National Committee to Preserve Social Security and Medicare

National Committee to Preserve Social Security and Medicare
10 G Street, NE, Suite 600
Washington, DC 20002-4215
202 216-0420
Viewpoint On SOCIAL SECURITY REFORM

Social Security continues to serve individuals in this country well as our nation's most successful federal initiative. It provides a foundation of retirement income which permits seniors to live in dignity and helps relieve younger family members of the obligation for their support. Social Security benefits Americans of all ages. In addition to retirement and spousal benefits, workers receive insurance protection that provides benefits to themselves and their families if the wage earner becomes disabled or dies. In fact, thirty-eight percent of all Social Security benefit dollars go not to retired workers, but to disabled individuals, spouses of retired and disabled workers, dependent children and survivors. Ninety-eight percent of children under age 18 in the United States can count on monthly cash benefits if a working parent dies.
Without Social Security half of all seniors would fall into poverty. In fact, Social Security keeps more than 15 million people of all ages above the poverty line. In a very real sense, Social Security is the most effective anti-poverty program this nation has ever enacted. The reason that it is so effective is that it is not a needs based welfare program. Benefits are paid as a matter of right in return for contributions throughout an individual's working years. Social Security provides benefits in a manner that is progressive and fair: lower-income workers get back a higher percentage of their earnings as Social Security benefits, but the more someone has paid in the higher their benefit check. Social Security is cost effective, financed equally by employer and employee, portable from job to job, provides inflation-adjusted benefits, and covers earnings over a working lifetime up to the taxable wage base.
Social Security is not in crisis. Its long-term fiscal health is manageable. Even if no changes are made, Social Security will have ample resources to cover 100 percent of benefit obligations through 2032, and 75 percent thereafter. Throughout its history, Social Security has adapted to changing economic and demographic conditions. In fact, Social Security has a remarkable and proven history of durability. The challenge Social Security faces is to correct the projected shortfall and ensure the system remains strong and vital for generations to come. Fortunately, reasonable and moderate adjustments in revenues and benefits can accomplish this.
Social Security's long-term solvency should be strengthened, so that it continues to provide a reliable, guaranteed base of retirement, disability and survivor's income. The National Committee to Preserve Social Security and Medicare remains committed to maintaining Social Security as a system of social insurance that pools risk among all workers.
Replacing any part of the current system with individual retirement accounts would erode Social Security's fundamental qualities and force each worker to bear the risk that his or her account may prove inadequate.
Moving to a system of individual accounts is also enormously expensive; the transition costs workers would be forced to pay could exceed $2 trillion for a partially privatized system. Totally privatizing Social Security would likely cost as much as $7 trillion. Essentially, American families would end up paying more money for less retirement security. There are many options for bringing Social Security back into long-range balance without replacing any part of the program with a system of individual accounts.
Some of the options that the National Committee supports are:

Making the program universal by covering newly hired state and local government employees.

Increasing the maximum amount of annual earnings subject to Social Security tax and credited for benefits.

Investing part of Social Security's accumulated reserves in broadly indexed equities funds. The investment policy should be designed to prevent investing to achieve social or political objectives. A contingency reserve sufficient to pay benefits for at least on year should remain invested in long-term Treasury bonds.

Other modest benefit reductions implemented with ample notice and planning for future beneficiaries such as increasing the length of the wage-averaging period from thirty-five years to thirty-eight years.

Although Social Security will face new challenges as the baby-boomer generation moves into retirement and longevity increases, these challenges can be met without dismantling the United States' remarkable and successful system of social insurance. Social Security is a unique blend of reward for individual effort and, at the same time, perhaps our strongest expression of community. Instead of eroding Social Security's basic protections, we should strengthen and fine tune the system so that it continues to provide a safety net that is essential to millions of Americans of all ages.