How Policymakers Fight a Losing Battle With Models
Reforms are needed to ensure that inaccurate budgetary math doesn’t take precedence over maximizing long-term prosperity.
BY ELIZABETH WARREN
APRIL 4, 2023
If you’re wondering why the U.S. has failed so miserably in developing a workable child care and early-childhood education system, consider the role of economic modeling.
In 2021, when the Congressional Budget Office (CBO) released its much-anticipated score for the cost of the child care provisions in the Build Back Better Act, it produced one headline number: $381.5 billion. This was what CBO estimated as the amount of money the government would lay out for child care.
But that budget score badly missed the mark on the net cost of the program. It did not account for any of the savings predicted by reams of academic research on the long-term economic benefits of child care. Nothing about how kids with high-quality early care do better in school, stay out of trouble, and have higher lifetime earnings. Nothing about the increased tax revenues generated by mamas and daddies who could now work full-time. Nothing about the mountains of data that show that when mothers are held out of the workforce in their early years, their lifetime earnings and even their security in retirement are seriously undercut—something universal child care could reverse. And nothing about the impact of higher wages for child care workers—wages that would mean many of those workers would be paying more taxes and wouldn’t need SNAP, Medicaid, housing supplements, and other help offered to the lowest-paid people in the country. In other words, according to CBO, investing in our children and filling a wheelbarrow with $381.5 billion in cash (a big wheelbarrow) and setting it on fire would have exactly the same impact on our national budget and our nation.
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Budget rules, by contrast, tilt against investing in people. And there’s a reason for that. Decades ago, Congress decided that CBO cannot account for the indirect or secondary effects a policy change may have on other parts of the budget. Research shows, for example, that federal spending on things like safe housing and nutrition assistance for babies makes people healthier and reduces total health costs. But because of the rules Congress set, CBO cost estimates for these programs cannot assume taxpayers would save any money on health insurance costs or that taxpayers would spend less on Medicaid. Meals on Wheels helps seniors stay out of much more costly nursing homes and saves Medicare and Medicaid billions of dollars, but the federal government says it is nothing but an expense. Beefing up IRS enforcement, as Democrats did in the Inflation Reduction Act, would mean fewer tax cheats and more revenue. But according to official CBO scoring, more money for the IRS is mostly another expense that adds to the deficit.
https://prospect.org/economy/2023-04-04-policymakers-fight-losing-battle-models/
( I think she is brilliant, and is a great teacher as well. )
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