Reactions to a New Social Compact

Commentators and policy analysts react to our proposal for a Family Income Supplemental Credit.

After publishing our proposal for a Family Income Supplemental Credit, or Fisc, we invited a range of conservative commentators and policy analysts to offer their own critiques, insights, and modifications. This page will feature an expanding set of arguments over the coming week.


 

Fitting the Fisc to Social Security

Robert Stein, former Treasury official

Oren Cass and Wells King have added their proposal, a parenting supplement they call the Fisc, to a list of ideas designed to reduce the fiscal burden on parents relative to non-parents.

One of the most hotly debated features of the Fisc is a “work requirement,” in that the annual allowance cannot exceed prior year earnings.  I’ll let others quibble over the details on the formula.  And I’m also sympathetic to the idea that parents need extra resources whether they’re working or not, particularly in the case of a single-mother.

However, by tying the payment to earnings, the Cass-King proposal may encourage marriage because they’d entice single workers to marry single parents.  Let’s say an unmarried couple has a child and the mother intends to be a full-time homemaker while the father works.  Un-married, they don’t get the Fisc; married, they do.  In this case, the “work requirement” is a marriage incentive in disguise.

Now a quibble that I do care about: the income thresholds for phasing out the Fisc start at $100,000 for singles, $200,000 for married couples.  I’d suggest lifting the threshold to $142,800 for singles, which is the amount of the taxable Social Security wage base in 2021, with a threshold of $285,600 for married couples.  In addition, I think those thresholds should rise each year at the same pace as the taxable wage base, which is generally faster than inflation.

Why lift the thresholds to the maximum wage base potentially faced by each kind of household?  Because one of the points of helping parents is to offset the disincentive for parenting built into the Social Security system.  The Social Security system taxes earned income (wages and salaries), forcing workers to use a portion of earnings up to those thresholds to purchase government retirement obligations.  Future Social Security benefits then relate to those tax payments, crowding-out the natural incentive to raise children to provide for old-age security.

Why not make the Fisc available to all parents, even those with very high incomes?   Because workers who expect to consistently earn more than the taxable wage base face different incentives.  For them, the Social Security tax is essentially a “lump-sum” payment to the government, which doesn’t affect them at the margin and shouldn’t generate the same distortions in their parenting behavior.

One other change I’d make is to specify that the only earnings that matter for purposes of deciding eligibility for the Fisc should be those taxed as part of the Social Security wage base.  That means no capital gains, no dividends, no interest.  All irrelevant!  Keep the Fisc a benefit tied to labor earnings; parents who only clip coupons need not apply.

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Is a New Entitlement Program the Solution for Working Families?

Angela Rachidi, American Enterprise Institute

Oren Cass and Wells King’s proposal for a Family Income Supplement Credit (Fisc) is the latest in a line of ideas aimed at family policy goals important to conservatives. Traditionally, scholars and policymakers have justified policies like Fisc by suggesting they would reduce child poverty, increase marriage, and support childbearing. Cass and King instead frame their proposal as a new social compact in which the federal government supports working families at a time when income strain is high and they might otherwise struggle to make ends meet.

One advantage of the Fisc is that it addresses some of the downsides of a universal (or near-universal) child allowance by directing benefits toward working families. The Fisc would match a family’s income from the past year up to $4800 per child under 6 and $3000 per older child paid monthly, with an extra payment for mothers in the final months of a pregnancy and a bonus for married parents.

My main concerns with a universal child allowance have always been that it resembles our failed welfare policies of the past, which discouraged work among single parents, while removing important touch points embedded in the existing social safety net, such as job training and child support. How does the Fisc stack up? Better than a universal child allowance, though I still have concerns.

Theoretically, a work disincentive still exists because parents do not have to be working to receive the payments (the prior year’s income determines the payment amount). This might be fine for two-parent families who have the potential for two incomes, but I worry about single-parent families with little employment in the household. And without knowing how the Fisc would interact with the EITC, it is hard to tell the overall employment effects for single parents. Even so, negative employment effects are likely to be small and narrowly focused since the Fisc targets working or recently working families.

My larger concern is the premise that we need another major federal entitlement to address the needs of working families. It is true that families with children face economic constraints at precisely the time they need money the most. But there are ways to address these constraints without creating a new entitlement program (see Holtz-Eakin and Gitis for a proposal on parental leave savings accounts). Instead, the Fisc replaces the Child Tax Credit (CTC), which Congress originally designed to be tax relief to working families, and the Child and Dependent Care Tax Credit, which rightfully credits childcare as a work expense. These two policies essentially lower the amount that families pay in taxes and offset child-related expenses. Instead of creating a new entitlement such as the Fisc, I would maintain tax relief for working families, consolidate the EITC in a way that reduces marriage penalties, and explore other ways to provide relief.

