2024 Leg Session, Ari Armstrong, Exclusives, Gold Dome, Uncategorized

Armstrong: Rethinking how we fund welfare in Colorado

When reading Ann Schimke’s Chalkbeat articles on a bureaucratic, inflexible child care subsidy program, my first thought was, why not just give the cash directly to struggling parents, and let them decide what to do with it? We can also ask deeper questions about how government hands out welfare benefits.

House Bill 24-1223 would simplify the application process for the $156 million subsidy program the Colorado Child Care Assistance Program or CCCAP,” as well as expand the available subsidy, Schimke writes. The bill also would expand subsidies for parents who work in child care.

The Colorado program relies heavily on uncertain federal funding. The bill’s sponsor, Lorena Garcia, said (quotes Schimke), “If something happens where these dollars then do not become available, we have time to correct.” State legislators, then, again play second-fiddle to the U.S. Congress, however much the arrangement undermines federalism.

The program services around 17,000 families for around 26,000 children, Schimke writes, “only about 11% of eligible children.” She adds, “Just over 2,000 child care providers accept state subsidies, fewer than half of the state’s providers.” In other words, most eligible families and eligible providers find the program so bureaucratic that they turn down this “free” money. The current bill means to help, but it seems like legislators should consider a fundamentally different approach.

Even when people take advantage of the subsidy, it’s inflexible. What if a parent would rather use the money to reduce work hours and spend more time at home? What if a parent would rather call in a grandparent to help out instead?

Here is a simple test. Ask each of the people who receive the subsidy if they’d rather have equivalent cash payments instead. My guess is all or almost all would take the cash.

Schimke profiles one woman who earns “about $1,300 a month from her work cleaning houses.” The Early Childhood Council of Larimer County, where the woman lives, says that the average monthly cost of child care in the area is around $1,300. Why do legislators think it’s so obvious that subsidizing child care for this woman is better than just giving the funds directly to her? It’s certainly not obvious to me.

As for the supply of child care, government should focus on removing regulatory and tax burdens that damage the industry. Just the uncertainty of government funding probably keeps some potential providers out of the market.

Ways to help the poor

Purist libertarians think government should play no role in aiding the less well off, and people who want to help should turn to personal efforts and private charities. Such efforts rely on people helping out because of their goodwill toward others rather than because government threatens to lock them in a cage.

Private charity tends to be more nimble than government action, and people can quickly start new charitable efforts to meet changing needs. Government programs, by contrast, tend to be heavily bureaucratic, inefficient, and prone to special-interest politicking. And tax-funded government programs sometimes push out private efforts, although private charity remains important regardless of government’s level of involvement.

In our society, most people (including some self-described libertarians) think government should help the less well off through various welfare programs. Fewer people think government should subsidize the middle class or the wealthy, but government often does that too.

The main argument against relying on private charity is that people might not contribute enough due to the free-rider problem. Most people with means would prefer to contribute to helping the poor if their gift were essential. But, if everyone else pitches in, a given individual can shirk. The problem is many people might be tempted to shirk. Government cuts down on shirking by threatening to take people’s stuff by force or arrest them.

Anyway, we do have a welfare state, and it’s reasonable to want a better-run welfare state. Government can help people financially in three main ways: direct cash contributions, payment for goods or services provided by third parties (via vouchers, food stamps, or the like), or in-kind contributions.

Bypassing the bureaucracy

With the child care program, government pays for people’s child care. Again, I think government probably would help the recipients more simply by handing out that cash to those in need, then letting parents decide what to do with it.

The argument against cash contributions, of course, is that some people will use the cash for stupid things, such as illegal drugs or a trip to Vegas. That’s a real risk, although I think most people would spend the money wisely. But we have to weigh the costs of such abuses against the costs of a bureaucratic, inefficient, inflexible program to pay for specific expenses. Arguably a cash program is less wasteful.

Another program where government pays for goods or services is the “free” school lunch program, which is spending more than expected. Again, why not just give that money to parents in need and let them decide what to do with it? Maybe some parents would prefer to pack their kids nutritious and delicious lunches rather than sign up for the low-quality food often served by schools. If government insists on buying food, why not instead expand SNAP benefits? Are two programs really better than one?

Regarding food benefits, another possibility is for government to provide food directly rather than via SNAP benefits. Government already does some of this. “The State of Colorado has provided $14 million in funding for food banks and food pantries in 2023,” reports Hunger Free Colorado. Whereas some individuals use SNAP benefits to buy low-quality food, government could, at least theoretically, buy higher-quality and economical food. A problem is that politicians often succumb to special-interest pressures rather than focus on optimal outcomes.

Interestingly, Colorado Democrats seem committed to paying (with tax dollars) for third-party child care, preschool services, and groceries, but dead-set against paying for third-party K-12 educational services. If you ask yourself what the difference is, you’d better come up with an answer that rhymes with “reachers’ tunions.” As I have argued, this is another case in which I think just giving the money directly to parents in need, to spend however they want, probably would be the better option.

Just because a government program purports to help the poor doesn’t mean it does a good job of it. Taxpayers and the less well off alike deserve careful thinking about the ways that government funds welfare benefits.

Ari Armstrong writes regularly for Complete Colorado and is the author of books about Ayn Rand, Harry Potter, and classical liberalism. He can be reached at ari at ariarmstrong dot com.


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