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Washington, DC - While advocating for Social Security privatization, President Bush has avoided explaining one key aspect of his plan: the drastic benefit cuts that will be necessary if Social Security is privatized. These benefit cuts will be inevitable under the president's plan, but he has conveniently ignored them when discussing his idea. Cuts in benefits will prevent future Social Security beneficiaries from receiving the guaranteed benefits currently enjoyed by 48 million recipients.
President Bush's privatization plan would divert one-third of a worker's Social Security payroll taxes out of the Social Security Trust Fund and into a private account. His plan will dictate where workers can invest this money, when workers can take their money out (only at retirement), and it will offset contributions to private accounts with cuts in benefits.
One of the least advertised features of the Bush plan is that any gains made from private accounts will be offset by reductions of up to 70 percent in Social Security monthly benefits. This is the part of his plan that the president prefers to ignore, and understandably so. When you look at the whole privatization picture, you begin to realize why President Bush doesn't want to talk about the details of his plan.
Under the plan that the president describes as a "good blueprint" for privatization, future benefits will be calculated according to increases in prices instead of wages. Prices increase at a slower rate than wages, and this alone would result in deep benefit cuts for all workers, even those who did not choose to divert money into a private account. For a 20-year-old worker today, this cut would mean the loss of $152,000 in guaranteed benefits over his or her lifetime. Future young workers would see even greater cuts. Today the average Social Security benefit is $955 per month. The average monthly benefit would drop to $516 in today's dollars if the president's privatization plan were implemented. These cuts would be devastating.
What will these benefit cuts really mean for people? They will mean reduced purchasing power, with rising costs and less money to spend at a time in people's lives when they may no longer be working. Social Security provides the majority of income for almost two-thirds of seniors. Costs for health care, gas, home heating oil, and housing are steadily rising and approaching record levels. Those services are becoming unaffordable for many people. Future Social Security beneficiaries will be forced to pay for the rising costs of needed services with drastically reduced Social Security benefits. It is already difficult to make ends meet, and if workers cannot be guaranteed a fair Social Security benefit, privatization will only make this challenge harder.
The guarantees that Social Security promises are as important as the money it provides. The loss in guaranteed benefits under privatization would seriously hurt future Social Security beneficiaries. Social Security has never failed to pay a benefit on time or in full. It has kept 90 percent of seniors out of poverty. Thirty percent of its beneficiaries are disabled or surviving family members of workers. No other system can fulfill the kinds of promises that Social Security does. It is Social Security's role as an insurance program that has made it so successful, and this necessary role will be destroyed if Social Security is privatized.
We cannot allow Social Security to slowly be destroyed by privatization. Social Security must be protected in order to ensure a secure standard of living for all future beneficiaries.
Congressman Maurice Hinchey is in his seventh term representing New York's 22nd Congressional District. He is a member of the House Appropriations Committee. Congressman Hinchey will be participating in a community forum on Social Security at Friends' Meeting House in Poughkeepsie on Saturday, April 9 from 1:00-4:00pm. |
