Re: Moderator's question

[National Dialogue Moderator <moderator>]

The current system has evolved from being a program designed as a
safety-net for seniors, to a family oriented insurance program.
The change happened early in the life of Social Security.  The
system will be placed in a difficult situation because of the
annuity portion of the program, and earlier because of the disability
portion of the program.  The annuity part of the program--its
retirement benefit--collects the larger share of FICA taxes, and
so dwarfs the issues about solvency for the disability portion of
the program.  So, it is natural that people have gravitated to the
annuity insurance in debating a "solution" to the Social Security
program.

But, that emphasis, and discussions of the annuity insurance, as
if it were the only function of Social Security, and a mischaracterization
of the annuity insurance as if it only covers the individual worker,
challenges the underlying philosophy of the current program.  The
current program is extra progressive for minorities and women
because of its family focus, and because the benefits are "indexed"
to family size.

The program is not formally called Social Security, but the Old
Age, Survivors and Disability Insurance program.  So, formally, it
is an insurance program.  The tax dedicated to funding the program
has Insurance in its name, not tax.  And the program gives benefits
to children, surving spouses, dependent adult children and divorced
spouses.  The benefits are intricately tied to various parts of
the program, and so claiming to "calculate" a "rate-of-return" on
this very complex insurance instrument is not, at all, a straight
forward exercise.  Benefits depend on life time earnings, family
size, including family formation--and possible marriage disolution,
the work and earnings capacity of spouses, and the probability of
being disabled.  Those variables are themselves correlated, and so
hypothetical workers are rarely "typical."

As a total insurance program, minorities benefit greatly.  Native
Americans, African Americans and other minorities tend to carry
less-than-adequate life insurance.  And, because they often do the
most dangerous jobs in society, are more likely to be disabled,
and would find it impossible to get disability insurance.  So, even
the conventional insurance programs generally available in the
private sector have proven difficult for most minority workers to
get.  In that sense alone, even the individual insurance feature
of Social Security is worth defending for minorities.

But, it is the family orientation which is most important.  Native
Americans and African Americans have the lowest life expectancy in
the U.S.  Focusing on the individual would then lead one to conclude
that the individual worker does not benefit from the retirement
benefit.  But, disproportionately, African Americans (and one must
assume Native Americans, adequate data have not allowed for detailed
work on some populations) benefit from the survivors benefit.  So,
those workers may not collect retirement, but are more likely to
have been raised in families where, but for the Social Security
Survivors benefit, their families would have been much worse off.

The attempt to change the philosophy of the program to an individual
focus then, becomes dangerous because within the Social Security
family-oriented insurance scheme, those who have long lives with
high earnings, are the low-risk individuals.  An individual based
system, in terms of its philosophy, will by its nature begin to
attack the high-cost parts of the program, when viewed from an
individual's perspective.  So, as is the case in some of the
legislation under consideration in the U.S. Senate, cuts are made
to benefits for disabled workers, and the retirement age is
raised--which lowers the cost of the program to high wage healthy
workers at the expense of less healthy, low-wage workers who seek
early retirement.  If the focus is the individual, and the individual's
"rate-of-return" on the annuity insurance, then even the progressive
benefit structure--which is the result of creating a floor level
of benefits for the annuity, acting as a safety-net for seniors--must
come under question.

But, it is not just minorities who benefit from the current family
orientation of the program.  All Americans benefit from the family
insurance that Social Security gives.  And, at its root, that is
why it is the most popular government program.  There is no equivalent
insurance offered in the private sector--no private insurance
company would want to offer disability, full-life (term and annuity)
and index the benefits to inflation, and family size (including
the possible divorce of spouses.)  Americans consider the family
focus of the program as a core value.  So, it is in that sense that
most Americans reject the individual focus that is the basis for
the radical change being debated.

William E. Spriggs