Metro Seniors in Action

Positions on Social Security Reform

1. SOCIAL SECURITY IS NOT IN CRISIS.

Right now the Social Security program is running a surplus (more payroll contributions than payments). This will continue for several more years until we begin spending some of the excess funds to meet future payment obligations. If we accept the very pessimistic predictions of the Social Security Administration (that our economy will grow at 1.5% per year), we will only be able to pay roughly 70% of benefits starting in the year 2034. For our reference, the economy's growth has averaged 3.5% in the last 75 years and is currently growing above 2%. If our economy averaged 2.5% growth in the next 25 years, there would be no shortfall whatsoever.

The perception of a Social Security crisis has been manufactured by those who want to "reform" the program. Adjustments to the program have been made in the past, and they can be made in the future. But there is no crisis to justify an overhaul of Social Security. Lastly, how can we justify outrageous levels of spending for the military and suggest that we cannot afford to provide for our retired workers?

2. WE OPPOSE ANY EFFORT TO PRIVATIZE SOCIAL SECURITY INTO PERSONAL RETIREMENT ACCOUNTS.

One of the strengths of Social Security is that it is mildly redistributive. In other words, lower-income workers receive a higher percentage of their contributions during retirement than higher-income workers. If we changed Social Security so that each person saves for his/her own retirement, we would destroy that progressive aspect of Social Security.

Secondly, in order to transition to a privatized system, current workers would need to begin paying into individual accounts (for their own retirement funds) AND continue to contribute to the funds that pay the benefits for current retirees! This would demand a significant payroll tax increase (more than an increase to cover the projected deficit).

Social Security has always been social insurance, not a savings program or an investment scheme. We need to protect the program as one that ensures a liveable income for all retirees, and avoid creating a privatized system that rewards lucky investors and punishes unlucky ones.

3. WE OPPOSE ANY EFFORT TO EVEN PARTIALLY INVEST SOCIAL SECURITY FUNDS IN THE STOCK MARKET.

The Social Security fund has historically invested in government bonds, the safest investment in the world economy. While there have been periods of remarkable growth in the stock market, there are no guarantees for indefinite high returns. As every investor knows, higher returns require higher risks. The potential higher return is not worth the risk when we are talking about people's basic retirement income.

We also recognize that directing billions of federal dollars into private investment could have untold economic and political effects. Do we want a federal program to rely directly on the financial success of private corporations? If the stock market did take a dive someday, how would the government provide a liveable income to Social Security beneficiaries? What would happen if the US Government suddenly stopped selling trillions of dollars of bonds?

While the stock market may be an appropriate investment for a portion of some people's personal savings for retirement, the government should not invest Social Security funds in such a risky manner.

4. WE OPPOSE INCREASES IN THE RETIREMENT AGE, DECREASES IN COST OF LIVING ADJUSTMENTS, MEANS TESTING, OR ANY OTHER CHANGES THAT WOULD REDUCE BENEFITS TO RETIREES.

Whatever changes that may need to be made in the structure of Social Security funding, we should not place the burden on the beneficiaries. No one is getting rich by collecting Social Security, and a reduction of benefits will drive more of our seniors into poverty. An increase in the retirement age is unjust and unwarranted: blue-collar workers (who have shorter life-expectancies and more physically demanding jobs) will lose a much higher portion of their share of Social Security. In addition, proposals to reduce the cost of living adjustments are based on general statistics that do not account for seniors' higher expenses (e.g. health care).

We support keeping Social Security, as an earned right, without means tests. Means testing would change Social Security from a program covering most Americans into a kind of welfare, discouraging participation by some needing it and weakening political support. Means testing also would involve considerably more administrative expenses.

In a time when worker productivity is up and the wealthy are getting richer, we should be talking about increasing benefits and lowering the age for retirement!

5. IN ORDER TO ADDRESS THE PROJECTED DEFICIT, WE SUPPORT THE REMOVAL OF THE CAP ON INCOME TAXED FOR SOCIAL SECURITY (CURRENTLY AT $72,600).

Currently, income above $72,600 is not subject to payroll taxes for Social Security! (A similar cap existed for Medicare contributions, but it was eliminated several years ago.) The removal of this cap would eliminate any projected deficit problems.

According to 1998 statistics, the projected 75 year deficit is 2.23% of the taxable payroll during that same period. If we removed the cap on contributions, we could make up 2.02% of that deficit (decreasing it to 0.19%). If we also raised the cap on benefits in a corresponding manner (to allow wealthy workers to receive some portion of additional contributions during retirement), we would still reduce the deficit by 1.53% (decreasing it to 0.70%). A deficit of 0.70% or less is considered within operating limits and requires no financial adjustments to the program. These numbers were obtained from the National Committee to Preserve Social Security and Medicare and confirmed by the Social Security Actuaries.

In other words, even if you accept the pessimistic projections for economic growth, there is an excellent way to fix the problem: tax everybody's income fairly by removing the cap, and allow benefits to increase with diminishing returns.