Clinton's $21 Billion Day-Care Gambit

President wants big tax credits, subsidies to aid families. Critics see a 'nanny state.'

The White House has been talking child care for months. Now it's putting some money behind its words.

In a proposal that would substantially boost federal funding of day care, President Clinton has put forth a package of tax credits and subsidies aimed at helping working parents across the financial spectrum.

The plan would provide a large infusion of cash - $21.3 billion over five years - into a system that advocates have long argued was underfunded. For low-income Americans, day care can be prohibitively expensive. And for all working Americans, the quality of care in the low-wage child-care industry is a major concern.

"This is a serious proposal, and certainly the most comprehensive and significant we've had in many years from the White House to improve the child-care system," says Faith Wohl, president of the Child Care Action Campaign.

The high-profile announcement yesterday of Clinton's plan, which will be part of his 1999 federal budget proposal next month, represents an effort by the Democratic administration to maintain the upper hand on a social issue that speaks to the concerns of middle-class Americans, families, and working women.

Between 1970 and 1995, the percentage of working mothers with children under age six doubled - from 32 percent to 62 percent. The White House faces criticism from some conservatives who argue that the federal government is advancing a "nanny state" by boosting its involvement in child care.

But the Clinton plan purposely avoids the issue of standards, which are left up to states to determine, if they choose to at all. Rather, by attempting to put more cash in the system, the administration is hoping to allow more room for higher wages, which will attract a more qualified, stable child-care work force.

At Clinton's announcement yesterday in the White House's ornate East Room - attended also by the vice president and first lady - the president sought to set a bipartisan tone. Several Republican governors and members of Congress shared the spotlight, a reflection of the broad political recognition that day care is a front-burner issue.

But that doesn't mean Clinton's plan will have an easy time in the Republican-controlled Congress. How to pay for it will be one tough hurdle. Reports indicate Clinton's plan banks in part on revenue from a national tobacco settlement, which has not been reached yet and whose future is far from certain.

"It's a big number," says Rep. Clay Shaw (R) of Florida, chairman of a key House subcommittee that handles human-resources issues, referring to the Clinton plan. "We should be really, really careful about creating new programs that get us into a new deficit situation."

Congressman Shaw credits Clinton for masterful use of political "spin" in garnering attention to the issue. "The president happens to be better at it than we are," he says. "Certainly we are concerned about a gender gap, and it looks like the president is trying to capitalize on that gender gap. But I think American voters both male and female are smart enough to see through it."

Republicans also accuse the president of playing to the middle class, which needs less help on child care than do low-income Americans, a group of workers that is expanding as welfare recipients move into the work force. Middle-class, suburban voters are a prime voting bloc.

The plan includes $5.7 billion in tax credits - including a 25 percent tax credit for businesses that establish and run their own day-care facilities - that will benefit employees at all income levels. Supporters of the plan argue that a major portion of the tax credits will come in increases to the Dependent Care Tax Credit.

The "sliding scale" aspect of this tax credit has been enhanced to benefit lower-income workers in particular. For example, a family earning less than $10,000 currently can claim only 30 percent of expenses up to $2,400 for one child and $4,800 for two or more children. Under the Clinton plan, a family earning $30,000 or less would be allowed claim 50 percent of the maximum credit.

Another key element would be a major expansion of the state block grant program offering subsidies for child care. Clinton's plan would add $7.5 billion to the program over five years, making 2 million children eligible for child-care assistance by 2003, administration officials said.

CLINTON earmarked $960 million over five years to expand an after-school program run by the Education Department called the 21st century community learning center program. Now receiving $40 million a year, the program would get $200 million annually under the president's plan.

Another initiative calls for spending $3 billion for an early-learning fund.

The Clinton plan has "the right balance," says Helen Blank, child-care analyst at the Children's Defense Fund. "It provides new help to low-income working families, to ensure that families who are struggling to stay off welfare get the child-care help they need."

Ms. Blank notes also that the plan puts funding into an area where there is a particular problem with quality - babies and toddlers - by expanding early Head Start and Head Start.

Bruce Reed, the White House domestic policy chief, calls the program "a sweeping plan to help parents balance the demands of work and family by making child care more accessible, more affordable and safer."

The Senate last year passed a bill by Sen. Herb Kohl (D) of Wisconsin that, for a short term, would have allowed businesses to reduce their federal tax liability by $1 for every $2 they spent on child care for their employees.

Although it did not survive negotiations with the House, supporters said the Senate action bodes well for Clinton's smaller but permanent 25 percent tax credit.

* Staff writer Lawrence J. Goodrich contributed to this report.