It takes only two things to keep people in chains:
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The ignorance of the oppressed
and the treachery of their leaders.
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The single most important problem in economics is the wide and growing Gap between the rich and the rest. Therefore, anything that narrows the Gap tends to get my positive attention. “Parental leave” is one of those things.
Parental leave would be an important benefit to middle-income groups, a vital benefit to low-income groups, and meaningless to the rich — exactly the kind of program I love, and exactly the kind of program the rich deplore.
There are infinite versions of parental leave, depending on the length and amount of the benefit. Fundamentally, it would recognize the fact that in today’s America, women of child-bearing age often are important money earners.
There are three times when these women and their families need financial help:
–During those pregnancy days when the women physically are unable to go to work
–At birth, and shortly thereafter, when again, the women are physically unable to work.
–During the months following childbirth, when the combination of physical weakness and the demands of infant care, impact family work ability
Every woman is different. True story: I know a young woman, who when pregnant, worked every day, then one day left the office to deliver her baby, and was back at work the next day. (Her mother took care of the infant.) That was exceptional, and not even advisable, but it was what she wanted and was able to do.
The purpose of this article is not to debate the amount or timing of the benefit, nor to determine whether it is “unfair” to families that don’t have children, or whether some women are malingerers who would take excessive and unneeded advantage.
Rather, the purpose is to discuss how any parental benefit program would be financed.
Here is what an article in the Chicago Tribune said:
Social Security Can’t Be a Piggy Bank for Parental Leave
The U.S. retirement system isn’t strong enough to support a proposal to let new parents borrow against future benefits.
By Michael R. Strain, February 9, 2018, 8:00 AM ESTDuring the State of the Union address last month, when the president called for helping “working families by supporting paid family leave,” Speaker Paul Ryan and Vice President Mike Pence remained seated, unable to muster enthusiasm.
Republicans have traditionally opposed government-provided paid leave, but the Trump administration, led by first daughter Ivanka, is trying to change that.
The GOP, which more and more has become “the party of the rich,” tends to oppose anything that helps the so-called “99%.” Social Security, Medicare, Medicaid, school lunch programs, food stamps all repeatedly are under fire by conservatives, who make two claims, both false:
–The recipients are lazy slugs, who game the system and who should work harder to support themselves.
–The federal government can’t afford the program.
The former is a function of Gap Psychology, about which you can read at, “Why you believe the Big Lie: The Gap Psychology con job.“
The latter is the focus of this Tribune article:
The State of the Union speech breathed new life into the idea, along with a compelling proposal to fund paid leave without — its advocates claim — burdening employers, reducing job opportunities for women or increasing taxes.
The idea is simple and elegant: Allow new parents to collect early Social Security benefits after the arrival of a child, provided that they are willing to delay collecting benefits when they begin their retirement decades into the future.
Embedded in the “simple and elegant” idea, are three beliefs, two of which are true and one of which is dead wrong:
- Employers should not have to pay employees for not working. True. When companies bear this burden in any form — paid vacations, paid sick days, etc. — the cost simply becomes part of the salary consideration, so ultimately is paid by the employee.
- Families of child-bearing age should not be punished in the job market. True. There was a time when prospective employers actually asked women whether they planned to get pregnant. That doesn’t happen as much anymore, but some employers still are reluctant to hire women between twenty and thirty years of age, especially to jobs that require a great deal of training and responsibility.
- Federally-funded family leave programs would require federal tax increases. False. The U.S., being Monetarily Sovereign, creates brand new dollars, ad hoc, every time it pays an invoice, so has no need for tax dollars.
Consider a 26-year-old new mother with five years of work experience earning $31,100 per year. Under this plan, she could receive 12 weeks of paid leave, at a rate of close to $300 per week. In exchange, she would delay claiming retirement benefits by about six weeks.
This idea is gaining traction. Senator Marco Rubio, the Florida Republican, is working with Ivanka Trump on drafting a bill. Earlier this week, two other Republican senators, Joni Ernst of Iowa and Mike Lee of Utah, discussed the plan in a press call hosted by the Independent Women’s Forum, which first outlined the new approach.
