President Trump’s Paid Leave Proposal Puts Democrats On The Defensive

President Trump’s Paid Leave Proposal Puts Democrats On The Defensive

President Trump has provided Republicans the opportunity to engage on paid leave in a meaningful way, and to craft a conservative solution.
Abby McCloskey
By

The Trump administration released its budget proposal between when the author submitted this article and its publication. The published article has been changed to reflect the budget proposal’s alterations to the campaign proposal.

The Trump administration is the first Republican administration to include paid parental leave in the White House budget. There are plenty of details to be worked out and parts of the policy to debate. But this is undeniably a big step regarding the majority of working parents, who have access to exactly zero days of paid family leave from their employers.

The broad outlines of the policy are consistent with what then-candidate Trump proposed in the fall, with the notable difference of being expanded out to all new parents, instead of only mothers. The Trump administration’s proposed budget for fiscal year 2018 requires states to provide six weeks of paid parental leave to new mothers and fathers run through their respective state unemployment insurance (UI) programs. States would be given broad latitude from the federal government to determine the programs’ structure and financing.

According to the administration, Trump’s proposal would cost $18.5 billion over 10 years (2018-2027). A footnote in the budget says this is inclusive of $8.1 billion in increased government receipts from state paid leave programs, presumably from the positive economic benefits on workforce participation and wages, although no details are given. Thus, the total cost of the program is $26.6 billion. Importantly, this cost would be born by the states, not the federal government.

The administration posits that the paid parental leave proposal would be fully paid for when accounting for “a package of sensible reforms to the unemployment insurance system,” which include requiring states to maintain adequate UI trust fund balances (likely through higher state payroll taxes), reducing improper UI payments, and providing for reemployment services and eligibility assessments to reduce periods of unemployment.

It is unclear if the full amount of these savings would be realized, as it is difficult to root out fraud and reduce the duration of unemployment. This is one of many unanswered questions about the proposal. Other questions include: who will be eligible for benefits, what will the size of benefits be, how will this interact with private-sector plans, whether there is job protection, what is the enforcement mechanism for states to set up these programs, will benefits be available to higher earners, how would this impact the “experience rating” of employers, and what assumptions the administration used to reach its cost estimate, which is similar to the cost estimate released with their campaign proposal that only included new mothers.

But there are several encouraging signs about the administration’s proposal.

Let’s Get Into the Details

First, while the eligibility requirements remain to be determined, the policy appears universal in nature, meaning that in theory it applies to all parents, whether they are the mother or father (unlike Trump’s campaign proposal), and regardless of the state they live in (only a handful of states currently have paid family leave programs) and the size or type of company they work for (unlike existing policy). Our only national leave policy, the Family and Medical Leave Act (FMLA), leaves out 40 percent of workers due to its eligibility requirements, including workers in small businesses, not to mention the many workers eligible for FMLA who cannot afford to take unpaid leave. Ideally, a paid parental leave policy would have much a broader reach.

Second, the business impact appears relatively contained. For example, the proposal relies on public financing instead of business mandates to provide leave, the latter of which could result in lower salaries or less hiring or negatively impact business cost structures. At only six weeks, the business burden is half that of FMLA and the Democrat’s FAMILY Act proposal. Polls in states such as California with a six-week paid family leave policy have found that 90 percent of employers have reported a positive impact or no impact from the introduction of the policy, though there is little research on the economic impact of longer periods of paid family leave should the proposal be expanded.

Third, by limiting the policy to parental leave and its duration to six weeks, it is modest in cost even for the most budget-conscious Republicans. The administration estimates it will cost approximately $2 billion annually once state programs are up and running. It’s likely to be more than that according to some analysts, but still a fraction of Democrat paid leave proposals. Ideally, a modest program of this size would be paid for out of reforms to existing spending and not require new payroll taxes at the federal or state level, which reduce workers’ take home pay. The note of concern here is that the UI reforms the administration identifies as part of the pay-for likely would require raising state payroll taxes.

