- Prior to FSA, Courts typically determined the financial needs of the child by taking the costs directly associated with raising children (clothing, school, etc). However, the child’s portion of shared (or indirect costs) like transportation, housing, etc. were not included because of two problems:
1. Spending decisions are made privately by households and not directly observable.
2. Most spending is done on shared goods – goods used by all members of the households.
- With the passage of FSA, states were required to use the best available data of child rearing costs to calculate just and appropriate child support payments.
- Two economic studies were commissioned as part of FSA and are often used by consultants as the benchmark for other studies.
- While economists do not agree on which economic study is the best measure, consultants say that the upper bound is USDA 2012 study and the Betson-Rothbarth 2010 is the lower bound.
- According the guidance provided by Lewin/ICF in the 1990 Estimates of Expenditures on Children and Child Support Guidelines, an amount between the upper and lower bound is appropriate.
- Since 1990, there have been multiple economic studies on the cost of raising children.
- OCSE was tasked with providing technical assistance to review ways to help develop measurements of children’s expenditures.
- There has been considerable criticism of the popular Economic Studies (Critical Articles Expenditures on Children).
- They are based on a set of assumptions that we are supposed to believe is correct. But as we are finding about economists’ miscalculations about the harmful effects of globalization, we need to scrutinize these assumptions even when they come from individuals with PhDs.