Why Even a Limited Federal Paid Family Leave Program Would Quickly Unravel

COMMENTARY Budget and Spending

Why Even a Limited Federal Paid Family Leave Program Would Quickly Unravel

Mar 21, 2019 3 min read
COMMENTARY BY
Rachel Greszler

Senior Research Fellow, Roe Institute

Rachel researches and analyzes taxes, Social Security, disability insurance, and pensions to promote economic growth.
No matter how limited, low-cost, or non-invasive federal paid family leave may starts out, it will inevitably expand over time. Jamie Grill/Getty Images

Key Takeaways

Last Tuesday, Sens. Mike Lee, R-Utah, and Joni Ernst, R-Iowa, introduced the CRADLE Act to let workers tap Social Security for paid family leave.

Social Security has been paying out more than it takes in. At the current rate, scheduled benefits will have to be slashed by about 25 percent beginning in 2034.

A one-size-fits-all federal program with excessive costs would not be better for workers than further expansion of employer- and state-based programs.

Republicans are jumping on the paid family leave bandwagon.

Last Tuesday, Sens. Mike Lee, R-Utah, and Joni Ernst, R-Iowa, introduced the CRADLE Act to let workers tap Social Security for paid family leave.

The day before that, President Trump proposed a 6-week federal paid family leave program and a one-time, $1 billion fund to help private employers set up paid family leave programs in his FY 2020 budget.

These proposals contrast with liberals’ predominant proposal — the Family Act — which would establish a federal paid leave program covering all types of family and medical leave and paid for through a new payroll tax on workers and employers.

All of these initiatives are problematic for the same reason: No matter how limited, low-cost, or non-invasive federal paid family leave may starts out, it will inevitably expand over time. This is the nature of all federal entitlement programs.

Consider the Social Security proposal, which would let workers “trade” future retirement benefits for family leave today. It calls for no new taxes and is supposedly self-funded.

But letting workers use America’s favorite entitlement program as a piggy bank for family leave would open the door to tapping it for other “good causes” like paying off student loans or purchasing a home. There’s a more immediate problem, too.

For years, Social Security has been paying out more than it takes in. At the current rate, scheduled benefits will have to be slashed by about 25 percent beginning in 2034. Tapping those funds early — for whatever purpose — will only hasten the benefit cuts.

The reason Social Security is in such sad shape is because lawmakers keep increasing its mission, its benefits and, hence, its costs.

Social Security originally provided relatively small benefits to a tiny fraction of the population and it took just two percent from workers’ paychecks. Today, it provides more than one in every five of all Americans with benefits averaging 45 percent of their previous earnings and takes 12.4 percent out of workers’ paychecks.

The Lee-Ernst proposal would allow workers to claim benefits to take leave following the birth or adoption of a child. But that type of leave accounts for only one out of every five family leaves taken today. Already lawmakers are saying that’s not enough.

Sen. Kirsten Gillabrand, D-New York, criticized the limited scope of the proposal, saying, “We urgently need a national paid leave program that covers all workers for all medical emergencies, and anything less is just not enough.”

If enacted, pressure would immediately mount, not only to expand the type of leave financed through Social Security, but to increase the amount of money that could be withdrawn. The argument would be that many workers — particularly lower-income ones — need 100 percent benefits in order to afford taking family leave.

Next would come demands to excuse workers from delaying their retirements until they have foregone retirement benefits equal to the leave benefits they “borrowed” earlier. After all, what future policymaker will want to force workers — predominantly lower- and middle-income women — to retire later than everyone else just to repay money used for a good cause?.

At the end of the day, a well-intended proposal to help workers stay at home with their new children could turn into a massive new federal entitlement that would cost workers an estimated $1,300 to $2,000 more in taxes per year.

And a federal program would be worse than the programs many workers have today. Paid family leave is already available to more than a third of U.S. workers, and most are more generous and don’t require workers to navigate a federal bureaucracy.

Employer can be quite flexible in accommodating unanticipated worker needs — be it to telework while recovering from surgery or to leave immediately to care for a family member who was hospitalized. By contrast, a federal program with a lengthy, rigid, and potentially intrusive application process would not meet most workers’ needs — at least not quickly enough to provide benefits when they need them.

What about workers who don’t yet have access to paid family leave? Proposals such as Sen. Lee’s and Rep. Martha Roby’s, R-Louisiana, Working Families Flexibility Act would help. This bill would let hourly workers accumulate significant paid leave simply by letting them choose between pay and paid time off when they work overtime hours — something that federal law currently prohibits for private-sector workers.

Other proposals, such as universal savings accounts and allowing workers to tap their 401(k)s without penalty for paid family leave, would also help increase access to paid family leave.

When it comes to helping workers receive paid family leave, policymakers need to consider not just the merits of what they propose, but the merits of will become of what they propose.

A one-size-fits-all federal program with excessive costs would not be better for workers than further expansion of employer- and state-based programs.

This piece originally appeared in The Orange County Register