Fourth, we can expect numerous positive economic outcomes, even from a six-week policy. For example, California has had paid family leave program in place for a decade which provides for six weeks of paid leave. Studies of this policy have found that paid family leave resulted in increased work and wages, especially for low-income and minority mothers, and reduced reliance on other government benefits, such as food stamps. Importantly, the wage replacement rate in California’s paid leave program (55 percent) is similar to the average UI replacement rate of approximately 50 percent, meaning that we could expect similar results from Trump’s plan. That said, replacement rates vary significantly across the states, which would affect the take-up rate.

Fifth, unlike much of what else is being discussed in Washington today, paid leave policy enjoys wide bipartisan public support. Only one in ten employees have access to paid family leave from their employers, according to the Department of Labor. Americans recognize this gap and want to fill it, with 83 percent of Democrats and 71 percent of Republicans in favor of paid parental leave policy in recent polling.

Despite wide bipartisan public support, however, politicians on both sides of the aisle will find much to take issue with.

Political Hurdles On The Left And Right

Ironically, the biggest opponents of the administration’s paid parental leave policy may well be Democrats.

The Left has long advocated for national paid leave policy. That’s to their credit. But many people in the progressive community are likely to hold up paid parental leave unless it also includes paid leave for family care (such as an elderly relative). Or unless it includes paid leave for one’s own medical illness. Or requires a longer period of leave. Or requires a more generous wage replacement. Or removes any state flexibility by making it a national policy only.

This is all to say that unless it is the Left’s own “FAMILY Act,” which notably a Democrat-controlled Congress and President Obama didn’t prioritize in 2009 and 2010, some progressives will try to block it.

The Trump proposal introduces new issues, such creating an unfunded state mandate and the likelihood of higher state payroll taxes.

This is unhelpful, to say the least. There are merits to many of these proposals, which should be discussed. But it is unacceptable that Democrats would deny help to millions of parents around America who need the assistance right now by insisting on a package that current political dynamics will not allow. Moreover, Democrats have consistently overlooked what could be the significant business and economic ramifications of such a far-reaching policy on the national level, likely to the detriment of working-class parents.

Then there are Republicans who, up until now, have been largely disengaged with the paid leave debate. When they have engaged, they have entertained the idea of business tax credits to provide paid leave, even though there’s limited evidence that this would actually increase the amount of leave offered, while still costing quite a bit in lost government revenue.

Republicans have long had an aversion to paid family leave, it appears largely because of distrust for another federal program (the government’s already too big), distaste for more government spending (the debt is already $20 trillion), or negatively impacting the business community. I share many of these concerns. These concerns are mitigated by the limited size and scope of the Trump proposal compared to what Democrats have put forward, but will need to be worked out among Republicans in the coming weeks and months.

Additionally, the Trump proposal introduces new issues, such creating an unfunded state mandate and the likelihood of higher state payroll taxes, which Republicans are likely to take issue with. If Republicans are serious about pursuing paid parental leave, they should hold public hearings on the topic as soon as possible.

A Fair Starting Point

While there’s plenty of room for debate on administration’s plan, it’s important on the Left and the Right to view it as a starting point, and a fair one at that. The policy would deliver significant help to millions of working parents across the country in a relatively affordable way. It’s a policy that could easily be expanded in the future, if it’s determined that that would be beneficial. Indeed one non-negotiable part of the final policy should be to include academic study on the business and economic effects of the policy to assess if there are unintended (positive or negative) consequences.

President Trump has provided congressional Republicans the opportunity to engage on paid leave in a meaningful way and to craft a conservative solution. Conservatives shouldn’t let this opportunity pass them by.

Abby McCloskey is an economist and founder of McCloskey Policy LLC. She was an economic advisor for Jeb! '16, and served as Gov. Rick Perry's policy director for '16.

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