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Getting Creative With Social Security

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Could Social Security be used to pay for a national family-leave program, at no cost to the taxpayer? Bloomberg View columnists Ramesh Ponnuru and Michael R. Strain discussed the idea in two recent columns, and reached different conclusions.

Ponnuru said the proposal qualified as a real reform, since employees who took family leave would be agreeing to delay the start of their Social Security checks to make up the difference in cost. Strain replied that it was a bad precedent to make future claims on Social Security, even if the costs were pitched as revenue-neutral. We asked them to discuss what their contrasting views say about the future of American entitlements.

Ramesh Ponnuru: Michael and I have a number of disagreements about this paid-leave proposal, and it seems only sporting for me to begin with one where he scores a point against me. I had argued that this proposal compared favorably to previous ideas for financing paid leave. Making companies pay for new parents’ leave, I said, would give companies an incentive not to hire or promote women of child-bearing age. (There is some evidence that companies act on this incentive in the presence of such policies.) I said, incautiously, that letting parents finance leave by borrowing from their future Social Security benefits would not create that incentive.

(Related: Starbucks to Spend $250 Million on Worker Benefits After Tax Cut)

Michael pounces on this point, noting that if new parents have access to ready financing for leave, more mothers will take it — and therefore companies will both face new costs in the form of disruption and have an incentive to avoid those costs. This is an argument against letting new parents, and especially new mothers, take time off. Nearly any measure that improves their ability to take time off would have this effect. (I say “nearly” because a requirement that mothers and fathers both take the same amount of time off might avoid it, albeit at the cost of significant coercion.)

I concede that Michael has identified an effect I ignored. But I question its magnitude. This policy would certainly impose a much smaller cost on employers, and do less to distort personnel decisions, than a policy that made companies pay for leave themselves. The effect would be further limited by the new parents’ expectation that they would be giving up future benefits in return for their leave time. This proposal, in other words, creates an incentive for restraint.

But of course the claim that the policy includes a built-in restraint assumes that policymakers can credibly promise to make people who use some of their retirement benefits a few decades early actually give them up in the future. That assumption too is a point of contention between us.

Strain: I’m glad to turn to that issue, because I think it is critical. My skepticism that they will stems from my view that Social Security will likely look a lot different 30 years from now. For example, it might be means-tested, or it might be relatively less generous to retirees who were high earners. When changing the bones of Social Security, will Congress ensure that recipients of early benefits pay them back? Given that many who will take early benefits will likely be low-income women — over 70% of college-educated workers already have access to paid leave — I doubt it.

Ponnuru: It would not be conceptually difficult to reform Social Security to make it solvent, while maintaining the principle that people who took leave benefits should get lower payments than similarly situated people who didn’t. Ideally, in my view, that reform should involve reducing the growth of Social Security payouts to people with average and especially with above-average lifetime earnings. Would politics allow the payback for leave benefits to be maintained in a reform? Obviously it cannot be guaranteed.

Any legislation that restrains future spending can be undone. If that is a knock-down argument against such legislation, though, it’s an argument against any entitlement reform whatsoever. But past increases in the retirement age — which have also been said to be unfair to blue-collar workers — have so far stuck. And this proposal could not be enacted without a consensus that it is fair to let people make the choice to have slightly lower retirement benefits in return for parental-leave benefits.

Since Michael is going to have the last word, I’ll close with two thoughts. The first is that the efficient working of the labor market is a very important good, but so is intensive parental care for newborns, and society has trade-offs to make. The second is that the two of us seem to agree that of all the extant proposals to promote what seems to be a broad consensus for paid leave, this one, based on Social Security, is the most promising.

Strain: It’s less an argument against any entitlement reform whatsoever, and more an argument that we need to proceed with great care when changing the structure of entitlements.

Letting people borrow against their Social Security benefits 30 years before they retire would be a considerable change that is unwise for multiple reasons. It would make the process of reform more complicated, as we’ve discussed. You argue that this plan wouldn’t add a new burden to Social Security’s existing funding problems, and in a sense that is true. But it would hasten the need for tax increases to fund benefits, which I would argue does add to the burden.

But let’s step back from the details. You’re of course correct that paid leave is an important good (which is why so many workers already have access to it). The same could be said for early childhood education, postsecondary education, owning a reliable car, and living in an adequate house. Why allow people to borrow against Social Security for paid leave, but not for those things?

Social Security has enough on its plate. It’s best to keep this Pandora’s Box shut.

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