Using Social Security to fund paid parental leave is not the way to go

Marco Rubio's proposed bill would increase spending

Aug 29, 2018 @ 4:45 pm

By Bloomberg News

Senator Marco Rubio has introduced a paid-leave bill that would allow parents to collect Social Security benefits following the arrival of a new child, even if those parents are not retired. The benefits would be used to finance time away from work, and parents collecting them would be required to delay receiving Social Security payments by several months once they reach normal retirement age.

Although some on the right are supportive, Sen. Rubio is taking heat from many conservatives (including from me). The Florida Republican argues that the bill wouldn't "expand government," because it is designed not to increase federal spending over the long term, but merely shifts the period when spending occurs across a person's life.

I'm not sold that spending won't go up, but let's leave that aside. It still seems that the bill would expand government in scope, even if not in scale. There is not currently a federal program for paid parental leave, but there would be if this bill is enacted.

Some supporters of the bill argue that it would add flexibility to Social Security, not expand it. It's even been described as a Social Security "reform." This characterization — reform and flexibility — is appealing to many conservatives. But if this is the goal, the Rubio bill does not go far enough. I have two suggestions to improve it.

The claim that the bill does not increase federal spending requires believing that paid-leave benefits taken today will be paid back with delayed receipt of retirement benefits decades from now. This leads to my first suggestion: Make sure spending doesn't increase by coupling any paid-leave benefit with actual cost-saving measures to Social Security as a whole.

The Congressional Budget Office calculates that linking initial Social Security benefits to average prices rather than average wages would save $114 billion over 10 years. Reducing payments by 5% for new beneficiaries would save $105 billion over a decade.

But if we're cutting, I'd favor making Social Security relatively less generous for high-income households. In a 2016 report on reducing the deficit, the Congressional Budget Office presented a way to make Social Security more progressive while also reducing 10-year spending by $36 billion.

It's hard to know how much the Rubio plan would cost, in part because of significant uncertainty around how many workers would sign up for the parental-leave benefit. A similar plan has been analyzed by the Urban Institute, which finds costs of $4.9 billion in 2019 and $9.2 billion by 2025. The bottom line is that reasonable cuts to Social Security borne most heavily by upper-income households could easily finance a federal paid-leave benefit while also significantly reducing the federal budget deficit, which should be a goal of any Social Security reform effort.

That's reform. Regarding flexibility, it is odd to congratulate this bill for that if the only expense to which early Social Security benefits can be applied is parental leave. Furthermore, it's not clear why paid leave should be at the top of the list. Why not allow early Social Security benefits for other discrete, infrequent life events? College tuition and home purchases immediately come to mind.

A 2014 report by President Barack Obama's Council of Economic Advisers found that 40% of working women reported having access to some form of paid leave following the birth of a child, and that this access increased as income rose. The more workers who receive the benefit from their employers, the less value offered by the bill's (so-described) flexibility.

One reason not to allow early benefits for tuition and home purchases — and to stick with only paid leave — is to help ensure that spending through the Social Security system actually does not increase, a key promise of the plan. But if the Rubio bill were improved by including actual cuts to Social Security spending, this concern would no longer be operative. Hence, my second suggestion: Don't restrict new spending to paid parental leave.

One way to put this suggestion into effect would be to couple Social Security cuts with an expanded child tax credit, perhaps by making the credit larger in the year a household welcomes a new child. Low-income households should get a relatively larger expansion. This money could be spent to finance a few months away from work — or, if the parents prefer, on any of the many expenses facing new parents.

This package — Social Security cuts and an expanded child tax credit — is much more attractive than the Rubio bill. It reduces federal spending, and it doesn't expand the government's scope. It actively reorients federal spending away from the elderly and toward children. It does not rely on spending cuts decades from now to finance new spending today, as the Rubio bill does.

And rather than deciding that they should direct their new resources to finance paid leave, it offers new parents real flexibility by allowing them to decide to spend on whatever they choose. Because what's right for my family may not be what's right for yours.

Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and resident scholar at the American Enterprise Institute. He is the editor of "The U.S. Labor Market: Questions and Challenges for Public Policy."


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