How Secure is Social SecurityBy Judith Wishnia
September 1, 2011
The recent debt limit debate that resulted in spending cuts to vital federal programs, and the rhetoric of “fixing” the so-called “entitlement” programs, has led many to ask: Will Social Security be there when I retire? Perhaps it is time to consider what possible changes in the system would mean to the nearly 60 million Americans who currently receive benefits and to those who will retire in the future.
On Aug. 14, 1935, President Franklin Roosevelt signed the law creating Social Security. The law, part of the New Deal, came in the depths of the depression when more than half of America’s elderly lived in poverty. Most business leaders and the Republican party thought that if the government took responsibility for aiding senior citizens, it would be “a dangerous trampling of individual liberty and was likely to bankrupt the government.” The U.S. Chamber of Commerce said it was Roosevelt’s attempt to “socialize America.” (Sound familiar?) Roosevelt appealed to the public in his famous radio fireside chats and the public responded by electing him in 1936 by an overwhelming majority.
Today, Social Security is one of the government’s most popular programs, providing more than $600 billion in benefits to seniors and families with disabled or deceased breadwinners. The average monthly benefit is $1,067, and for 64 percent of seniors, Social Security is their primary source of income (Newsday, Oct. 11, 2010).
Every year, Social Security payments go to more than 2.5 million seniors, widows, dependent children and disabled New Yorkers, pumping more than $36 billion into the New York economy (NYSUT/AFT/ NEA/NYS Alliance for Retired Americans). But even these benefits are far lower than what retirees get in other industrialized countries. In the U.S., Social Security pays only 42 percent of the median salary. Luxembourg and the Netherlands replace 90 percent of salary (Joshua Holland, Alternet, June 5, 2011).
But after running a surplus for years and building up a sizable trust fund, Social Security is now dispensing more money than it is taking in. Although there is no immediate danger, it is projected that within 30 years the system will be in serious trouble. Clearly something has to be done. But what?
Until recently, President Barack Obama stated he will not change Social Security. Yet politicians from both parties—but especially those from the tea party wing of the Republican Party, who are determined to eliminate social programs of the New Deal and the Great Society—are targeting Medicare and Social Security, After all, as the famous bank robber Willie Sutton said, “that’s where the money is.” Benefits from Social Security have already been eroded. In 1983, changes were made to the retirement age that mandated a gradual rise until the age of retirement would go from 65 to 67 by 2022. The result is a 13 percent decline in benefits if the retirement age had remained at 65. In addition, the 1983 ”reforms” also added new taxes on Social Security benefits and a small delay in cost-of-living adjustments, another cut of 20 percent (Mark Miller column, Newsday, June 25, 2011).
So what are the current threats? First, there are the proposals of Congressman Ryan who would not only privatize Medicare with a voucher system, but would also return to the George W. Bush proposal to privatize Social Security, a plan that was rejected by the majority of Americans who don’t want to expose their money to the wolves on Wall Street. U.S. Rep. John Boehner, speaker of the House, wants to raise the retirement age to 70, and some have gone as far as to recommend 75.
But according to Dean Baker of the Center for Economic Policy Research, unlike the sedentary members of Congress, 45 percent of workers over the age of 58 hold physically demanding jobs and have a hard time waiting until 65, let alone holding out longer (Washington Independent, Aug. 26, 2010).
So what can be done to ensure that Social Security will be there for future generations?
First, let’s make it clear that Social Security did not add to the federal government deficit. In fact, Social Security is owed 2.6 trillion dollars, previously loaned to the federal government when Social Security surpluses were routinely used to balance the budget. We could ask for the return of this money! But a more secure way is to bring in more revenue: to raise the tax cap. Under the current law, contributions are based on earnings that fall below an annual cap, which is currently $106,000. In the past, this covered 90 percent of contributors. Today, that figure is only 83 percent, primarily because the highest paid 6 percent of contributors have been rising faster than the vast majority who earn less than the cap. A possible solution would be to eliminate the cap so that the richest earners would pay their fair share. Christine Weller of the Center for American Progress calculates that eliminating the cap would get very close to eliminating the entire Social Security deficit for the next 75 years. (Ibid)
Today, 77 percent of Americans—68 percent of Republicans—believe that Washington politicos should leave Social Security alone. (They also want to tax the rich.) In fact, a poll from last year found that 75 percent of tea party supporters favor Social Security and Medicare (The New York Times/CBS poll, April 2010). Working Americans of all ages have contributed to Social Security and that money belongs to them (us!). It should not be used to solve the fiscal crisis brought on by greed and bad policies of the past.
Let’s make sure that everyone—today and tomorrow—will have these benefits when they retire.
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