Katie Jordan of the Illinois Alliance for Retired Americans says this is no time to privatize social security.
Protect and Strengthen Social Security
Social
Security is the most effective anti-poverty program in our nation’s history. Social
Security benefits should be boosted to address growing retirement income
insecurity.
Social
Security does not face an immediate
crisis, and its modest funding shortfall over the next 75 years can be
addressed without benefit cuts or
major changes to the program. Social Security does not contribute to the federal budget deficit, and benefit cuts must
not be part of any deficit reduction package.
What Is Social Security
Social
Security embodies the principle that we are all in it together and reflects the basic American values of
hard work, personal responsibility, caring for family and neighbors, prudent financial
management and respect for dignity and independence. Social Security recipients
earn their benefits by paying into the system throughout their time at work.
Social
Security provides a guaranteed income each year to more than 54 million
American workers and their families who have lost income due to retirement,
disability or death. That’s nearly one family out of four.
Nearly
two-thirds of retirees count on Social Security for half or more of their
retirement income and for more than three in 10, Social Security is 90 percent
or more of their income. It is a safety
net that keeps retirees out of poverty. Between 1960 and 2008, Social Security
helped cut the poverty rate among seniors by more than two-thirds, from 35
percent to just under 10 percent.
Social
Security also provides important disability and life insurance protection, each
worth more than $400,000 for young workers and their families, according to the
National Academy of Social Insurance. In early 2011, more than 8 million
workers with disabilities were receiving Social Security benefits as were 4.5
million widowed spouses and 4.3 million children. More than 1 million children are
kept out of poverty by Social Security.
- Strengthen Social Security Benefits
- Social Security Is Not In Crisis
- Strengthen Social Security Funding
- Social Security Does Not Contribute to the Deficit
- Reject Social Security Benefit Cuts
To learn more about Social Security:
Strengthen Social Security Benefits
Social
Security benefits should be strengthened.
Today’s benefits are modest, averaging some $15,000 per year for men and
$12,000 for women. The portion of wages
that Social Security benefits replace is already decreasing as the full
retirement age rises to 67 and Medicare premiums increase. For a medium wage earner
(roughly $43,000 in 2010) who retires in 2030, the replacement rate will be 29
percent, 10 points lower than it was in 2002 when the full retirement age was
65.
Other
sources of retirement income are non-existent for most workers, declining in
the case of workplace pension plans, or collapsing, like home equity.
In
light of this growing retirement insecurity, Social Security benefits should be
increased across the board, not reduced.
Social Security Is Not In Crisis
The Social
Security trust fund is fundamentally sound with a surplus that, according to
both the Social Security Trustees and the Congressional Budget Office, will
continue for years to come. The trust fund is projected to grow from $ 2.7 trillion
in 2011 to $ 3.7 trillion in 2022. Social Security can meet 100 percent of its
obligations until 2036. And even if no changes are made, it can then pay about
77 percent of scheduled benefits through 2084 and 74 percent thereafter.
The
Social Security surplus is invested in Treasury bonds backed by the full faith
and credit of the federal government.
These bonds are as solid as all other Treasury bonds. There is no
precedent for the United States to default on its bond obligations.
Strengthen Social Security Funding
While Social Security is not in crisis, its modest revenue
shortfall, about 0.7 percent of GDP over the next 75 years, should be
addressed. Doing so can be done without
cutting benefits. In size, the shortfall
is comparable to the cost of extending the Bush tax cuts for the wealthiest 2
percent. Most of the shortfall could be closed by eliminating the annual cap on
wages subject to the payroll tax, currently set at $106,800 per year. Other options to close the Social Security revenue
gap include raising the cap on wages subject to the payroll tax, lifting the
cap on wages for employer payroll tax contributions, gradually raising the
payroll tax rate over time, applying the payroll tax to income from interest,
dividends, capital gains and stock options, and a financial transactions tax.
Social Security Does Not Contribute to the Deficit
Social
Security does not contribute to the deficit and should not be lumped in as part
of the long-term deficit problem. The Social Security trust fund is a separate
segregated account with its own dedicated source of funding—employer and
employee payroll tax contributions. It
cannot pay benefits unless it has funds to do so--that’s the law. Social
Security cannot borrow or spend dollars it doesn’t have. The real causes of the projected deficits are
the Bush-era tax cuts, two wars that were not paid for, the recent recession
and health care costs.
Reject Social Security Benefit Cuts
All three of the following proposed changes to Social
Security are benefit cuts that would hurt working families and retirees:
cutting the cost-of-living adjustment (COLA); raising the retirement age and changing
the benefit formula. The proposal from the co-chairs of the National Commission
on Fiscal Responsibility and Reform, Erskine Bowles and Alan Simpson
(“Bowles-Simpson proposal”) included these benefit reductions while other
deficit reduction plans and Republican-introduced legislation include similar
or even deeper benefit cuts.
Cutting the Annual COLA. The automatic annual COLA for Social
Security protects the value of benefits from erosion due to inflation. Proposals
to adopt a supposedly “more accurate” formula to calculate the COLA, such as
the “chained Consumer Price Index,” are really disguised attempts to lower COLA
payments and reduce Social Security for current and future Social Security
beneficiaries. The chained CPI makes the inflation rate look lower than the
index now used by Social Security. As a result, the annual COLA payment would
be about 3 percent less after 10 years, and the benefit reduction would increase
over time, reaching more than 6 percent after 20 years. These larger cuts would
have a greater impact on those receiving benefits the longest, including older women
who rely more on Social Security than men and those disabled at a young age who
go on to live long lives. Because the chained CPI does not take into account
the fact that seniors spend more on health care, it is an inaccurate way to measure
inflation for them.
Cutting Benefits by Raising the Age for Full Social Security Benefits. Raising
the age at which workers can claim full Social Security benefits is an
across-the-board benefit cut. Increasing the age from 67—the full retirement
age for workers born after February 1960—to 69 would reduce lifetime benefits
by about 13 percent. For each year the full retirement age is increased, Social
Security benefits are reduced roughly 7 percent.
Cutting Benefits through Benefit Formula
Changes.Benefit formula changes are often described as affecting only workers
with higher average earnings.The
Bowles-Simpson proposal, however, would
cut Social Security benefits for workers with average lifetime earnings as low as $27,000, with bigger reductions for
workers with higher average earnings.
Other proposals, such as “progressive price indexing,” would reduce benefits for those with average lifetime
earnings of $22,300. These kinds of changes reach
deep into the middle class.
These types of formula changes
weaken the connection between the Social Security benefits and the payroll
contributions workers make throughout their careers.
The Republican budget proposal also
targets Social Security by creating a process that makes it easier for Congress
to cut Social Security benefits.
For more on the Chained CPI, go to:
·
National
Academy of Social Insurance.
·
National
Women’s Law Center.
·
Economic Policy
Institute.
For more on the Republican budget proposal and Social
Security, go here.
