Should Social Security Be Used to Fund Parental Leave?

Should new parents be allowed to tap Social Security to fund parental leave benefits?

Sens. Marco Rubio, R-Fla., and Mitt Romney, R-Utah, reintroduced last September the New Parents Act, legislation that would allow new parents up to three months of parental leave benefits, drawing the funds from their Social Security retirement benefits.

The debate over parental leave benefits has heated up since Roe v. Wade was overturned in June. Rubio has rolled the family-leave-for-Social-Security benefits provision of the New Parents Act into a broader bill — the Providing for Life Act.

The New Parents Act has drawn opposition from across the political spectrum.

"Unfortunately, the idea that the U.S. government can provide generous new benefits to Americans today while successfully financing this spending decades down the road is implausible, not least because the plan relies on a host of unrealistic assumptions," Mercatus Center senior fellows Veronique de Rugy and Charles Blahous state in a new policy brief.

The two fellows at the libertarian policy group also say the New Parents Act "fails to account for political constraints that virtually guarantee the failure of its principal financing mechanism."

Under the bill, parents would be able to receive a Social Security benefit providing up to three months' worth of paid parental leave.

"Parents receiving the benefit would later pay it back either by increasing their Social Security full retirement age (which is 67 under current law) by three to six months or by receiving a proportionate reduction in monthly retirement benefits during their first five years of retirement," de Rugy and Blahou explain. "In other words, every parent who receives paid leave benefits today would either begin receiving Social Security at a later age than other Americans or receive smaller Social Security benefits in their first years of retirement."

In theory, they continue, "the plan would be budget neutral in the long run because the benefits paid today would be recouped by the government in the distant future. The stated goals of the plan are to invest in American families today in a way that produces substantial social and economic returns without increasing the net cost of government overall."

The Mercatus fellows argue the plan will fail for three reasons.

Contrary to the popular narrative about Social Security, the two write, "there is no actual pot of money from which today's young people can draw — only promises of future benefits."

Second, "it is bad to set multiple retirement ages for different Social Security participants on the basis of their choices regarding parental leave-taking," the fellows state.

The New Parents Act would also "reverse the traditional order of Social Security contributions and benefits," the two state. "Although in practice Social Security is an income-transfer program, ostensibly, participants must still earn benefit entitlements; workers pay payroll taxes over their entire career, which makes them eligible for benefits later in retirement. Contributions come first, then benefits."

Social Security Advocates Weigh In

Nancy Altman, president of Social Security Works, agreed in an email to ThinkAdvisor that the New Parents Act "has so many shortcomings that it is opposed by progressives and conservatives alike."

While professors de Rugy and Blahous "are correct to oppose the Rubio-Romney proposal, they are wrong on a number of their specific concerns," Altman said.

Contrary to their views, "Social Security is a perfect vehicle for long-needed paid family and medical leave," Altman argued, as it "is insurance against the loss of wages in situations where expenses often increase. Those situations include paid family and medical leave, both of which should be added to Social Security. This would be completely consistent with President Franklin Roosevelt's vision. Indeed, he considered including short-term disability in the Social Security Act of 1935, but ultimately decided to proceed incrementally."

Altman continued that it's "long past time that the United States joins the rest of the industrialized world in providing paid family leave. But in no circumstance should anything like the Rubio-Romney proposal, which forces people to forfeit a large portion of their future retirement benefits if they take parental leave, be enacted. It would undermine working families' economic security in general and Social Security in particular."

Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare, told ThinkAdvisor in a separate email that his group "strongly oppose[s] Senator Rubio's New Parents Act because it asks Americans to sacrifice some of their future Social Security income in exchange for paid family leave."

There's "no doubt that parents would greatly benefit from a federal paid family leave program," Richtman said. "But today's parents will need every dollar of their future Social Security benefits, given the ever-rising cost of aging in America."

The Mercatus Center, Richtman continued, "is correct that the New Parents Act is bad policy, but mostly for the wrong reasons. While it's true that Social Security should not be a piggy bank for unrelated benefits, Mercatus is using the Rubio bill to promote the myth that Social Security will not be there for future retirees."

Social Security's chief actuary estimated that the New Parents Act "would have a negligible long-range impact on the Social Security trust fund," Richtman maintained.

Chances of Passage

Rubio's bill has only one co-sponsor — Romney, Richtman said. "And any change to Social Security requires 60 votes in the Senate. So I don't see this bill moving any time soon."

Mercatus' de Rugy added in a separate email to ThinkAdvisor that since Roe v. Wade was overturned, "legislators on both sides of the aisle have pivoted their focus towards women, parents, and raising families. In terms of political feasibility, Democrats overwhelmingly support the notion of federally paid parental leave and key Republicans are now joining the effort.

"However, they completely disagree with the ways to go about it, and Democrats are radically opposed to the idea of taking money from seniors to give to parents. So, this [New Parents Act] bill is unlikely to go anywhere."

That said, she continued, "it is worth making the case for why the Social Security trust fund is a bad idea to solve this problem. Once you put into people's mind that Social Security taxes are up for grab for any other priorities than retirement benefits, we could see new proposals emerging to do just that."