How the child care cliff could yank back the labor market

From: POLITICO's Morning Money - Monday Aug 21,2023 12:01 pm
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By Eleanor Mueller and Sam Sutton

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QUICK FIX

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.

IT’S MONDAY — Sam is flying solo this week while Zach takes some much-deserved time off. Send tips, gossip and suggestions to Sam at ssutton@politico.com.

 

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Driving the Week

Monday … The National Association for Business Economics hosts an event on its policy survey at 3 p.m. … 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 … Wednesday … New home sales for July will be released at 10 a.m. … Thursday … Bipartisan Policy Center hosts an event on housing policy at 1 p.m. … 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.

China’s economy — China’s decades-long economic expansion is finally starting to fade. It’s “a gearshift in what has been the most dramatic trajectory in economic history,” Adam Tooze, a Columbia University history professor who specializes in economic crises, told The WSJ’s Lingling Wei and Stella Yifan Xie.

— In Washington, China’s stalling growth adds another wrinkle to a complex and evolving policy landscape around trade. Commerce Secretary Gina Raimondo heads to Beijing this week, where she’ll face the “awkward” position of having to promote “U.S. exports while likely being pressured by Chinese officials to ease up on long-standing trade restrictions and ‘de-risking’ measures the administration has taken over the past year,” our Phelim Kine and Doug Palmer report.

— On Sunday, Bloomberg’s Li Liu reported that China’s central bank and financial regulators “met with bank executives and told lenders again to boost loans to support a recovery.” It’s a sign that policymakers are increasingly concerned about the country’s economic prospects.

Shrinking — The savings American consumers accumulated during the pandemic have started to dwindle. And as households grow more reliant on regular paychecks to support spending, consumers are at a crossroads “as they consider how to alter their spending and whether to go deeper into debt,” Wendy Edelberg and Sofoklis Goulas of the Brookings Institution’s Hamilton Project told Bloomberg’s Rich Miller.

First in MM: The progressive agenda on junk fees — President Joe Biden has made going after so-called junk fees a core issue of his administration’s regulatory and financial policy agenda. Now The American Economic Liberties Project — an anti-monopoly group that’s often aligned with progressives like Warren and CFPB Director Rohit Chopra — is rolling out draft legislation and a state-level playbook for policymakers to target charges levied by banks, resorts, airlines and ticket vendors that have come under fire.

Fed File

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 will ever return to the lower levels that prevailed before 2020 even if inflation returns to the Fed’s 2% target over the next few years.”

In the markets

The bond bulls — The WSJ’s Eric Wallerstein: “Bond investors say the summer selloff in U.S. Treasury debt is providing the best buying opportunity in years … Many bond bulls believe the sheer weight of U.S. debt being issued over time will play to their advantage, with increasing debt payments ultimately slowing economic growth and causing riskier assets to sputter.”

As if college wasn’t expensive enough — Axios’s Sareen Habeshian reports that “students would need to earn about $72,000 a year to afford rent in America's most expensive college towns.”

Something to watch — Nvidia will report its quarterly earnings on Wednesday. The chipmaker has become a major component of the S&P 500 amid the artificial intelligence boom. We’ll be listening in for commentary on China’s slowing economy and Biden’s outbound investment proposal.

 

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Fly Around

Gaucho — Bloomberg’s Fabiola Zerpa: “Argentina’s economic minister and presidential candidate Sergio Massa will travel to the US on Monday for talks with the International Monetary Fund on the country’s refinancing disbursements amid the peso’s devaluation.”

Outbound — Reuters: “German Economy Minister Robert Habeck wants to tighten the process for reviewing foreign investments with a new law that would aim to enhance economic security, according to a ministry document seen by Reuters on Sunday.”

[Peak Congressional intern voice] My uncle’s a member — The FT’s Oliver Barnes and Harriet Agnew: Washington power brokers will from next summer have a new rendezvous as club group Soho House teams up with ‘junk bond kingMichael Milken to launch a new outpost in a complex next to the grounds of the White House … Milken, one of Wall Street’s most influential figures of the past three decades, will collaborate on the project with his friend Ron Burkle, the American retail billionaire who is the majority shareholder in Soho House.”

 

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