Some prominent conservative intellectuals are also getting behind the idea.
A born-rich woman and a do-nothing Senator have created an idea that gives to the present and takes from the future, exactly what financial experts suggest one never should do.
If this reminds you of the disgraceful student loan program — in which young people are punished long-term by ongoing debt, you are correct.
Punishing families by taking money from future Social Security payments, is an idea one would expect from conservatives.
Helping the young by enslaving the old is a favorite GOP gambit, who simultaneously (and ironically) preach saving for the future.
To its designers’ credit, this is the best federal paid-leave proposal being discussed. My Bloomberg View colleague Ramesh Ponnuru agrees, writing that he hasn’t “seen a better plan.” Its underlying philosophy — that society should invest more in the young and less in retired individuals — is sound.
But it’s still a bad idea.
Yes, it’s a bad idea, especially since it does not ask “society” to invest more in the young” — it asks the elderly to invest more in the young — nor is there any merit to giving less to the elderly.
And now comes the heart of what conservatives want — the “widen the Gap between the rich and the rest“ part:
Spending on Social Security is projected to rise by 1.5 percentage points of annual economic output over the next three decades.
Policy should be focused on decreasing projected spending to preserve Social Security for future generations.
Social Security spending needs to be cut, not redirected.
This idea, being promulgated by the rich, tells you two lies:
- Social Security benefits are so lucrative, they can be cut without punishing the elderly, who anyway, aren’t productive members of our society
- Federal taxes pay for Social Security.
Lie #1 is ridiculous and disgraceful. Social Security benefits already are shamefully low, below poverty levels, and the notion that the elderly can be cast aside as no longer productive is beyond contempt.
Lie #2 is just that: A lie. The truth is that federal taxes — FICA, income taxes, any other taxes — do not pay for anything. They do not pay for Social Security. They do not pay for Medicare. They do not pay for the military, or for roads or for the White House, or for Congress. Not one dime of federal taxes is used for anything.
When you send your tax dollars to the U.S. Treasury, they instantly disappear from any measure of the money supply. They no longer exist in the economy. They effectively are destroyed.
By contrast, when you send your dollars to your state and local taxing authorities, those dollars are deposited in a private bank, where they remain in the nation’s money supply.
That is a fundamental difference between a Monetarily Sovereign government, like the U.S. government, and a monetarily non-sovereign government, like your state and local governments.
State and local governments need income in order to spend. The federal government neither needs nor uses income. It creates brand new dollars, ad hoc, by paying bills.
And one wonders what else Congress might want to finance using future Social Security benefits if a family-leave plan creates that possibility.
Depending on the party in power, the federal government always can afford that party’s favorite projects.
Currently, the favorites are the military and the “Wall.” They will be funded, even while taxes are reduced.
The federal government never has, and never will, run short of dollars, which is why all concerns about federal deficits and federal “debt” are misguided.
Social Security will soon pay out more to retirees than it receives in tax revenue and interest income, and its “trust fund” reserve is projected to be exhausted in 2034.
By the time today’s new parents reach retirement age, either benefits will have been reduced or taxes will have increased.
Social Security does not use tax revenue to pay benefits, and the so-called “trust fund” is a bookkeeping fiction. Of what purpose is a trust fund for a Monetarily Sovereign government that has the unlimited ability to create its own sovereign currency?
If you ever have played the board game “Monopoly,” you know that the Bank never runs short of money. Players can use any item as asubstitute or keep a record of transactions. The Bank creates Monopoly dollars, ad hoc, every time it pays a bill.
The federal government operates the same way as the Monopoly Bank. If you can’t run short of money, why be concerned about running short of money?
Future lawmakers could decide that retirees shouldn’t be “penalized” with lower benefits because they took paid time off. Any policy where the benefits are enjoyed today and the costs aren’t realized for decades should be met with skepticism.
This was not a concern for the GOP Congress, who gave benefits to the rich in the form of tax cuts, and the “costs” never will be realized.
