National Council on the Aging

The National Council on the Aging
409 Third St. SW, Suite 200
Washington, DC 20024
202-479-1200
www.ncoa.org
Public Policy Statement on Economic Security, 1998-1999

The issues facing retirement income, such as privatizing Social Security and limiting defined benefit plans, will affect the entire workforce of today and of the foreseeable future.
NCOA is concerned about the impact of recommendations made by the 1994-96 Advisory Council on Social Security to partially or fully privatize the Social Security program, accelerate and increase the Social Security retirement age, and increase the basis for computing benefits from 35 to 38 years of wage- covered employment. NCOA also questions the wisdom of investing up to 37.5 percent of the Social Security Trust Funds in the equity and bond stock market.
NCOA recognizes that there is a need for an intensive debate and review of the Social Security program, especially with _ _ regard to assuring that the program will remain fiscally solvent and pay adequate benefits during the entire period when the so-called "baby boom" generation retires.
However, NCOA opposes such drastic proposals for change as full or partial privatization. The Advisory Council's partial privatization proposal would establish a new 1.6 per cent tax on Social Security and mandate covered employees to invest in one of six or so government-sponsored funds. The Advisory Council's full privatization proposal is even more extreme. It calls for an eventual phase-out of Social Security as we know it, including an estimated seven trillion dollars to pay promised benefits during a 72-year transition period and a new tax of 1.53 percent on payroll running from 1998 to 2070.
Social Security
NCOA reaffirms its strong and unqualified support for the nation’s Social Security cash benefit program. That program now provides benefits to more than 45 million retired or disabled persons, and widows and children. It is a universal program that is based on an excellent 60-year history of contributory social insurance principles, involving the contributions of workers and employers in a system that protects against the loss of income because of retirement, disability, or death of a family wage earner. Moreover, it is a system based on statutory rights and covered employment. Lower-income workers, whose contributions represent a maximum percentage of earnings and who experience earlier mortality on average, receive benefits weighted to provide greater income replacement to lower income beneficiaries. This is a strong social adequacy feature of the program.
The Social Security Old Age, Survivors and Disability Insurance Program (Title II of the Social Security Act) is the basic underpinning of the nation's income-maintenance structure. It provides at least 50 percent of the total income for three out of five older Americans and keeps approximately 15 million individuals above the poverty line. However, Social Security was never expected to provide the total economic security required by American workers and their families in old age; private pension and individual pension systems (including personal savings) must be encouraged and fostered for all workers in our economy.
Social Security has the resources to meet benefit obligations to covered workers and their dependents for the next three decades. However, by the year 2020, the Social Security trust fund will likely collect fewer tax revenues than are needed to pay benefits; by 2032, revenues and fund balances are expected to be inadequate to meet benefit obligations. Congress and the executive branch must address this long-term solvency problem.
Experts at the Bureau of Labor Statistics, whose job it is to make adjustments to the Consumer Price Index (CPI) should be given the finances and tools to ensure an accurate assessment. That said, NCOA is particularly concerned with efforts to reduce through legislation the CPI. Any changes to the CPI would affect Social Security, military retirement, civilian retirement benefits, and means-tested programs such as Supplemental Security Income and food stamps, and taxes would also change. Medicare premiums are linked to the CPI. Any change to the CPI would have an enormous impact across all income maintenance and health programs. Changes in the CPI should not be based on political whims; rather, they should be based on scientific data.
NCOA also has serious reservations about the proposal to increase the normal retirement age under Social Security. This includes the concerns about the recommendation of the Advisory Council that would increase the computing period for Social Security from 35 to 38 years of wage-covered employment. Both provisions would have particularly negative consequences for women workers, who often have to leave the work force from time to time to serve as caretakers. A further increase in the retirement age would create hardship for African- American male retirees as well as blue collar workers who are often displaced from their regular jobs earlier than age 65.
Where NCOA Stands
The National Council on the Aging is committed to sustaining the performance that generations of working Americans have come to expect and rely upon.

NCOA supports retaining the Social Security system's basis of universal coverage for all workers; payroll tax financing by both employers and covered employees; and a progressive, wage- related benefit structure.

NCOA supports retaining the present schedule for raising the retirement age for Social Security to age 67 by 2022.

Congress and the Administration should explore the advantages and disadvantages associated with investment of Social Security Trust funds into the equity and bond stock market.

NCOA opposes provisions that would tend to "privatize" Social Security at the cost of reducing the present social insurance protections now existing for both current and future retirees.

Steps should be taken to make Social Security more responsive to the needs and circumstances of women. This would include the creation of a basic benefit that would provide an adequate base of retirement income and improvements in the benefits now available to survivors, including divorced survivors and modification of the present "government pension offset" rule that penalizes unfairly many woman retirees.

NCOA supports continued annual cost-of-living adjustments, based on fair and carefully assessed measures, and eliminating remaining gender inequities.

NCOA supports modest adjustments to help solve Social Security's long- term financing problems;

NCOA supports eliminating the use of the Social Security Trust fund to mask the deficit;

The present requirement delaying a spouse's Social Security benefits for two years after a divorce should be eliminated altogether. Under current law, a divorced person age 62 and over may receive Social Security upon divorce if the former spouse is receiving Social Security, but must wait two years if the former spouse is employed. This can be a time of great hardship.

The Social Security program should provide credit to a worker's Social Security benefit at a base amount for every year that the worker has cared for a severely disabled family member.

The National Council on the Aging is a private, nonprofit research, education, and advocacy organization. Founded in 1950, NCOA created the Meals on Wheels, Foster Grandparents, and many other innovative programs for seniors. Members include projessionals and service providers in the field of aging, government agencies, and consumer, religious, and labor groups. For more information, visit NCOA's Web site at www.ncoa.org.