For two years of total control of the federal government, Republicans refused to repeal and replace Obamacare. They refused to enforce existing border laws, let alone build a wall they spent the entire year prior promising. They refused to defund Planned Parenthood. They refused to decrease the deficit.
But hey, the party of limited government is ready to embrace what conservatives have spent a decade clamoring for: entitlement expansion!
Wait, what?
So-called conservatives have begun to tout two variations of the same basic paid parental leave law, the CRADLE Act and the New Parents Act, both which allow American parents to pull from Social Security and theoretically delay or reduce their retirement payments.
You know, the same Social Security fund that will become insolvent within 15 years. You know, the effective Ponzi scheme that, once upon a time, actual conservatives wanted to phase out, not expand. You know, the impenetrable “lockbox” that’s inexplicably running deficits.
The New Parents Act would allow parents to pull from Social Security for up to three months after a birth or adoption in exchange for delaying retirement for the amount of time taken off or receiving payment reductions for the first five years of retirement. The CRADLE Act differs in requiring that users to delay retirement for two months for every month taken off. Additionally, the CRADLE Act actually requires parents to take time off from work, whereas the New Parents Act does not. There are other more technical variations between the bills, but the mechanisms are the roughly the same.
Proponents of both bills say that while they’ll result in short-term deficit increases, as Social Security would see increased output with no increase in funding, in the long run, when beneficiaries of the paid leave plans reach retirement, the decreased output resulting from those who opted in will result in deficit neutrality.
This may be true in theory, but it requires such an absurd ceteris paribus assumption of everything from inflation to Fed rates to economic growth that it’s almost impossible to guarantee in practice.
The most obvious issue is the Ponzi scheme structure of Social Security itself. By design, today’s workers pay for today’s retirees. Workers cannot pull from “their” money, because that money is already promised to retired beneficiaries.
On Jan. 1, 1940, Ida May Fuller received the first ever Social Security paycheck at the age of 65. She had paid $24.75, just shy of $450 in current dollars, into the system in the three years prior. In the subsequent 35 years that she remained alive, she received $22,888.92 in total. In 2019 dollars, that’s well into the six figures. Her return on investment for Social Security was 92,380.48 percent, or a 22 percent ROI annually.
Every American born in subsequent years has seen the ROI plummet. Adjusted for inflation, the average ROI is in the single digits, and will eventually become negative. And for certain minority demographics, it’s already negative. As early as 1997, the Heritage Foundation found that low-income, single black men born after 1959 lose thousands of dollars into the Social Security abyss over their lifetimes.
So not only would both Republican plans add an unprecedented expansion to a program explicitly intended for insuring against job loss, but it would also add to the inevitable math crisis the program already faces.
Then there’s the issue that there’s absolutely no guarantee that those pulling from the paid leave programs will ever return to the workplace. This creates an immediate funding problem of reduced input for a program that will have just radically increased its output. Social Security’s Ponzi-like structure has always had the one benefit of linking the relationship between work and payout. But if a parent decides to simply sit out of the labor market for good after acquiring paid leave, as many new mothers do, then they just pulled “their” money that they don’t wind up actually ever paying for.
Social Security’s finances are already a lie. But as the Mercatus Center explains, these paid leave programs would screw up the calculus even more, resulting in “benefits now, funding later.” It’s a risky bet, and one that will likely prove even more unsuccessful than Social Security as it is.
Proponents of the Republican paid leave plans, as well-intentioned as they may be, are claiming that expanding an enormous entitlement will prove budget neutral in the long term. To back this up, they have little math and plenty of platitudes. If they actually want us to buy the claim that this can be fiscally conservative, they’re going to have to put up or shut up.
