10% is Not a Solution for Childcare Costs and Student Loans

paying-billsNew Orleans   In the last couple of days I’ve read various campaign pronouncements on capping the cost of childcare and capping student loan payments. Hey, tell me we can’t all get behind something like that.

But, I was struck by the fact that the ceiling on both of these onerous burdens for millions of working families were targeted at 10% of their annual income. Many of them are the same struggling families who are trying to raise young children, which means significant childcare costs, and pay student debts simultaneously. So even if we were capping both at a combined 20%, I started to wonder, would these families make it? Were these real reforms or a shuffling of costs on the Titanic?

So, I started looking around. Here’s the word from the Department of Labor.

The average income in the U.S., by household, was $63,784 in 2013, according to the Consumer Expenditure Survey conducted by the U.S. Bureau of Labor Statistics. Here’s how the average household budget breaks down:

Expenditure Category
Annual Average Cost
% of Budget
Housing
$10,080
16%
Transportation
9,004
14%
Taxes
7,432
12%
Utilities and Other Household Operational Costs
7,068
11%
Food
6,602
10%
Social Security Contributions, Personal Insurance and Pensions
5,528
9%
Debt Payments or Savings
5,252
8%
Healthcare
3,631
6%
Entertainment
2,564
4%
Cash Contributions
1,834
3%
Apparel and Services
1,604
3%
Education
1,138
2%
Vices
775
1%
Miscellaneous
664
1%
Personal Care
608
1%
TOTAL
63,784
100%

Childcare isn’t even on the list for the average family, so that 10% or more than $6000 that would have to come from some reductions in the list of basic household expenses. Education is on the list at 2%, though not as debt, and if fact on this hypothetically average list debt payments and savings are in the same category at 8%. In this cash crunch let’s assume the whole 8% would go to school loans and savings are put off for another sun shining day. This family would still be 2% of their income short, which now means they have to find $7200 and change to make ends meet and pay the bills, if and when this reform were ever implemented.

Drop entertainment at 4%, cash contributions at 3%, apparel and services at 3%, vice at 1%, and personal care at 1% and we get there, as long as the family can essentially wear old clothes and go to rummage sales, learn to play cards and look out the window for thrills, hold onto every spare dime and avoid the collection plate, learn to cut their own hair or take up begging on the streets and so forth. Is that a life? Is that possible? Hard to believe.

And of course there can be no rainy days in this family’s future. An emergency, a breakdown, a layoff, or a health crisis and this family goes under. Remember too that this is the average family so half of the households are even in worse shape than $63000 in annual income or may live in housing in much of urban America where 30% of annual income versus this optimistic gauge of 16% is considered a gift from heaven. We all know people now living in cities where half of their income is going for housing.

What’s my point? You could see it coming: a 10% cap doesn’t get the job done. Only the exceptions can live by such rules. In order to right size the economics of the average American family we need to see some loan forgiveness around student debts and we need some direct subsidies for family childcare. This neoliberalism, pay-as-you-go-under program has failed and is increasing the equity gap by leaps and bounds.

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