The Success of Social Security
Bush Tax Scheme Jeopardizes Social Security’s Future
Privatization: the Greatest Threat to Social Security
Impact on African-Americans and Women
Fixing, not Dismantling, Social Security
Social Security was designed as a comprehensive, inflation-adjusted retirement plan nearly 70 years ago to provide a minimal level of economic security for our nation’s seniors. When Social Security Income (SSI) was first enacted in 1935, more than 50% of all older Americans lived in poverty. Today the poverty rate has decreased to little more than 12% in large part due to Social Security. The system now services over 45 million Americans at $32 billion a year, with two-thirds of recipients collecting disability and survivor’s benefits. The program also provides needed cash assistance to more than 3.2 million children, making it one of the largest federal assistance programs for children in the nation. More than 60% of all retirees depend on SSI for at least half of their retirement income.
Residents of the state of California receive more social security income on a yearly basis than residents of any other state in the nation. Approximately 4.9 million Californians currently receive some form of Social Security income, and over one quarter of those receiving benefits reside in Los Angeles County. The number of social security recipients for Los Angeles County alone is larger than the social security rolls of 40 states.
From 1999 to 2001, a bipartisan majority of members of the House of Representatives voted to preserve the Social Security Trust Fund. As recently as January 2002, President Bush stated that “the Social Security surplus must be preserved only for Social Security.” Nevertheless, one month later, the President submitted his FY 2003 budget plan to divert $2 trillion from the Social Security Trust Fund, in the form of tax cuts, which completely wiped out the $1.3 trillion surplus. Due in large part to the President’s $1.35 trillion tax cut in 2001, the non-Social Security federal budget has gone from $68 billion in the black during the first half of FY2001 to $185 billion in the red in 2002. The numbers simply do not add up.
It is likely that the Republican-controlled Congress will offer legislation making permanent the 2001 tax cuts over the next two years. The total cost of the Administration’s tax cut policy could then reach $4 trillion dollars, and almost every penny of the new cuts will come at the expense of the future financial health of social security.
During the 107th Congress, the Administration resisted any discussion on its proposal to privatize Social Security. In June 2002, I joined my Democratic colleagues in mounting a discharge petition calling for a full and free debate on this issue. Although unsuccessful, the discharge petition illuminated the Republicans’ fear to publicize their highly suspect proposals with the voters.
Based on current projection, Social Security can pay full benefits until 2041 and roughly 72% of benefits thereafter. Although filling the gap poses a real and serious challenge, Social Security’s fiscal viability has in fact improved every year over the past five years. To view the system through a prism of “crisis” is simply irresponsible and premature.
Ironically, the Republican schemes to privatize Social Security would force an immediate meltdown in the current program. The reason: Social Security is a “pay-as-you-go” program, meaning that Social Security taxes collected today are immediately paid out to current beneficiaries. Any plan to divert any amount of payroll taxes away from the trust fund would thus result in reduced benefits or raised taxes right away, plain and simple.
When President Bush directed his Commission to Strengthen Social Security to propose privatization plans last year, the results were dismal. The Commission produced three options that would require massive infusion of unspecified revenues to produce long-term program solvency. In fact, in order to divert Social Security income to private individual accounts, an estimated $1.5 -$1.7 trillion over 10 years for each of the three plans would have to be made up somewhere to maintain current benefit levels for retirees or those too close to retirement. With the federal budget already facing hefty deficits, where will the money come from? The Commission doesn’t say.
Without counting investment returns, the chief actuary for Social Security has also concluded that all three Commission plans would lead to as great as a 43% reduction in guaranteed benefits. They would even necessitate cuts as high as 47% in Social Security’s disability and survivor programs. Should we expect individual accounts to make up all the differences? Just consider the stock market’s recent travails. Since Jan. 2001, the market has lost $4.5 trillion in value. The market’s volatility will not only destroy the essence of Social Security as a social insurance program, it will also make it impossible to replicate Social Security’s inflation-indexed benefits. This is simply not acceptable. The benefit cuts required by privatization are so large that everyone will face benefit reductions; even those who do not choose to set up private accounts will be adversely impacted.
By requiring every worker to shoulder substantial transition and administrative costs in exchange for unprotected investment schemes, privatization is a process that denies individual choices and cheats workers out of their guaranteed benefits, all the while stealing from the pockets of today’s seniors who are already relying on their SSI benefits.
While Social Security is race neutral, its progressive structure has a disproportional impact on traditionally underemployed groups. Today 40% elderly African-Americans have no income other than Social Security. Although African-Americans represent about 12.5% of the U.S. population, nearly 18% of workers receiving disability benefits are African-American. In fact, African-Americans account for 45% of children receiving survivor benefits and 22.5% of those receiving benefits as the children of disabled workers. Without SSI, the poverty rate for African-American retirees would jump from 24% to 65% today.
Social Security also makes a significant difference for female workers who, in general, make 72 cents for every dollar a man earns. 70 percent of working women today earn less than $25,000 each year. They are also less likely than men to have access to a pension or retirement plan. Indeed, more than one-half of all women over 65 years old rely on Social Security for an average of 72% of their income today, and nearly 40% of older women living alone depend on Social Security as their sole income.
Social Security needs fixing, but the real challenge confronting our nation today is whether political leaders will approach this issue responsibly. Social Security may not be solvent 38 years from now, but it will neither go bankrupt nor implode. Agendas aimed at privatizing Social Security, based on exaggerated rhetoric and fuzzy math, will not solve the problem. For the 108th Congress, Democrats and Republicans must seek ways to strengthen Social Security without compromising its value as an economic insurance policy of last resort. Bipartisan proposals based on realistic fiscal assessments must be forged. Let’s not deny the financial security and dignity for millions of Americans at the expense of aggrandizing the riches of a few.
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