On balance, then, it’s best to think of the family-leave plan as another middle-class entitlement program. Given projected federal debt and deficits, another entitlement is something the U.S. does not need, however laudable the goal. (This is especially true in light of the fact that four out of 10 working women already report access to paid time off following the birth of a child.)
If there is anything the rich hate, it’s “entitlement programs,” specifically entitlement programs for the 99%.
Entitlement programs for the rich, such as special tax breaks for non-salary income, are just fine, however.
Apparently, the writer of the article, Mr. Strain, believes that if 40% of working women have access to some unknown amount of paid time for some unknown duration, under certain, unknown circumstances, the problem is solved.
Finally, advocates of the plan are quite wrong to suggest that it won’t burden employers. It’s true that it wouldn’t require employers to finance the leave taken by their workers, but it would impose other significant burdens.
Subsidizing time away from work through the Social Security system would increase both the number of parents who take long periods of leave and the weeks of leave new parents take.
The increased use of leave would materially disrupt business operations, particularly for smaller firms.
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This is under the theory that middle- and low-paid people are congentially lazy, and will look for ways to cheat the system. (Of course, rich people never do such things.)
Since women tend to be the main users of parental leave, businesses would probably respond to this disruption by hiring fewer less-educated women of child-bearing age, offering women fewer hours of work per week, and by promoting fewer women into management roles.
The costs of paid leave will disperse throughout the labor market, creating invisible victims whose employment opportunities are diminished.
“Hiring fewer less-educated women of child-bearing age, offering women fewer hours of work per week, and by promoting fewer women into management roles” is exactly what happens now.
The difference is that today families not only are punished because they might have children, but also are punished when they actually do have children. A federally-financed family leave program could remove the second punishment.
Paid leave has many benefits. But the costs of letting families borrow against Social Security to finance it are too high.
Michael R. Strain at mstrain4@bloomberg.net; To contact the editor responsible for this story: Jonathan Landman at jlandman4@bloomberg.net
Yes, paid leave has many benefits, especially if funded by the federal government, and isn’t another version of the awful student loan program, that gives today and punishes forever.
Rodger Malcolm Mitchell
Monetary Sovereignty
Twitter: @rodgermitchell; Search #monetarysovereignty
Facebook: Rodger Malcolm Mitchell
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The most important problems in economics involve the excessive income/wealth/power Gaps between the have-mores and the have-less.
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.
Implementation of The Ten Steps To Prosperity can narrow the Gaps:
Ten Steps To Prosperity:
1. ELIMINATE FICA (Ten Reasons to Eliminate FICA )
Although the article lists 10 reasons to eliminate FICA, there are two fundamental reasons:
*FICA is the most regressive tax in American history, widening the Gap by punishing the low and middle-income groups, while leaving the rich untouched, and
*The federal government, being Monetarily Sovereign, neither needs nor uses FICA to support Social Security and Medicare.
2. FEDERALLY FUNDED MEDICARE — PARTS A, B & D, PLUS LONG TERM CARE — FOR EVERYONE (H.R. 676, Medicare for All )
This article addresses the questions:
*Does the economy benefit when the rich can afford better health care than can the rest of Americans?
*Aside from improved health care, what are the other economic effects of “Medicare for everyone?”
*How much would it cost taxpayers?
*Who opposes it?”
3. PROVIDE A MONTHLY ECONOMIC BONUS TO EVERY MAN, WOMAN AND CHILD IN AMERICA (similar to Social Security for All) (The JG (Jobs Guarantee) vs the GI (Guaranteed Income) vs the EB (Economic Bonus)) Or institute a reverse income tax.
This article is the fifth in a series about direct financial assistance to Americans:
Why Modern Monetary Theory’s Employer of Last Resort is a bad idea. Sunday, Jan 1 2012
MMT’s Job Guarantee (JG) — “Another crazy, rightwing, Austrian nutjob?” Thursday, Jan 12 2012
Why Modern Monetary Theory’s Jobs Guarantee is like the EU’s euro: A beloved solution to the wrong problem. Tuesday, May 29 2012
“You can’t fire me. I’m on JG” Saturday, Jun 2 2012
Economic growth should include the “bottom” 99.9%, not just the .1%, the only question being, how best to accomplish that. Modern Monetary Theory (MMT) favors giving everyone a job. Monetary Sovereignty (MS) favors giving everyone money. The five articles describe the pros and cons of each approach.
