Social Security is very likely this nation's most important social program. The Center on Budget and Policy Priorities ran an analysis in 2016 that found that 22.1 million people, including 15.1 million retired workers, are kept above the federal poverty line solely as a result of receiving a guaranteed monthly payout from Social Security.  

Data from the Social Security Administration further confirms the program's importance. Of the existing aged beneficiaries, 62% are reliant on Social Security to provide at least half of their monthly income, with 34% leaning on the program for essentially all of their income (90% or more). In other words, if Social Security didn't exist, we'd have a serious elderly poverty problem on our hands.

Dice and casino chips lying atop two Social Security cards.

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Social Security is facing an upcoming crisis

The financial foundation that Social Security has afforded seniors for the past 78 years is beginning to crumble. The latest annual report from the Social Security Board of Trustees forecasts that, for the first time in 36 years, the program will pay out more in benefits ($1.7 billion, per the intermediate-cost projections) than it collects in revenue, beginning this year. With the exception of 2019, this net cash outflow from the program is expected to widen significantly with each passing year, dwindling Social Security's $2.9 trillion in asset reserves. By 2034, this excess cash is projected to be completely gone.

So, what's this all mean? In plainer English, it signals that the current payout schedule is unsustainable. While Social Security can and will survive for future generations, even without any excess cash in its coffers, an across-the-board benefits cut of up to 21% may be necessary to make that possible.

With a $13.2 trillion cash shortfall looming between 2034 and 2092, and aged beneficiaries so reliant on the program, lawmakers on Capitol Hill are constantly being looked upon to provide solutions. However, not every "fix" that's proposed will be a winner.

There's a "new" Social Security proposal on Capitol Hill

Case in point: Sen. Marco Rubio's (R-Fla.) recently introduced "Economic Security for New Parents Act."

The idea behind this bill, which has received input from President Trump's daughter Ivanka, and is modeled similarly to a policy paper released by the Independent Women's Forum in January, is to provide new parents with the option of using their future Social Security benefits to take a longer leave of absence from their place of employment.

A man and woman hold a newborn baby.

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New parents would be allowed to use their future Social Security benefits (i.e., benefits they'd otherwise be due when they hit the eligible retirement age) to provide income so they can take in the range of two to three months' leave from their job to care for their newborn. In return, they'd be required to wait anywhere from three to six months longer once they reach the eligible claiming age before they can sign up for retired worker benefits. 

Rubio and team tout three benefits from Economic Security for New Parents Act. First, it would (obviously) give new parents added financial and personal flexibility when raising their newborn.

Secondly, it presumably reduces the economic hardship on businesses of providing a paid-leave benefit for employees who've just added to their family. With Social Security benefits being forwarded to workers, businesses would be able to hang onto their capital.

And thirdly, it could potentially reduce long-term program expenditures. If aged workers are required to wait longer to claim benefits, it would reduce the number of years those folks were collecting a payout. That could take a bite out of the forecasted $13.2 trillion cash shortfall between 2034 and 2092.

A worried mature couple examining their finances.

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Here's why this Social Security proposal is terrible

But as I proclaimed in April, and previously in February, when this was nothing more than an idea, it's an awful proposal.

The most glaring issue is that it would do nothing to address Social Security's imminent cash shortfall. The Trustees project that a benefits cut of 21% may be needed 16 years from now. However, the projected benefits of workers waiting longer to claim benefits won't begin to be realized by the program for another three-to-four decades. In other words, sure, it'll reduce Social Security's expenditures eventually, but it does nothing to address the more pressing intermediate-term cash issues.

Making matters worse, the Economic Security for New Parents Act might actually make things even worse in the near and intermediate term. If parents choose to take their future benefits as an income source, it would exacerbate the net cash outflow of the program and could deplete its asset reserves at a much faster pace.

Another issue is worker productivity. Even though this bill would allow workers to use their own future benefits, rather than having employers provide a paid-leave benefit to their employees, it could nonetheless adversely impact productivity by encouraging new parents to take an extended absence. If these employees play a critical role to a business, it could be bad news.

And, perhaps scariest of all, it would reduce the lifetime benefits received by parents who choose to take future benefits for parental-leave purposes. A study by the Urban Institute found that just one 12-week paid leave by parents would reduce lifetime payouts by about 3%. Should parents have four children, and thus take four 12-week paid leaves, lifetime benefits could be reduced by about 10%! That could put these folks in a precarious financial predicament come retirement.

A hundred dollar bill burning from the inside outward.

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It's also worth noting that the Urban Institute estimates that roughly a quarter of these "loans" from the Social Security program will never be recouped through lower lifetime payouts during retirement. Between parents passing away at a young age, being able to receive disability insurance, or simply not working enough to reach the prerequisite 40 lifetime work credits needed to claim a retired worker benefit, these loans would be essentially lost by the program. 

Look, there are a lot of unique ways Social Security could be improved, and the same could be said for parental-leave policies. This, however, is a Social Security proposal that needs to be buried.