The loans-for-babies program did not boost babymaking either. It has only served to 1) push families into dependence and 2) to punish those who were not eligible by pricing them out of the housing market.
The loans-for-babies program sounded like a great idea – if you didn’t think too much about it.
It gives a mixture of loans and non-refundable subsidies to couples who sign a contract to deliver up to 3 children in exchange. If they deliver, the loan doesn’t have to be repaid. If they fail to deliver the promised number of offspring in the allotted time, divorce or move house during the next two decades, they have to repay the loan with penalty. And the penalty is harsh – even before the interest rates start to rise again.
The policy has been a communist staple – so it stands to reason that Orbán reintroduced it in 2015. It is a hugely popular policy so it is unlikely to ever be cancelled. Yet, it only sounds like a good idea for a superficial onlooker. In depth, it doesn’t only cause incalculable human misery by locking people into abusive marriages and making unwanted children born – it has also failed to give any help on the housing ladder for its intended beneficiaries. Or just very little.
When the program was first hinted at, in 2015, asking prices shot up literally overnight. Then years and years of new rules and conditions followed. There was no week without yet another condition, micromanaging rule or new type of hypertargeted subsidy being announced. Somehow it made Orbán hugely popular, despite the demeaning conditions, the mountains of paperwork, the avalanche of arbitrary conditions and the paternalism of it all. Orbán inherited a society damaged by a statist autocracy – and he exploited as well as amplified state dependence even more.
The first numbers are in. According to a study by the central bank (pdf) 170 thousand couples took out the baby loan since its inception in 2016.
It was supposed to boost birth rates, yet in the data between 2016-19 no such increase can be seen. And although there were 3.3% more births in 2020 than the previous year – it is still below the 2016 level.
If the policy boosted anything, it was the number of marriages (a condition of the loan) out of which 62% claimed they only signed the marriage contract to get the subsidies.
The program didn’t give a financial boost to its recipients either. It caused a bigger inflation in house prices than the subsidy covered. According to the central bank 75% of the subsidy/loan was soaked up by the price hike in the same period.
So if a couple took out the maximum of 27 thousand euros in exchange for 3 new children, they were only 7 thousand euros better off on the housing market. 7000 euros of advantage. In exchange for 3 children. And most took out less cash.
How much money can someone save if they have fewer babies? How much can they make in the same amount of time, if they are only a little more flexible with their time and where they move?
Is 7000 enough to give away one’s freedom to change her or his mind later? About their marriage? About where they live? About the number of children they have to have?
7000 to give up one’s freedom to leave an abusive relationship? To move where the jobs are? To give up one’s freedom to leave a village? (There is a special branch of the baby loan that only applies if the couple agrees to move to a village – to keep the villages “alive” – for 20 years, and raise their unfortunate children there.)
The massive state subsides thus did not help families to buy anything they could otherwise not afford – without signing a contract to deliver babies in exchange.
Luckily (for them) 77% of couples only took out the subsidy for their already existing children. (After some serious hesitation, the government eventually allowed to count in existing children because those who already delivered to the nation felt punished.) They will be fine. But those who promised children were also overwhelmingly cautious, promising only one or two children in exchange for less money.
For those who promised three kids and had none yet, we have some bad news. We have some data about the program from the last few years of the communist times and it showed that about a quarter of the loans became repayable with penalty as the recipients failed to deliver the contracted number of new Hungarians for the state. That’s nearly ten thousand families ripped to pieces by the taxmen and the bank – on top of the family issues they had – totally at the mercy of politicians. And they were all, no doubt, blaming themselves. And society blamed them, too. No one blamed paternalist politicians ever, but we should.
Of course, no policy makes sense based on its publicly intended purpose.
But they all make sense when it comes to their political purpose.
Putting aside birth-boosting, which failed, the loans-for-babies program is a political tool to entrench dependence on the state and thus on the political leadership. Not only does it make its victims rationalize their own misery, it will keep them grateful for the (nominally) big sum – even if they lose out on it in the end in the form of higher house prices and in the very likely event that they have to repay the loan with penalty. If they do so because they divorced – they will blame themselves. If they don’t reach the contracted number of babies – they will blame themselves. Have the had the clarity to see the cruelty of such paternalism in principle – they would not have taken out the loan in the first place.
It also entrenches political loyalty on the village level. It clearly shows that only villages with an Orbánist mayor became eligible for the village CSOK, the offshoot of the loans-for-babies program that made couples sign to move into a village, stay there for two decades and force their children to grow up there as well. Because politically, the phrase “keep villages alive” makes sense. In real life, it does not.
For those who are not eligible for the loan, it may first look like a disaster and a punishment – and it is. It prices them out of the housing market – the price increase strikes them as well – and they will blame themselves. It is also an overt political punishment for being single or childless, living in a non-heterosexual relationship or being in any way non-standard, like having worked abroad prior to the application. (As I said, the jungle of arbitrary conditions should by itself be a cause for outrage.) But they, too, blame themselves.
If people can’t afford something it may sound logical to give them money to buy it. But only in theory and for very simplistic minds, such as politicians and state-dependent voters. In reality, something whose supply is as rigid as that of housing, extra money will only result in price increase. It can not result in anything else.
All the rest of the consequences were even more foreseeable if one took a look at the conditions from his or her own, individual point of view. But we are discouraged to do so.
Yet, the political benefits of such a policy are obvious. It gets one elected and reelected to spend taxpayer money back on certain taxpayers in a spectacular fashion – especially when the policy’s damaging consequences as well as its failures will be blamed on the recipients and the non-recipients alike. It encourages dependence – which is a tempting state for lesser minds, but it only ever serves as the source of oppression. Going abroad and making 27 thousand euros makes a lot more sense for anyone, even those who wish to have children, but we are not encouraged to think like that.