Kamal Imhotep Latham
Personal Statement of
Kamal Imhotep Latham
President and CEO, Harvard University NAACP
President Franklin D. Roosevelt called Social Security "some measure
of protection.. .against poverty-ridden old age." In my opinion,
it is one of the few massive government programs to have successfully
achieved an honorable objective. Unfortunately, two major problems
exist with the current system. It places an unfair financial burden
on young people and it is on course to run a cash flow deficit
early in the next century. The question of today is whether or not
national policymakers will take the difficult step of reforming
the system to resolve those problems while maintaining a safety
net for the low-income elderly.
There are only two ways to save Social Security. The U.S. Congress
and President William J. Clinton must either reduce benefits or
increase revenue. The decision to reduce benefits is politically
untenable and it would have dire consequences for low-income persons,
especially if inflation rises. At first glance, increasing revenue
sounds unpalatable because the assumption is that payroll taxes
would have to be raised drastically. I believe there is another
way. Individuals must be allowed to invest a portion of their
retirement assets in the stock market. In short, the system must
be partially privatized. It will not only promote intergenerational
fairness and save the system from insolvency, but it will increase
the national savings rate, allow individuals to earn more money,
and put young people's confidence back in the federal government.
Young people are very skeptical of Social Security because they
know that it is not a retirement planning system but merely an
income transfer from themselves to retirees. Furthermore, they do
not believe that it will be there for them in their old age. These
sentiments should not be ignored nor taken lightly. The future of
this nation looks very bleak if young people, whom President John
F. Kennedy considered America's greatest natural resource, do not
believe that the federal government is serious about having a system
that will adequately provide for them in their retirement years.
Generation X shares a disproportionate amount of the financial
commitment from society that is currently required to fully fund
Social Security. Employees and employers each pay 6.2% in Social
Security taxes up to an earnings threshold of $68,400. The overwhelming
majority of young people earn less than that and the FICA tax is
automatically deducted from their paychecks. Although employers
must contribute the same percentage, many economists believe that
they pass on almost all of their tax to employees in the form of
lower wages. In essence, young people are actually paying a FICA
tax of nearly 12%. That is simply unfair.
If the current system is left unchanged, by the year 2013, the tax
receipts coming into the Social Security Trust Fund will not meet
the disbursements being paid out of it. Technically, the system
can be financially engineered to cover all beneficiary payments
through the year 2032. However, the 40 million Americans that belong
to Generation X will be retiring around that time and millions of
them will fall through the crack because there will only be enough
money to meet three-fourths of mandated benefit payments. It is
wrong that what young people get in return for their FICA taxes is
an empty promise of future financial security.
Lawmakers have a hard task ahead of them. They must have the
political will to reform a system that places an unfair financial
burden on young people and is on course to run a cash flow deficit
in almost fifteen years. My desire to see the system changed does
not stem from a conservative nor liberal ideology. Ensuring that
all Americans have adequate retirement security in their old age,
in my opinion, is just the right thing to do.
| 
