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More on Paid-Leave Plans and Personal Accounts

(Olegunnar/Dreamstime)

In response to The Paid-Leave Debate, Continued

Ramesh responded to my post from Tuesday, here.

I was confused because he writes, as if I’d be surprised, that personal accounts “would only reduce the program’s long-run fiscal shortfall if they were combined with changes to the program’s existing benefits.” Well, yes. That’s why every personal-account plan incorporates benefit reductions (that was the plan back in 2005 and that’s what countries that have adopted personal accounts have done too). There is never a free lunch (no matter what people try to tell you) but it still beats the train wreck we face with our current system.

Because of the phase-out from the traditional unfunded accounts, which I mentioned in my post, the “present value” of savings are larger than the present value of the transition costs.

Ramesh and I also don’t share the same definition of progress. We currently have a state-run tax-and-transfer, horribly unfunded Social Security system. Switching to personal accounts would have unambiguously been progress in terms of economic freedom. It’s not perfect but it’s progress.

In contrast, we don’t currently have a national parental-leave entitlement. Yes, the plan he’s talking about isn’t as bad as what Hillary would propose, but it still assumes that the federal government should be playing a role in this. Let’s not pretend otherwise. It relies on the government-run Social Security system, and it increases spending for a good while. That’s regress, not progress.

And we also need to be realistic. Once the door has been opened, the Left will radically expand the scheme in ways that none of us like. And, to be honest, I can already hear future conservatives demanding that the program be expanded because parents who have to retire a few months later because they use paid leaves pay “a retirement penalty” compared to non-parents.

For more on that, I recommend (again) John Cogan’s book and this  Wall Street Journal article.

Again, my point of reference for judging this plan is economic freedom and smaller government involvement. If you prefer more pro-family benefits even at the risk of growing the government, then we won’t agree.

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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