Give Parents $2k When a Baby is Born
Help when parents need it most
Over at my actual job, I’ve laid out a proposal for a baby bonus:
$2000 when a baby is born, delivered to the parents as quickly as possible.
Either fully universal, or phasing in to be fully available with $10k+ in earnings.
Pretty cheap in the world of family policy.
In many ways, the pitch for a baby bonus is as simple as showing someone this graph:
When parents have a baby, they suffer an income shock. A baby bonus operates like unemployment insurance—it provides a cushion during a turbulent time.
UI helps people handle something bad, a baby bonus helps you with a good disruption.
Both are meant to give you the breathing room you need to make good choices in hard times, not act out of desperation.
I’ve got a shorter, less wonk-ish distillation of a baby bonus at The Institute for Family Studies.
When a baby is born, parents are more vulnerable to economic shocks than they might be later in a child’s life. The parents are younger, which means they have lower earning potential than they are likely to have when the child is older. In addition, they’ve had less time to build up reserves of savings or sick days.
A baby bonus might make it possible for either a mother or father to take unpaid FMLA leave that he or she otherwise could not afford to use. The $2,000 payment roughly matches the average out of pocket hospital bill—for many parents, it would take that worry off the table. The baby bonus might give a mother time to fully establish breastfeeding with the help of a lactation consultant, rather than her feeling rushed to return to work and stranded without help.
The beauty of a baby bonus is that it’s a force-multiplier for parents.
A baby bonus isn’t a bribe to have kids (if $2000 changed people’s minds, aspiring grandparents would be all over it).
If it raises the fertility rate, it will be a modest rise, and it’s likely to come by helping people who want to have a baby, but wonder about waiting to try till next year. The bonus is there, for people who want an excuse for hope.
And if you want wonkier reading on a baby bonus, I’ve got a more detailed commentary on why you’d want a baby bonus to be a standalone program, not a one-year boost for the existing CTC.
For one thing, the CTC comes much later (I had two January babies, whose CTCs came 15 months later, when they were toddlers, not babies).
For another, the CTC phases in slowly with income. If you layer on a baby bonus, the extra payment is essentially waiting in line behind any CTC you’re eligible for already. The more children you have, the more earnings you need to see any of the baby bonus.
Throwing $2000 at new parents isn’t nearly enough—in fact it’s insulting. If a woman has a C section and the baby spends even a few days in NICU, you are talking more than $2000 out of pocket-you are talking hitting your out of pocket limit, and given how many employers are forcing people into high deductible plans, that can be more like $15,000 because being a combination of mom and baby, you have to hit your family out of pocket—not just the amount for mom.
Then there is the issue of income loss during parental leave. Daycare expense if the parents plan to return to work. And yeah, car seats, strollers, and all the other routine expenses.
If you want to remove the financial penalty that parents suffer, insist on parity between contraceptive coverage and prenatal/childbirth coverage. The ACA mandates that birth control be covered without any out of pocket—-e.g. free to the insured—if it’s free NOT to have a kid, it should be free to have a kid. Maybe the Feds could reimburse the insurance companies if it’s financially ruinous to them to provide this benefit. Or put all pregnant women on Medicaid and mandate that health care providers accept Medicaid for pregnant patients. Lots of ways to skin this cat.
I still think the most elegant solution to addressing the financial penalty that is parenting was proposed by former Senator Mitt Romney—take a look at his child tax credit proposal. It started in the second trimester of pregnancy, and I think it covered kids until age 6 or so—-about the time they are in school full time. It was enough to give almost all families a real choice as to whether to pay for decent child care or have one parent opt out of paid work. Having done both (worked full time with a baby under age 1 and stayed home full time after the second kid) I believe the key to unlocking this problem of people not being able to have the children they want is to enable families to choose to do their own childcare or hire childcare. If you are a high earner and love your job, the difference between day care and a nanny might be covered by a tax credit. If you are a low paid Amazon worker, the child tax credit provides income replacement giving you the choice as to whether to return to work or not.
We spend untold trillions on seniors and paltry sums on the future taxpayers of this country. Maybe rebalance the scales and give younger people a hand, and increase taxes on capital gains and on high earners Social Security benefits to pay for it.
I will now leave my soapbox!
Is the size a concession to political constraints--in which case I totally understand--or do you think there are good reasons not to go (much) bigger?