Column: The Republican plan for family leave would destroy your Social Security benefits
The idea of government-sponsored paid family leave is gaining popularity at the state level and in Washington, where Sen. Marco Rubio (R-Fla.) and Ivanka Trump are “strategizing” to bring more Republicans into the fold. Sens. Joni Ernst (R-Iowa) and Mike Lee (R-Utah) are said to be interested.
It’s a good idea that would finally bring the United States into line with every other high-income nation on Earth, as a recent analysis by the Urban Institute points out. But the Urban Institute also observes that the Rubio-Trump idea for financing the program through Social Security is a terrible idea. It would not only undermine Social Security’s fiscal condition, but change the very nature of Social Security in ways that will harm the millions of Americans who depend on it for their retirement.
Given that Republicans have had the knives out for Social Security since its inception in 1935, that outcome may even be deliberate. We’ll take the charitable view of the Rubio-Trump idea, and assume that undermining Social Security would be an unintended consequence of their idea. But if they’re blind to the consequence, it may only be because Republicans as a party wouldn’t really care if Social Security as we know it disappeared.
If we let people borrow against Social Security, that adds to the precariousness of the retirement system.
— Richard Johnson, Urban Institute
The Rubio-Trump plan is still in its formative stage, but in its outline it tracks an idea first proposed by conservative commentators Andrew Biggs and Kristin Shapiro in the Wall Street Journal back in January.
We wrote about their plan at the time, but the Urban Institute analysis by Melissa M. Favreault and Richard W. Johnson subjects it to rigorous number-crunching. The idea is to allow mothers and fathers to take up to 12 weeks of paid leave for the birth or adoption of a child, and repay the benefit by delaying their Social Security at retirement or accepting a long-term cut in their Social Security checks.
Rubio’s idea differs from a proposal introduced by Sen. Kirsten Gillibrand (D-N.Y.) and Rep. Rosa DeLauro (D-Conn.), which would fund a more generous parental leave stipend through a new payroll tax shared by employers and employees. Rubio’s proposal boasts the Republican virtue of not requiring any new tax to fund the program. But it has the overall defect of condemning participants to a shakier retirement.
Favreault and Johnson calculate that parents who take leave would have to delay collecting Social Security for twice the period for which they took leave — to repay 12 weeks of leave, they would have to delay their retirement benefits by 20 to 25 weeks. But delaying Social Security translates into a real financial loss; the authors reckon that parents who took a single 12-week leave would lose about 3% of their future retirement benefits, and those who took four leaves would lose 10%.
They also observe that the consequences of the retirement reduction might be especially severe for mothers, in part because they’re likelier than men to take parental leave from their jobs, so they’re likelier to lose more retirement benefits. That’s dangerous, because women already tend to be disadvantaged by the Social Security system compared to men. Among other things, they don’t get any Social Security work credits for the years they spend as caregivers in the home.
Favreault and Johnson also show that the idea that Social Security is “made whole” by charging people at retirement for their benefits early in life is a myth. The leave program would run a deficit every year until it stopped paying benefits to the last claimant, they write — and Social Security would bear the burden of that deficit. The reason is that the system would pay out benefits now but not be repaid for 30 years or so. In 2050, for example, the system would pay out an estimated $4 billion in benefits but receive only $2 billion in repayments.
As I wrote earlier, the big question is why Social Security needs to be part of a parental leave program at all. The Urban Institute pegs the cost of parental leave at somewhere between $7.2 billion and $15 billion in 2025, based on participation estimates ranging from 24% to 50% of new parents.
In terms of federal spending, that’s money that could be found in the government’s seat cushions. In fact, it could be more than paid for by eliminating just some of the tax cuts handed over to the wealthy in the tax package passed by the Republicans in December. The tax cuts will cost at least $1.5 trillion over 10 years, or an average of $150 billion a year in benefits immensely weighted toward the wealthy. That’s about 10 times the maximum annual cost of parental leave.
The drawbacks of exploiting Social Security to fund this program — or any others outside of retirement or disability — are great.
“Social Security today is a social insurance program where people pay taxes when they’re young that fund retirement benefits for people who are old today,” Johnson told me. “It’s not a savings program. But if you allow people to borrow against their future Social Security benefit, that fundamentally changes the program into a system of private savings accounts.”
That destroys the basic purpose of Social Security, which is to provide disabled people and retirees with support based on their historical earnings, with relatively greater benefits flowing to lower-income Americans or those in need because of disability during their working years. Savings accounts don’t work that way — they’re tied closely to the account holder’s earnings, and their benefit payouts are meager until their savings have had a chance to accumulate and grow, typically only after several decades.
Johnson also pointed to the drawbacks of treating Social Security as a piggy bank to be raided for any number of purposes. Proposals have been heard on Capitol Hill to allow workers to use Social Security to repay student loans. Once the first one of these plans is enacted, you can be sure that others will follow, until there’s almost nothing left of Social Security’s guarantee of a living income in retirement.
“Already we have a retirement system that leaks a lot,” Johnson says. “People can dip into their 401(k) savings or borrow against them, so people don’t get to retirement with as much savings as they should. The one thing they have now is Social Security, but if we let people borrow against Social Security, that adds to the precariousness of the retirement system.”
It’s proper to ask, moreover, why mothers and fathers should bear all the costs of childbearing and child-rearing themselves. Civilized societies recognize that healthy children and families are important to the entire community, and will provide for them on a community-wide basis. The American system distributes those burdens narrowly, and the Rubio plan, while at least providing some money for families, would just burden them in another way. Can’t we do better than that?