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THE NATIONAL CAUCUS AND CENTER ON BLACK AGED, INC.

1424 K Street, NW, Suite 500
Washington, DC 20005-2407
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Statement by
National Caucus and Center on Black Aged, Inc.
White House Conference on Social Security
December 2, 1998

Social Security's long-range actuarial deficit is currently about 2.19 percent of taxable payroll. This is a manageable deficit that can be corrected without imposing draconian cuts in benefits for low-income and other Social Security beneficiaries. Social Security's financing can be strengthened without the necessity of undermining the core principles that have made Social Security the most successful program in our nation's history. This objective can also be achieved without raising the payroll tax rate for employees and employers. The National Caucus and Center on Black Aged (NCBA) has a blueprint to place Social Security in long-range actuarial balance. This is a plan that is fair and protects low-income Americans from shouldering a disproportionate burden in strengthening Social Security's financing. It will also maintain the features that have made Social Security so vital and effective for American families.

Alternatives NCBA Opposes

Before discussing the proposals to place Social Security on a sound long- range financial footing, NCBA believes it is imperative to discuss briefly alternatives that NCBA adamantly opposes.

First, NCBA is unalterably opposed to privatizing the Social Security system either partially or fully. Both the Personal Security Account (PSA) plan and the Individual Accounts (IA) plan are assaults on the Social Security system and would be a disaster for low- income persons and the vast majority of other Americans. Privatization proposals place family security at risk by trading a defined-benefit plan with statutory enforceable rights in the courts for a return on an investment that is subject to the vagaries of the market. The harsh reality is that returns will fluctuate widely from year to year and from decade to decade. Financial returns will depend upon market conditions, timing, and an individual's investment skills.

Second, NCBA strongly opposes proposals to increase the retirement age for full benefits or to move up the effective date for raising the retirement age to 67 under present law. African Americans are among the big losers under this proposal because of their shorter life expectancy. In addition, the greater actuarial reduction that accompanies proposals to raise the retirement age will adversely affect African Americans because they must oftentimes take Social Security benefits at an earlier age since they have a tendency to be employed in physically demanding jobs that prevent them from working to more advanced ages. Moreover, many African Americans must grab for earlier Social Security benefits because they have physical ailments preventing them from being gainfully employed but not sufficiently severe to meet the strict disability requirements.

Third, NCBA will resist with all its power measures to reduce or delay the Social Security cost-of-living adjustment (COLA). There can be no sugar coating for these proposals because they will effectively force many older Americans to slip below the poverty line, and perhaps several hundred thousand depending upon how the measures are structured. Surely there are more humane and effective proposals to strengthen Social Security without offering up the most vulnerable as cannon fodder to achieve this objective.

Proposals to Place Social Security on a Sound Long-Range Financial Footing

NCBA proposes to place Social Security's long-range financing in actuarial balance through a series of measures to improve the return on investment for the trust funds, make Social Security a more universal program, and obtain additional revenue.

Increase Maximum Wage Base: The maximum wage base for Social Security cash benefits ($68,400 in 1998 and $72,600 in 1999) is adjusted annually based upon the average wage level for all U.S. workers. NCBA supports a 5-percent increase for each year during the period 2000 to 2009 in the maximum taxable wage base above and beyond the automatic adjustment. Approximately 84.5 percent of all workers now have their wages fully covered by Social Security. This adjustment would provide full coverage for more workers and would be more in line with the situation that existed when Social Security first began. Projected savings: about 0.58 percent of taxable payroll.

Extend Coverage for State and Local Government Employees: Social Security should be extended to new hires for state and local government workers starting in 2011. This will not only help to make Social Security more universal but will also provide additional protection for these newly covered state and local government employees. Social Security is a portable system that follows workers from job-to-job with a defined benefit and inflation protection. Projected savings: about 0.18 percent of taxable payroll.

Tax Social Security Like Contributory Private Pensions: Social Security benefits are taxable when one-half of an individual's Social Security benefit and other reportable income (e.g., interest income, dividend income, tax-exempt interest income, pensions, and other sources) exceed certain levels: $25,000 for single filers and $32,000 for join filers. NCBA believes, as many tax experts do, that Social Security should be treated similarly to a contributory private pension with the current taxing thresholds phased out over ten years, starting in the year 2000. This can be achieved by counting as reportable income all benefits above what a worker paid into the system. Projected savings: about 0.36 percent of taxable payroll.

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