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Policy: Health Care

Private sector makes raising children less expensive, public sector makes it more expensive

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Beltway Confidential,Opinion,Transportation,Food and Drink,Michael Barone,Health Care,Walmart,Housing

The private sector has been making raising children more inexpensive. The public sector has been making raising children more expensive. That’s the lesson I draw from this Bloomberg blog post by the indefatigable and insightful Megan McArdle. She links to U.S. Department of Agriculture data on “expenditures on a child from birth through age 17, total expenses and budgetary component share” for 1960 and 2013, both expressed in 2013 dollars. The pie charts show that the percentages spent on housing and transportation have remained static, while the percentages spent on food and clothing have declined significantly and the percentages for health care and “child care & education” have risen significantly.

I thought it would useful to translate these percentages into dollar figures. The following table shows dollar figures for 1960 and 2013 (both in 2013 dollars) and the percentage increase or decrease over those 53 years.

Category 1960 2013 Percentage change
Child care & education $3,971 $44,161 +1,012%
Health care $7,942 $19,627 +147%
Housing $61,553 $73,602 +20%
Transportation $31,770 $34,348 +1,012%
Miscellaneous $23,827 $19,627 -18%
Food $47,654 $39,254 -18%
Clothing $21,842 $14,720 -33%
Total $198,559 $245,339 +24%

 

Obvious conclusion: Parents have to pay lots more for things that are largely provided by or heavily regulated by government — education (including child care) and health care. The increase for child care also is undoubtedly due to the fact that in 1960, a much higher percentage of children lived in two-parent families in which the mother did not work outside the home. Two-earner households today presumably make more money and can afford this, indeed have chosen to afford the extra costs of child care; but they must weigh pretty heavily on one-parent households.

Housing, despite skyrocketing housing costs in liberal metropolitan areas with high income equality and restrictions on housing supply (New York, Washington, San Francisco, Los Angeles, etc.), have not risen substantially. They may not have risen at all, on average, if you count housing cost per square foot, since houses today tend to be significantly larger than they were in 1960. Transportation costs have not risen much at all. Housing and transportation are to some extent provided by government, in the form of mortgage subsidies and spending on highways and mass transit. But most of the dollars go to private sector providers — homebuilders and automakers. They seem to have done a good job of providing goods at pretty steady prices — indeed, declining prices, perhaps, when you account for increased house sizes and technological advances in home appliances and automobiles.

Costs of childrearing have gone down — sharply down — in two areas dominated by private sector provision: food and clothing. Call it the Walmart Effect, although Walmart is only one of many businesses that have squeezed costs out and compete vigorously in providing quality goods at low prices. Some of these declining costs, I am pretty sure, come from the deregulation of transportation and communications, policies pursued vigorously by the Ford, Carter and Reagan administrations.

When visiting relatives in Michigan, I have occasion to go shopping in Meijer Superstores, which I’m told Walmart used as a model when it expanded into groceries. I’m amazed by the low prices and profusion of merchandise, including high-quality meat and produce. These stores are not in upscale neighborhoods, and there’s plenty of racial and ethnic diversity among the shoppers. The selection compares very favorably with the supermarkets I remember from the 1950s and 1960s. Americans may not realize it, but it is cheaper to buy most things, from fresh vegetables to luxury goods, in the United States than anywhere else in the world.

The bottom line is that the private sector, thanks in significant part to deregulation and free-market competition, has made it substantially less expensive to feed and clothe children over the past half-century. The private sector, aided marginally by government, has made it only marginally more expensive to transport and house them. But the public sector, together with changes in lifestyles, has made it much more expensive to provide them with health care and to educate them. There's a lesson here, I think.

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Author:

Michael Barone

Senior Political Analyst
The Washington Examiner

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