Republican senators compete for leadership of “Department of Bad Ideas” with new plans to cut Social Security to finance paid parental leave

[CBPP] At some point in their lives, most workers in the United States will experience a major life event or emergency requiring them to take time off work, such as a serious illness, the birth of a child, or caregiving responsibilities for an aging parent.[1] A national, comprehensive paid family leave policy that is responsibly financed would provide much-needed economic support to workers during these times and ensure equitable access to paid leave for low-income people and people of color, who often do not have significant paid leave from their employers.

However, two recent paid leave proposals — the New Parents Act from Senators Marco Rubio and Mitt Romney[2] and the CRADLE Act from Senators Joni Ernst and Mike Lee — fall short of this standard in important ways:

  • Unlike the paid leave programs of several pioneering states (and the federal Family and Medical Leave Act, which provides for unpaid leave), both bills would provide paid leave only to parents caring for newborn or newly adopted children, leaving out workers who need to care for their own serious health issues or those of a family member.
  • Instead of pooling risks and resources across the entire workforce, as the rest of Social Security and the state paid family and medical leave programs do, these bills would ask individual parents to bear the cost of their parental leave benefits by cutting the Social Security retirement benefits they would receive decades later. This would weaken Social Security’s near-universal social insurance protection by treating the program’s guaranteed benefits like a private account from which individuals could draw. Essentially, both bills ask parents to choose between their current caregiving needs and their future retirement security.

Using Social Security partly as a piggy bank rather than an insurance policy is central to the design of these proposals. Carrie Lukas, president of the Independent Women’s Forum — which first developed this approach — has written that getting workers to see Social Security as assets “to be used now or at retirement” is a first step toward partially privatizing Social Security.[3]

Moreover, under the two bills, parents opting for parental leave would face permanent cuts to their Social Security retirement benefits that would ultimately exceed their parental leave benefits. The cuts would amount to their parental leave benefits plus interest, as well as an additional reduction to cover the cost of the parental benefits provided to other parents who die or become disabled before they reach retirement and can’t repay their own leave benefits. Leave-taking parents with moderate incomes, for example, would receive about $5,300 in benefits for each three months of parental leave, on average — and then lose about $15,100 in lifetime retirement benefits for each three months of leave, after adjusting for inflation, according to the Urban Institute.[4] All told, this amounts to losing about 3 to 4 percent of lifetime Social Security retirement benefits for each three months of leave, meaning that parents who take three periods of parental leave (after three births or adoptions) would lose roughly one-tenth of their lifetime Social Security retirement benefits.

Under both bills, parental leave benefits would essentially be treated like loans that accrue interest. For a typical worker who has her first child at age 26 and claims Social Security retirement benefits at about 65, interest would accrue for about 40 years.[5] Over such a long period, the amount of interest would ultimately exceed the amount of the benefit; in fact, the Urban Institute estimates that leave-takers would eventually pay back nearly four times as much as they received in leave benefits, on average.[6] These cuts would weaken retirement security and impose the greatest hardship on women and workers of color, as they already face less secure retirement than others.

At a time when many workers face shaky finances in retirement, policymakers shouldn’t weaken Social Security, which is most workers’ only source of guaranteed retirement income. Policymakers can provide paid leave without asking parents to sacrifice some of their retirement security. In fact, that’s what every existing state program does, by financing benefits with modest payroll tax contributions. It’s also what the overwhelming majority of workers prefer: when polled about the best funding mechanism for a national paid family and medical leave policy, just 3 percent of voters preferred drawing from the Social Security trust funds.[7]

Future proposals should not force workers to choose between the paid leave they need and their hard-earned retirement security, but should instead finance a national paid family and medical leave program through modest payroll tax contributions or other sources of revenue. A broad-based financing mechanism would recognize that paid leave programs are an asset not only to those taking leave, but also to society at large.

Full analysis continues at CBPP.org »

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