Analysis: How Biden plans to add $600 billion to the U.S. 'care economy'

By Andrea Shalal and Heather Timmons

WASHINGTON (Reuters) - President Joe Biden's $4 trillion plan to rebuild the U.S. economy aims a flood of cash at something millions of women in America do for low pay or no pay at all: taking care of other people.

Biden's "American Jobs Plan" would boost an existing government program with $400 billion more over a decade, to give more elderly and disabled people basic care they need, while his "American Families Plan" creates free universal 'pre-Kindergarten' and adds other childcare to the tune of $200 billion.

The White House's team of economists and economic advisers, many of them women, argue that this influx of government cash is essential to fix and grow the U.S. economy. It will get women back into the workforce who left because of the coronavirus, allow other stay-at-home caregivers to take jobs, and pay the people who do care-giving work as a job a more livable wage.

"Investing in the jobs that women do is core to economic recovery," said Jen Klein, co-chair of the White House Gender Policy Council told Reuters. "It's not a side thing that can be traded away."

The entire premise, though, is proving to be one of the most controversial parts of Biden's plans. Republicans and some Democrats question why taking care of children, the elderly and disabled should be counted as infrastructure, should be funded by the government, or whether women want this aid at all.

WHAT BIDEN'S PROPOSALS WOULD DO

Biden's infrastructure plan calls for Congress to add some $40 billion each year to Medicaid, the nation's public health program for people with low incomes, and $25 billion to upgrade and add new child-care facilities.

The additional Medicaid money would mean more people who need free or low-cost home and community-based care could get it, aiding a rapidly-growing population of older Americans, people with disabilities, and the people who take care of them.

It would be a significant jump - total Medicaid funding towards "long-term support services" was $129 billion in fiscal year 2018. Overall Medicaid spending for these services dropped from 47% of the total budget in 1988 to 32%, as the United States scaled down welfare programs at the end of the 20th century.

Boosting Medicaid funding will clear a 800,000 person waiting list, the White House said, while adding millions of well-paying federally-backed jobs that include medical benefits and the right to unionize. It has not released an estimate of how many jobs could be created.

The White House has deliberately not prescribed how the boost in Medicaid spending would be structured or how funds would flow to states, so that Congress can work out the details, according to two administration sources.

Biden's infrastructure plan also calls for $25 billion in funding for states to build infant and toddler daycare, and allows companies to write off 50% of their construction costs on their taxes to add onsite childcare.

His "Families plan" would create nationwide pre-kindergarten, which would essentially create free daycare for three- and four-year olds. It also adds 12 weeks of paid leave for all workers for their own or a family member’s serious health conditions, caps childcare costs at 7% of income for low-to-mid income families, and extends the expanded child tax credit through 2025. [L1N2MF38D]

HOW FUNDING CARE HELPS THE ECONOMY

White House officials say the coronavirus pandemic revealed the economic importance of caregiving.

Millions of women left the workforce during the pandemic to care for children doing school from home, or elderly relatives who couldn't use other services. Nearly 20% of working-age adults said in July of 2020 they were not working because COVID-19 disrupted their childcare arrangements, with three times as many women between the ages of 25-44 in that situation than men.

Now that offices and schools are opening back up, whether America's mothers return to work after the pandemic remains uncertain, because childcare facilities have fewer spaces and fewer teachers.

Even before the pandemic, the dearth of affordable childcare in the United States was a drag on economic growth, experts say. Some 51% of Americans now live in areas with insufficient supplies of licensed child care, or "child care deserts," with rural areas and Latino families hit particularly hard, according to the Center for American Progress liberal think tank.

In such areas, maternal labor force participation is about 3 percentage points lower than in areas where licensed child care is more readily available.

Childcare needs aside, America's growing elderly population will create a huge demand for carers. By 2034, there will be more people in the United States over 65 than under 18, a first in U.S. history.

Half of those over 65 will need long-term care and services, according to LeadingAge, which represents more than 5,000 providers of services for aging adults.

The Labor Department projects demand for home care providers will increase 34% by 2029 as the number of Americans over 65 rises rapidly.

Some 3.4 million people, mostly women of color, work in the paid home care economy now, earning an average of $13 per hour, or about $27,000 a year. Another 1.1 million people work in providing child care, earning about a dollar less an hour, or about $25,460 a year.

"This is desperately needed infrastructure because we are totally unprepared for the demographic changes that are happening in this country," Klein told Reuters. "These services have been woefully underfunded for far too long."

However, Republican Senator Mitt Romney said the plan was simply throwing good money after bad.

"Simply dumping more money into existing programs, programs that really need reform, is not ideal economic policy," he told an Aspen Institute event.

(Reporting by Andrea Shalal and Heather Timmons; Editing by Kieran Murray and Alistair Bell)