Welfare State Paper 1 Paid Family Leave copy

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S R Larson Paid Family Leave Wyoming Prosperity America’s brand new entitlement program In his budget for fiscal year 2018, President Donald Trump proposed the introduction of a new, major entitlement program. Called “paid parental leave”, this program allows working Americans to receive a check from government when they have to be home to care for a newborn or adopted baby. It will also presumably be a vehicle for federally paid sick leave. As presented in the president’s budget, the paid-leave program is not supposed to cost taxpayers a dime extra. The $1.8-$1.9 billion estimated annual cost will supposedly be covered by savings emerging from improved efficiency in the unemployment insurance program. Predictably, the program is being hailed as an opening for bipartisanship. In an article in the USA Today on July 22, Steven Findlay of Kaiser Health News summarized the political positions. The president’s initiative, he says, proposes six weeks of paid leave for mothers and fathers … funded by restructuring the federal unemployment insurance system. Congressional Democrats, meanwhile, have reintroduced the Family and Medical Insurance Leave, or FAMILY, Act, which they first submitted in 2013. It would permit all workers to take up to 60 individual days of paid leave per year to care for a new child, a sick family member or one’s own illness. Workers would receive up to 66% of their regular wages to a maximum $1,000 per week. The program, initially introduced in 2013, would be funded by a 0.4% payroll tax on workers’ wages, split evenly between employers and employees. … Republican lawmakers have countered this year with the Strong Families Act. That bill would give employers offering at least two weeks of paid family or medical leave a 25% tax credit for wages paid to workers taking up to 12 weeks of leave. The credit would be capped at $3,000 per employee per year. The credit would cease entirely two years after enactment. To bring paid family leave forward on Capitol Hill, President Trump has put his daughter Ivanka in charge of Congressional outreach. On June 20, Politico reported: Ivanka Trump is set to meet Tuesday morning with Sens. Marco Rubio (R-Fla.), Deb Fischer (R-Neb.) and others to discuss paid family leave, according to two sources with knowledge of the plans. The meeting comes as the Trump administration pushes a proposal for six weeks of mandatory paid leave for mothers and fathers. That is an unpopular proposal with many in a Republican-controlled Congress, but the idea has gained traction among more moderate members. It makes sense for Ms. Trump to meet with Senator Fischer (R-NE). On February 9, 2017, this year she introduced the aforementioned Strong Families Act. Despite the party-line divide between this proposal and the Democrat-supported FAMILY Act, differences are not very large. The Strong Families Act suggests a tax credit to employers who offer paid family and medical leave, while the FAMILY Act proposes a traditional entitlement-benefit system with the federal government cutting checks for eligible citizens. However, despite the apparent differences in construction, all that is needed to effectively bring these two proposals in line with one another is to retool the tax credit in the Strong Families Act as a refundable credit. That would make employers and their employees eligible regardless of the taxes they pay. 2
S R Larson Paid Family Leave Wyoming Prosperity Other differences are limited to the size of the benefits and the amount of leave guaranteed: Strong Families Act Sen. Fischer (R-NE) S.2354, 114th Congress Type Tax credit Qualification criteria Person is an employee Leave time guaranteed 12 weeks/year Benefits Credit cap at $3,000 FAMILY Act Sen. Gillibrand (D-NY) S.337, 115th Congress Entitlement benefit 12 months of prior inc. 60 days/year $8,000/year If the tax credit in the Strong Families Act becomes refundable, it is a minor issue to synchronize qualification criteria, guaranteed leave and benefits between the two proposals. Both bills are constructed according to the same redistributive architecture. By capping benefits, the FAMILY Act replaces a higher share of low-income earners’ wages. Likewise, by capping the tax credit, the Strong Families Act incentivizes leave among low-income employees while disincentivizing it among high-income employees. Republicans have long supported redistributive entitlement programs by perpetuating and expanding them; prior to the Affordable Care Act (ACA), no Republican-led Congress had ever voted for a repeal or phase-out of any entitlement program. Their failure to deliver a repeal or replacement of the ACA after the 2016 election is further evidence of their tacit or overt support for the redistributive welfare state. In terms of paid family leave, though, their support is new. As recently as in 2015 Congressional Republicans were still opposed to it. Now that the Trump administration has their own proposal, it is very likely that paid family leave will become the law of the land in one form or another. The rush to create such a program is confounding. Regardless of which version of paid leave Congress would pass, the program is going to grow into a major expense item in the federal budget. Based on experience with similar programs in European countries, it is possible that federal paid family leave – which is the more commonly used term – could end up costing taxpayers as much as Social Security. President Trump’s proposed program, and his administration’s material on the issue, make only one reference to the expected cost of the program, namely in table S-6 of the president’s budget. There, the expected annual cost is reported to be $1.85 billion per year for the next ten years. More realistic estimates point to much higher numbers. Even though these estimates make no attempts at calculating the cost based on experience with paid-leave programs, some of them do at least provide a more realistic picture of the expected cost than does President Trump’s budget. A later section examines these estimates; one of them runs as high as $391 billion for a full-fledged program. However, the maximum entitlement value – the amount of money that eligible citizens could claim from the program if they used it to its fullest extent – could be almost $1 trillion. Ahead of an examination of the fiscal and economic impact of paid leave, it is important to examine the program from the perspective of ideological values. These values would be the guide to a broader discussion of how an expansion of redistributive entitlements would reshape the American economy and American society. Since paid family leave is a major contribution toward closing the gap between the American welfare state and its Scandinavian peers, a discussion is merited about whether or not United States of America should become a full-fledged Scandinavian welfare state. 3
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