WSJ Your Money Briefing - Child Care Is Expensive. Would a Baby Bonus Help?

Episode Date: August 28, 2024

Presidential candidate Kamala Harris has proposed giving families of newborns a $6,000 bonus in the form of a tax credit – an approach that’s been used by a few other countries. With rising child-care costs, will it make a difference? Wall Street Journal reporter Dalvin Brown joins host J.R. Whalen to discuss.  Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

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Here's your money briefing for Wednesday, August 28th. I'm JR Whalen for The Wall Street Journal. The Urban Institute estimates that having a baby can mean a roughly 10% drop in income from the month the baby is born compared with before the pregnancy. As part of a presidential campaign platform, Vice President Kamala Harris is proposing a baby bonus. So Harris's proposal builds on the success of the pandemic's expanded child tax credit. During the pandemic, it was $3,600,

but Harris is now picking up on that and proposing a more generous $6,000 as a one-time bonus to help families with big expenses during their baby's first year. We'll go over the details with Wall Street Journal reporter Dalvin Brown after the break. Introducing TD Insurance for Business with customized coverage options for your business.

Because at TD Insurance, we understand that your business is unique, so your business insurance should be too. Whether you're a shop owner, a pet groomer, a contractor, or a consultant, you can get customized coverage for your business. Contact a licensed TD Insurance advisor to learn more. Democratic presidential candidate Kamala Harris is proposing a $6,000 baby credit to ease the financial burden facing new parents. Wall Street Journal reporter Dalvin Brown joins me.

Dalvin, what does it currently cost to have a baby in the U.S.? Having a baby in the U.S. usually comes with a pretty big financial hit. And it causes a 10.4% drop in income on average from the time the baby is born, compared with during the pregnancy. And that's according to the Urban Institute, which tracks these types of expenses. And those expenses don't stop there, right?

Correct. The costs keep coming, especially with daycare. In big cities, infant care can cost $1,400 a month or more. And over the past few decades, the cost of daycare and preschool has risen nearly twice as fast as inflation. How have the current child tax credits benefited families? The expanded child tax credit during the pandemic was a huge help to families. It lifted 2.9 million kids out of poverty by providing $3,600 payments or credits to families

per child. And then families used this money during the pandemic to buy things like groceries, rent, and utilities. And for many, it was a crucial lifeline during that time. How did VP Harris arrive at the $6,000 number for her proposal, and how would it expand those tax credits? So Harris's proposal builds on the success of the pandemics, expanded child tax credit. During the pandemic, it was $3,600.

But Harris is now picking up on that and proposing a more generous $6,000 as a one time bonus to help families with big expenses during their baby's first year. She also plans on bringing back that expanded child tax credit so families could get more to support their kids in those early years. Who would be eligible for the $6,000 payment? Eligibility would likely follow the current child tax credit rules, so most families would qualify.

And some of the experts that I spoke to said that they're expecting families that are earning $150,000 a year or less to qualify for this program, though the Harris campaign hasn't put out all the details and eligibility requirements just yet. But is that $6,000 figure enough? You spoke to several people who recently had children. What did they tell you? One of the parents I spoke to, Chabre McCollum,

said that $6,000 would help a lot, but it might not cover everything. After her third child was born, she had to make some tough decisions like canceling cable, skipping family trips. They also cut back on their auto insurance. So when they got in a wreck, they couldn't afford to buy a new vehicle.

But she did say that during the pandemic, she felt like she could make ends meet with those pandemic era credits. So having it right now would be really useful. That potential $6,000 credit would come in handy for many families, but the money has to come from somewhere. Who would pay for it? Preliminary estimates suggest that it could cost $1.6 trillion or so over the next decade. And funding would primarily come from either federal funds, possibly increasing taxes,

which will definitely be a point of debate. Has this type of credit been offered before? Yes. Australia offered a similar one-time baby bonus starting in 2004. And it was so popular that some parents delayed their births to qualify for it. And notably, some researchers said that there were more births that July 1st in Australia than on any other day in history.

While it's not necessarily a new idea, Harris's proposal would be the first at this scale in the US. What's been the response from the Trump campaign and Republicans? Both sides of the debate want to put more money in families' hands and recognize just how expensive it is to raise children these days. Trump's vice president nominee, JD Vance, says he supports a tax credit worth about

$5,000 for children, though the details have not been released yet. And Trump has also said that he supports the idea, but hasn't given a specific amount of money just yet. That's WSJ reporter Dalvin Brown. And that's it for your Money Briefing. This episode was produced by Ariana Osspuru with supervising producer Melanie Roy. I'm JR Whalen for The Wall Street Journal. Thanks for listening.