The Biden Family Leave Plan: Good Intentions, Bad Policy, Worse Implementation Plan
Parental leave has been on the agenda not merely of Democrats but also of moderate Republicans for quite some time. To be sure, Republican proposals have been far more restrained — Marco Rubio’s ill-fated 2018 proposal to allow parents to “borrow” from their Social Security benefits never went anywhere, but at about the same time, the Brookings Institute and AEI, two think tanks generally on opposite sides of the political spectrum collaborated on a paid leave proposal. And, yes, even the Heritage Foundation has a hard time saying, “no,” to the idea itself, suggesting instead that programs should be left to states and employers.
As with any social insurance program, there are bound to be winners and losers, and families who make the intentional decision that one parent will leave the workforce to care for children may grouse that wages are taken out of the wage-earner’s paycheck to support those making the opposite decision, but some level of grousing is pretty much unavoidable and the wider consensus seems to be that the idea is sound but the implementation must be done smartly.
Which means that when the Biden administration announced back in April that it was including Family Leave in its American Family Plan, I criticized the details, however limited they were at the time, for failing as a social insurance program because it did not have a dedicated payroll tax. The typical family leave program in a typical Western European country is funded based on a dedicated payroll tax, as was the case in the original “Family Act” (though even there, the proposed payroll tax was not sufficient to fully fund the benefit). Even in those countries where leave programs are provided through general tax revenues, the funding source is not a special “soak the rich” tax but an income tax system in which everyone pays more.
We now have more details on the Biden plan, which is now intended to be funded through the Reconciliation bill. The legislation itself contains many of the characteristics of the spring proposal — 12 weeks of paid leave to “qualified caregivers.” Specifically, the program would provide benefits for pretty much any sort of caregiving as long as it was “in lieu of work” and without compensation, for the equivalent of 12 weeks (all at once or spread out over time) per year, at a pay-replacement structure with bend-points similar to Social Security. This means that someone earning about $35,000 would get about 80%, someone earning $72,000 would get 67% of pay, and someone earning $100,000 would get about 55% of their pay by the benefit, with a de facto cap at that pay level but a trivial level of benefit up to $250,000. (This vaguely resembles proposals for hiking Social Security benefits, as if it was intended originally to be based on a payroll tax to $250,000.) In addition, benefits would be paid for any of the eligible reasons of the Family and Medical Leave Act, so not just for newborns or newly-adopted children but for medical caregiving as well, which suggests that in the case of long-term needs, individuals could collect benefits year after year.
And, indeed, not only is the program not funded by a payroll tax, but it is not really funded in any real way at all, since it is part of a spending plan with tax increases that are intended to cover only half of the new spending in the first place — $3.5 trillion in new spending with $1.75 trillion in new debt. In fact, the overall level of new debt is even worse when considering that many of the proposed spending programs in the Reconciliation bill, which include child tax credits, free preschool and community college and heavily subsidized child care, are nominally authorized for only a portion of the 10 years, so that the Committee for a Responsible Federal Budget has estimated that a true 10 year cost would be more like $5 – 5.5 trillion. The official “framework for the FY 2022 budget resolution” indicates, for every new spending proposal, that “the duration of each program’s enactment will be determined based on scoring and Committee input.” The very prospect that any of these programs would be implemented using the “10 year sunset” that is part and parcel of how Reconciliation works, is appalling. Once these programs are implemented, families should be able to reliably make future plans in a way that just isn’t possible when Congress plays games with sunsets and extensions. Implementing family leave through a Budget Reconciliation bill is the wrong way to create the program — and by that I do not just mean that it is an imperfect way, but that it would do more harm than good.
In a commentary at the Boston Globe last week, Vicki Shabo and Jacob S. Hacker said of this proposal, “Done right, paid leave could be Democrats’ Social Security for the 21st century” — a “social policy landmark that could cement the loyalties of a new generation of voters.” Yet they cite FDR’s famous quote that “no damn politician can ever scrap my social security program” while omitting the fact that this very quote is about FDR’s perception of the importance of financing the Social Security program through payroll taxes rather than general revenue.
The bottom line: yes on family leave as an extension of social insurance policies, if done right with appropriate plan design and funding. But by no means should it be debt-financed and certainly not with an expiration date to hide its cost.
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