Parental leave benefits rooted in Social Security are politically unpalatable---ensure comparatively more backlash, including outcries that wreck effective enforcement

Why the US Government Shouldn’t Use Social Security to Pay Parental Leave Benefits

Problematic Use of Social Security

The proposed use of Social Security as a funding source has problems for several reasons.

First, the claim that individuals can spend some of their future Social Security benefits today in exchange for forgoing those benefits tomorrow is not well-founded. This intertemporal exchange cannot really work because, contrary to the popular narrative about Social Security, 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. Consider that Social Security’s coming insolvency means the program’s retirement age will almost certainly need to be raised, so it is impossible for parents to fully consider a tradeoff between current and future benefits. Yet the New Parents Act is premised on the unrealistic assumption that the retirement age, even decades from now, will remain unchanged. Until a solution to Social Security’s insolvency is legislated, no participant can know how much the retirement age will be raised, how much the payroll tax may increase, or how much benefits may be cut. Consequently, today’s parents don’t have the information to know whether they should take the deal offered in the New Parents Act. Some who delay their retirement until age 68 might never have taken the deal had they known it would mean delaying their retirement until, say, age 69 or 70, which might be required if Congress raises the general retirement age. The public outcry caused by this apparent bait and switch would make it even less likely that the offset can ever be fully enforced.

Finally, the New Parents Act would reverse the traditional order of Social Security contributions and benefits. 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. Using Social Security to pay for parental leave would turn this principle on its head: the benefits would happen first, then (supposedly) be followed by contributions. This reversal should be troubling to anyone concerned about fiscal responsibility.