Only in recent years have policymakers expanded (or considered expanding) the CTC beyond federal income tax and payroll tax liability. The Fisc would take that one step further by removing the child benefit from the tax system entirely and creating a new government entitlement program ripe for future expansions. There are plenty of conservative policy alternatives to the government sending cash to nearly all families through a new program. Let’s start with coordinating safety net programs better, expanding school choice, reforming our healthcare system, and rethinking the way we license occupations and regulate new businesses.

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Support Families Because They Are Families

Chris Buskirk, American Greatness

Conservatives have a persistent problem: they often don’t know what it is they want to conserve. This bears on the burgeoning discussion of family policy. The good news is that the broad center-right appears ready to engage the subject seriously and offer some major policy solutions instead of mere exhortation. “We’re pro-family!” is a disposition not a solution.

So it’s in this context that the proposal put forward by Oren Cass and Wells Kings (the Fisc) is a welcome addition. However, it’s with all due respect to my host that I must disagree with the Fisc in favor of a broad child allowance like that proposed in the Family Security Act. As usual their report is smart, well-researched, and full of helpful insights. But reading the report, I come to a different conclusion. And it’s because I think we’re trying to solve for different problems. The predicate to determining the best policy is defining the goal.  We all agree, I think, that the challenges facing most Americas who want a family are big enough that we need something better than the existing policy approach. But what exactly are we trying to achieve and how do we measure success?

I agree with their premise that we need to revitalize the American social compact. But the way to do that isn’t by creating a needless link between wage-work, having children, and receiving this broadly necessary allowance. I realize that some people on the right are concerned about the possibility that a child allowance will subsidize or even encourage people to game the system and that some people might even leave the workforce as a result of a child allowance. To the former, I say, who cares? The small group of people who spend their lives gaming America’s welfare system are already doing it and no one is going to go out and have a brood of children just to get the child allowance. And as for the allowance permitting more parents to leave wage-labor to raise their children, well, that sounds like a feature, not a bug.

For conservatives, I’d ask, what is this country’s top priority? Is it keeping as many parents and potential parents engaged in wage-work or is it more children being raised by their parents?

Let me offer this answer: we want more families, more family stability, and more children. The success of family policy should be judged by those criteria. Discussion of the impact on consumption, GDP, wage-work and so forth miss the point entirely. Let me go a step further and suggest that if fewer parents were forced to lean into cubicle culture and were able to have more children and spend more time raising them that the country would be much better off.

Over the past four decades fewer and fewer families have been able to afford a stay-at-home parent. As Cass’s own Cost of Thriving Index demonstrates so well, a single median American income hasn’t been enough to provide a family of four with a home that they own, a car, health insurance, and college tuition for a long time. As a result we’ve redefined what it means to be middle class. The material distinctives are essentially the same, but now it requires two incomes so both dad and mom work. That leaves a parenting gap which either means that people have no children, fewer children than they want, or, in an unfortunate homage to the McKinseyized, globalized economy that wrought havoc on American wages, they outsource childcare to poorly paid third-party services and then to the public schools. Why is there is so much pressure for universal pre-K? It’s not because those three, four, and five year-olds need more schooling, it’s because their parents need free daycare. And that’s what coming if a child allowance isn’t passed. The real political choice isn’t between a child allowance or nothing. It’s between a child allowance and even more money being spent on expanding the amount of time kids spend in government schools and away from their parents.

The fact that the average American family can’t afford to have a stay-at-home parent isn’t Middle-America’s fault. It’s the fault of American elites who spent decades pursuing policies of globalization and financialization that proletarianized the middle class, beggared the working class, and ravaged interior America. In a better world, a single median wage would be enough to buy a house, raise a family, and provide a traditional middle class life. But until we rebuild a more robust economy that can do that, the more urgent issue is supporting American families and helping them have more kids and raise them themselves. There is nothing more conservative than parents raising their own children. That’s why I think the Fisc, while much better than what we have now, is ultimately insufficient. A broad child allowance like the Family Security Act is closer to what is needed, but even that could be improved upon with an increased allowance to cover birth expenses and perhaps some sort of downpayment assistance to help families with children buy a home.

Over the past few years there has been a lot of discussion about the integrity of America’s borders. A country that can’t enforce it’s own borders isn’t much of a country, they say. That’s true enough. But a country that can’t reproduce itself isn’t much of a country either.

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