4. FREE EDUCATION (INCLUDING POST-GRAD) FOR EVERYONE Five reasons why we should eliminate school loans
Monetarily non-sovereign State and local governments, despite their limited finances, support grades K-12. That level of education may have been sufficient for a largely agrarian economy, but not for our currently more technical economy that demands greater numbers of highly educated workers.
Because state and local funding is so limited, grades K-12 receive short shrift, especially those schools whose populations come from the lowest economic groups. And college is too costly for most families.
An educated populace benefits a nation, and benefitting the nation is the purpose of the federal government, which has the unlimited ability to pay for K-16 and beyond.
5. SALARY FOR ATTENDING SCHOOL
Even were schooling to be completely free, many young people cannot attend, because they and their families cannot afford to support non-workers. In a foundering boat, everyone needs to bail, and no one can take time off for study.
If a young person’s “job” is to learn and be productive, he/she should be paid to do that job, especially since that job is one of America’s most important.
6. ELIMINATE FEDERAL TAXES ON BUSINESS
Businesses are dollar-transferring machines. They transfer dollars from customers to employees, suppliers, shareholders and the federal government (the later having no use for those dollars). Any tax on businesses reduces the amount going to employees, suppliers and shareholders, which diminishes the economy. Ultimately, all business taxes reduce your personal income.
7. INCREASE THE STANDARD INCOME TAX DEDUCTION, ANNUALLY. (Refer to this.) Federal taxes punish taxpayers and harm the economy. The federal government has no need for those punishing and harmful tax dollars. There are several ways to reduce taxes, and we should evaluate and choose the most progressive approaches.
Cutting FICA and business taxes would be a good early step, as both dramatically affect the 99%. Annual increases in the standard income tax deduction, and a reverse income tax also would provide benefits from the bottom up. Both would narrow the Gap.
8. TAX THE VERY RICH (THE “.1%) MORE, WITH HIGHER PROGRESSIVE TAX RATES ON ALL FORMS OF INCOME. (TROPHIC CASCADE)
There was a time when I argued against increasing anyone’s federal taxes. After all, the federal government has no need for tax dollars, and all taxes reduce Gross Domestic Product, thereby negatively affecting the entire economy, including the 99.9%.
But I have come to realize that narrowing the Gap requires trimming the top. It simply would not be possible to provide the 99.9% with enough benefits to narrow the Gap in any meaningful way. Bill Gates reportedly owns $70 billion. To get to that level, he must have been earning $10 billion a year. Pick any acceptable Gap (1000 to 1?), and the lowest paid American would have to receive $10 million a year. Unreasonable.
9. FEDERAL OWNERSHIP OF ALL BANKS (Click The end of private banking and How should America decide “who-gets-money”?)
Banks have created all the dollars that exist. Even dollars created at the direction of the federal government, actually come into being when banks increase the numbers in checking accounts. This gives the banks enormous financial power, and as we all know, power corrupts — especially when multiplied by a profit motive.
Although the federal government also is powerful and corrupted, it does not suffer from a profit motive, the world’s most corrupting influence.
10. INCREASE FEDERAL SPENDING ON THE MYRIAD INITIATIVES THAT BENEFIT AMERICA’S 99.9% (Federal agencies)Browse the agencies. See how many agencies benefit the lower- and middle-income/wealth/ power groups, by adding dollars to the economy and/or by actions more beneficial to the 99.9% than to the .1%.
Save this reference as your primer to current economics. Sadly, much of the material is not being taught in American schools, which is all the more reason for you to use it.
The Ten Steps will grow the economy, and narrow the income/wealth/power Gap between the rich and you.
MONETARY SOVEREIGNTY
#Monetary Sovereignty - Mitchell 