Trump’s paid-maternity plan doesn’t quite add up
Republican presidential candidate Donald Trump has weighed into the debate over paid leave for new parents, with a proposal to provide six weeks of partially-paid maternity leave to working mothers whose employers don’t already provide the benefit. His daughter, Ivanka Trump, was up on Capitol Hill this week talking to Republican lawmakers about the plan.
Trump announced the idea in a speech in Aston, Pennsylvania, on September 13, where he also unveiled proposals to help families pay for child care.
Trump said his paid-maternity program would be paid for “by recapturing fraud and improper payments” in the UI program,” adding that “this maternity leave will be paid straight out of the unemployment insurance fund,” and “this safety net will be completely paid for through savings within the program.” In the same speech, Trump said the new benefits “would be paid for by offsetting reductions in the program so that taxes are not raised.” That could suggest that other sources of revenue within the UI system—in addition to cracking down on fraud and overpayments—would also be tapped to pay for maternity leave.
The Unemployment Insurance (UI) system is funded in each state by an employer tax (based on the employer’s salary base and number of covered employees). Each state collects its own UI revenues, and determines its own employer tax rate, eligibility rules and benefit levels. The federal government provides the states with UI administrative services , holds each state’s UI trust fund, and provides extended unemployment benefits (beyond 26 weeks, as authorized by Congress) when unemployment spikes during economic downturns.
Neither Trump’s speech, nor the position paper posted on the campaign’s website, provided a cost estimate for the proposed maternity-leave plan. Unnamed campaign sources told CNN and the Los Angeles Times that the program would cost $2.5 billion, and $3.4 billion per year, respectively. Marketplace requested additional information and clarification via email from the Trump campaign; the campaign did not respond.
How much money could be generated by “recapturing fraud and improper payments” in the UI system?
“This is something we actually know a lot about,” said policy analyst Andrew Stettner at the progressive Century Foundation. Stettner said that based on rigorous audits by the U.S. Labor Department, “about 10 percent of all payments are classified as an ‘overpayment.’ So that’s about $3.4 billion dollars total per year.”
But Stettner said most of that money would not be available to pay for new maternity benefits.
He said a significant portion of overpayments come from paperwork and math errors—resulting in people getting higher benefits than they’re entitled to. Stettner said the government has gotten effective at clawing back those benefits from recipients at tax time. He estimated that only about $1 billion represents intentional benefit fraud.
“At least one third of overpayments aren’t recoverable, while about $1 billion is actually recovered,” said Stettner. Those funds are typically returned to the state trust fund, and the dollar value of the benefits credited back to the employer, who may face lower unemployment insurance premiums in future, since premiums are based in part on an employer’s past claims history.
Stettner’s conclusion: “There is really not much new revenue to be collected in the UI system.”
Economist Apurna Mathur at the conservative-leaning American Enterprise Institute agrees.
“We may be losing billions of dollars in waste and abuse,” said Mathur, “but at the end of the day, there’s a cost to enforcement and getting those dollars back. It’s hard to see how this could provide a sustainable long-term revenue source to fund a program that’s likely to have a high take-up rate. It might fund us for one year, and not cover everybody.”
The other possible source of revenue within the UI system, according to Trump’s proposal, is “offsetting reductions in the program.”
Economist Heidi Hartmann, director of the Institute for Women’s Policy Research, thinks such reductions would be necessary, because “there isn’t enough money from eliminating fraud and abuse” to fund the program. “Trump is saying there will be no new costs,” Hartmann continued, “so the tax for the employer won’t go up. Instead, benefits will go down in other parts of the unemployment insurance system. So all workers are going to be paying in some way for this new benefit for child-bearing women.”
Hartmann pointed out that Trump’s proposal to use unemployment insurance to deliver maternity benefits is similar to one floated by President Bill Clinton in the late 1990s. “It’s a tax that’s already being collected, and it covers virtually every worker,” she said. “It’s just a limited way of doing this.”
Hartmann said the Trump proposal is nonetheless a welcome addition to the policy debate. “It’s an important idea to make coverage for child-bearing women universal and something that everyone deserves,” said Hartmann.
Stettner, meanwhile, points out that the UI system isn’t in good financial shape to begin with, and couldn’t easily absorb a major new employee benefit.
For decades, states kept their unemployment taxes low, and didn’t adjust them with inflation, in order to help employers. As layoffs and benefit volumes soared in the Great Recession, many state trust funds ran low or went bust, and had to borrow from the federal government to continue paying benefits. At the end of 2015, only 18 states had recapitalized their trust funds enough to cover anticipated benefits in the next recession, let alone to pay out new maternity leave claims that might arrive on their doorsteps.
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