A key weakness of administratively determined prices is that they don’t respond rapidly and rationally to changes in economic circumstances. A friend who grew up in the Soviet Union cooked with an iron pot that had the price of the pot cast into its iron. Child-support orders in the U.S today embed roughly the same price-setting mentality.
Family courts set child-support payments based on complex administrative-economic formulas. The resulting administrative-economic price (payment amount) is presumed to be valid for the next twenty-one years. A burdensome court procedure is required to change the child-support price. Making the whole apparatus even more economically absurd, the totalitarian Bradley amendment outlaws any retroactive changes in accrued child-support debts. Hence, if you’re under a child support order and you’re imprisoned, you better get a child-support modification form filed quickly, or you could be imprisoned again for child support debt accrued while you were in prison.
Rigidity in child-support orders is a significant economic problem. Only about a third of child-support orders are ever modified. Among child-support orders in force for more than ten years, 57% have never had the amount of the order changed. Most child-support orders are never modified. That doesn’t mean that they remain economically appropriate for eighteen or twenty-one years.
Real, vitally important economic circumstances change rapidly. For example, from early 2007 to early 2009, the unemployment rate in the U.S. rose from about 5% to about 10%. Among persons subject to child-support orders, 10% have family income below the poverty level, 11% didn’t work in the past month, and 21% have two or more children living with them in their household. At population medians, child support orders account for an estimated 14% of gross family income. Housing, for comparison, consumes 24% of gross family income. In response to changing economic circumstances, persons usually can change their housing costs more easily than they can change their child-support payments.
Child-support orders cast in iron undoubtedly create great hardships for adults and children living in the rapidly changing circumstances of the real world.
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