terrain of political debate, which now included the relationship between families and the state—as reflected in the Liberal government’s pursuit of a national child-care scheme.

Conservatives, according to Harper, needed to bring their ideas to bear on these new and emerging questions—including the child-care question—if they were to win elections and ultimately the contemporary battle of ideas. This was, in effect, a call for the Canadian version of applied conservatism, by which the conservative policy agenda needed to expand beyond the conventional mix of low taxes, free trade, deregulation, and so on.

The combination of these two forces caused the Conservative Party to put a universal child benefit at the center of its party platform in the 2005–2006 federal election campaign. Boessenkool’s proposal for a universal tax deduction evolved into a universal, monthly, per-child cash transfer for families with children under the age of six. The transfer payment would be treated as taxable income for the lower-earning parent. These policy design changes were mostly driven by the goals of administrative and communications simplicity. The latter is especially important: The unofficial campaign slogan was $100 CAD ($78.35 USD) per month for each child under age six.

The issue became a major differentiator in the election campaign. The Liberal Party advanced its plan to effectively nationalize child care in Canada, whereas the Conservative Party instead argued for the flexibility and choice inherent in unconditional cash transfers to families.

The Conservative position was aided by two factors. The first is that nearly six in ten families with children under the age of four at the time used a mix of home-based daycare and other private arrangements for their child-care needs and would as a result benefit far more from the Conservative Party’s choice-based plan than the Liberal Party’s one-size-fits-all model.

The second cause was an infamous, mid-campaign gaffe when a Liberal spokesman complained on a television panel that parents would abuse the unconditional dollars under the Conservative plan to buy “beer and popcorn.” The political misspeak proved deadly. It accentuated the technocratic, government-knows-best underpinnings of the Liberal Party’s child-care proposal, and it reframed the public debate around Harper’s key insight: that family policy issues were fundamentally about values.

The net effect was to position the Conservative Party as trusting and supporting parents in contrast with the Liberal Party who did not seem to trust parents to make the best choices for themselves and their families. It is hard to discern how fundamental this political contrast was to the Conservative Party ultimately winning the election, but trusting parents nevertheless became a major theme for the party including during its nearly decade in power.

The new Conservative government led by Prime Minister Stephen Harper canceled the previous government’s national child-care framework and implemented the UCCB in its first year in office. The UCCB was enacted alongside the pre-existing means-tested Canada Child Tax Benefit. This is an important point: the adoption of a universal benefit was therefore not a substitute for an income support approach to child benefits but rather filled a policy gap that had been created when the universal family allowance was eliminated in the early 1990s. The Harper government’s policy approach left Canada with a good mix of targeted and universal benefits that addressed poverty and inequality on one hand, and recognize the social value of parenting on the other.

The UCCB was subsequently augmented under the Conservative government to increase its generosity and provide a partial cash transfer for children between the ages of six and 17. Research showed that it increased labor force participation for single parents while married women with lower education reduced theirs. Fundamentally, though, it re-established the basic idea that government policy should universally recognize the positive externalities of raising children—even if the per-child amounts were modest. This was as much a matter of principle (and the accompanying signaling effects) as it was about any specific outcome.

The animating principle of the UCCB was that the nation has a collective interest in producing and raising children, but that the costs—including the opportunity costs of foregone income and consumption—are typically fully borne by parents. There is scope therefore for public policy to tilt in favor of families with children to recognize the difference between private costs and social returns. The UCCB became one of the signature achievements of the Harper government’s nearly ten-year agenda.

The key takeaway is that there is a role for public policy to recognize our collective interests in families and children, and well-designed child benefits can help to close the gap between the private costs and public benefits of raising the next generation.

What is interesting is that in its successful 2015 election campaign the Liberal Party basically sought to relitigate the universal-versus-targeted debate of the 1990s and proposed consolidating federal child benefits, including the UCCB, to establish a new, much more generous Canada Child Benefit for families under the household income of $190,000 CAD ($148,869). By targeting the distribution of federal child benefits, the Liberals argued, the government could significantly reduce child poverty.

This represented, on one hand, a significant departure for the Liberal Party relative to its national child-care policy in previous years. The Liberals de-emphasized national child care in the 2015 campaign and instead essentially adopted Conservatives’ arguments for unconditional cash transfers to parents. Notwithstanding the renewed political tensions between universality versus means-testing, the Liberal Party was in effect drawing from the Conservative playbook on unconditional child benefits.

But the Liberals’ Canada Child Benefit rejected, on the other hand, the conservative view that public policy ought to recognize parents and children irrespective of their circumstances and preferences. Some Liberal policy experts have since argued that the newly configured means-tested benefit was somehow revolutionary, but this is an ahistorical claim. Instead, it marked a partial return to the 1990s repeal of the universal family allowance and a reaffirmation of child benefits as a form of welfare policy.

The case for a more progressive distribution of federal child benefits was nevertheless a good fit for the political milieu. Conservatives were too self-conscious about the politics of inequality to fundamentally challenge the progressive critique of universality. The Liberals therefore not only won the 2015 election but have since implemented the Canada Child Benefit with no sustained intellectual or political alternative from the Right.

The child benefits debate in Canada has now shifted to the supply of affordable and high-quality child care—namely how to boost the supply of child-care spaces available to meet demand and to lower costs in major cities. The past experience of advocating for and implementing the UCCB should guide Canadian conservatives and the Conservative Party as they look to challenge and shape this newest manifestation of the child-care debate.

But it can also guide the ongoing child allowance debate for American conservatives—particularly social conservatives who can understandably feel neglected in the realm of conservative policymaking. The key takeaway is that there is a role for public policy to recognize our collective interests in families and children, and well-designed child benefits can help to close the gap between the private costs and public benefits of raising the next generation. The positive signal that such a policy sends to society can be powerful and may be necessary in an era of declining marriage and birth rates.

Canadian conservatives and the Conservative Party came to accept these insights in response to a unique combination of policy and political conditions. Perhaps now is the time that our conservative neighbors to the south accept them too.

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Sean Speer

Sean Speer is a fellow-in-residence at the Public Policy Forum and an assistant professor at the University of Toronto’s Munk School of Global Affairs and Public Policy. He previously served as a senior economic advisor to former Canadian Prime Minister Stephen Harper.

@Sean_Speer

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