THE NATIONAL CAUCUS AND CENTER ON BLACK AGED, INC.
1424 K Street, NW, Suite 500
Washington, DC 20005-2407
202-637-8400
Fax# 202-347-0895
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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