Washington takes historic step forward on paid parental leave

Washington takes historic step forward on paid parental leave
© iStock

Republican Senator Bill CassidyWilliam (Bill) Morgan CassidyA cash advance to consider Bottom Line I'm not a Nazi, I'm just a dude: What it's like to be the other Steve King MORE and Democratic Senator Kyrsten Sinema have recently introduced the first bipartisan paid leave bill proposed in Congress. Its political contribution to the debate cannot be understated. The bill provides an interest free loan to parents in the year a child is born or adopted by allowing them to pull forward future tax credits to use immediately and then have reduced tax credits in the coming years.

The bill would allow families to pull forward $5,000 of child tax credits in the year a child is born or adopted. For the next 10 years, a family would be eligible for $1,500 in child tax credits, a reduction from the $2,000 of annual payments in child tax credits that families are otherwise eligible for. There is a lot to like about the bill, not the least of which is that it is in Congress. While there have been bipartisan proposals in the think tank community, such as the plan by the Paid Leave Working Group of the American Enterprise Institute and the Brookings Institution I was part of, the fact this is an active bill makes bipartisan compromise more likely.

The bill does not raise taxes or spending. This has been a key point for Republicans who have been hesitant to support any bill that expands the government. Instead, this bill simply shifts the timing of existing benefit payments, making it largely budget neutral. In this way, the plan is not unlike some of the other Republican proposals in the Senate that allow new parents to use future Social Security payments to cover parental leave in exchange for reduced benefits in retirement. But because the timeframe for repayment of the new bill is 10 years instead of a much longer horizon, it is more fiscally prudent and does not rely upon the increasingly questionable solvency of the Social Security trust fund.

ADVERTISEMENT

The bill provides families maximum financial flexibility. The money can be used to cover paid leave, but it does not have to. If a family member needs or wants to return to work, the money can be used to help cover quality child care or other expenses. The proposal does not conflict with any state plans or any private sector plans. To be sure, the bill will have its critics. One likely criticism is that new parents who take this tax credit would have slightly reduced benefit payments in future years. A more poignant criticism is not knowing its impact on increasing the number of parents who stay home with their children during the weeks after birth.

There has been extensive documentation on the importance of parents, and mothers in particular, being with a child during those early weeks for breastfeeding, for maternal healing, for parental attachment, and for the involvement of fathers. But these benefits only accrue if a parent actually is home with the child. There is no data to suggest whether a larger child tax credit would encourage more parents to stay home in the first few weeks after birth. Democrats will likely be upset that the bill does not address family or medical leave, although there is no reason to bundle these types of leave other than the old Family and Medical Leave Act.

But everyone should be able to recognize the important step forward this bill is political progress. Here kudos here rests mostly with Sinema, who is one of the first to break from the largely Democratic consensus around promoting the Family Act. This demonstrates a level of critical flexibility that has not been seen from other members of the Democratic caucus.

It shows willingness to craft policy specifically for parental leave, which has the largest evidence behind it of any type of leave, and to be creative about pay fors instead of simply raising taxes on workers. For Republicans, after a long period of hesitancy to engage on the issue, this proposal adds to the plethora of new plans to solve the paid leave problem, from tax credits to employers to increasing Social Security and health savings account flexibility. Their continued engagement on this is encouraging.

Paid parental leave has strong support from President TrumpDonald John TrumpGraham: America must 'accept the pain that comes in standing up to China' Weld 'thrilled' more Republicans are challenging Trump New data challenges Trump's economic narrative MORE, bipartisan backing from the Washington policy community, and majority support among the Republican, Democratic, and independent voters. American families have been waiting on our elected politicians to work together to bring it home. Cassidy and Sinema have now stepped up to the plate.

Abby McCloskey is an economist and the founder of the consulting and research firm McCloskey Policy and a member of the Paid Leave Working Group of the American Enterprise Institute and the Brookings Institution.