The Truth About the Free Market Family

“A genuinely free market family agenda could start with reforming tax laws to ease the burden on two-income families with children. As Edward McCaffery documented in his 1997 book Taxing Women, the U.S. tax code is biased against secondary earners, who are usually women. The secondary earner’s first dollar is taxed at the same high rate as the primary earner’s last dollar, because we don’t allow true individual filing for married couples.”

“One of the book’s best chapters explores the benefits of marriage and decries falling marital rates among the poor. But it does not explore how tax and welfare policies that distort market signals help explain the rejection of marriage. For example, a couple who each earn $20,000 and are eligible for the Earned Income Tax Credit can get substantially more by remaining unmarried and filing two separate tax returns than by marrying and filing one. And because many welfare benefits are reduced as household income rises, there is a disincentive to live with the other biological parent of one’s children. A simpler relief system, along the lines of a negative income tax or a universal basic income, could avoid many of those dysfunctions by providing benefits directly to individuals regardless of marital status or other demographics. But even that sort of reform, hardly a radical libertarian move, doesn’t get discussed here.”

“Nor do we hear as much as we should about the potential drawbacks to the policies Eichner prefers. She frequently invokes Finland as a country that does more to mandate paid parental leave, subsidize day care, and limit weekly hours of paid work. She does not ask what the costs to Finnish society might be from such policies. For example, the Finnish unemployment rate over the last decade (before COVID-19) was roughly twice the U.S. average, falling only briefly below 6 percent and topping out at almost 12 percent in 2015. The female unemployment rate for 2009–19 averaged about 8 percent, compared to about 6 percent in the United States. In 2014, Reuters found that fewer women are in high management positions in the private sector in the Nordic countries than in the United States. There are two likely explanations for this. First, despite public policy geared toward equality, Nordic women still are disproportionately represented in occupations such as health care and education that are largely in the public sector. Second, parental leave laws still encourage more time off for mothers, and that time off can set women back when pursuing management tracks. The Financial Times recently reported a similar result looking specifically at Norway.
Perhaps these costs are worth the benefits, but to make that case you have to discuss the cost side of the equation. The Free-Market Family does not grapple with the evidence that virtually every federal social program in U.S. history has ended up costing far more than projected when it passed. Whatever Eichner imagines the costs of her preferred pro-family policies to be, we can reliably multiply that several times over to get the likely costs over time.

She does finally say something about costs in the final chapter. But even there we get only a few paragraphs of hand waving and the assurance that these programs will pay for themselves with greater productivity and female employment. And if they don’t, well, we can just reallocate what we spend on the military and make the tax code more progressive. There is no discussion of the potential tradeoffs caused by higher marginal tax rates. (She points out that the U.S. economy grew when statutory rates were higher in the past, but this ignores the difference between statutory rates and the effective rates paid after avoidance and deductions. According to the Tax Foundation, the top 1 percent of earners in the 1950s paid an effective tax rate of about 42 percent, which is not that much different from the 36 percent effective rate today.)

Despite these omissions and flaws, The Free-Market Family does document some significant problems facing American families. As Eichner shows, the more we learn about the neuroscience of child development, the more we know about the material conditions under which children thrive. It is important to think through how best to ensure that parents can create those conditions, especially at a time when the prevailing policy assumptions tend to favor big-government interventions like the ones Eichner proposes.”