Today’s social security has proven to be enormously effective in greatly reducing poverty among the elderly, protecting relatives of deceased workers and the disabled, and providing a reliable and predictable source of retirement income.
–Libby Perl, Century Foundation[1]

Social Security is more than a retirement program—it is an insurance program that takes care of vulnerable families at all stages of life. Funding private retirement accounts by diverting money away from the current system would increase retirement insecurity and undermine the viability of the survivor and disability components of the social Security system—the very programs upon which African-Americans [as well as numerous other minority groups] and their children heavily rely.
-Urban League’s Maya Rockeymoor, Senior Resident Scholar

The Bush administration announced on Thursday, November 4, 2004, his intention to reform the ailing social security system. But is it really in need of reform? For six decades, the Social Security Administration has helped Americans avoid abject poverty in their retirement years, as well as during times of the death of a working family member or in the case of disability. According to the numbers popularly crunched, even by Bush’s commission, Social Security is adequate enough to cover benefits for everyone for the next 38 years with no changes. In fact, the non-partisan Congressional Budget Office estimates social security’s adequacy to extend into the next 48 years. “Yet social security ‘reformers’ have spent the last decade and a half convincing most of the public that social security is in dire straits.”[2]

The Bush administration is jumping the gun and creating a system that would benefit the wealthy in the long run and leave the young workers of today struggling just the same as they would if social security was left to its original design. The Bush administration is not creating a solution to the possible crisis of Social Security, instead their plans are only creating divergent ways of reaching the same critical point in the future. What are not being talked about are the critical issues that are the source of the problem. The fact that the amount of contemporary workers is out numbered by the amount of today’s beneficiaries may have something to do with outsourcing and other such policies that favor sending jobs overseas while Americans are left to struggle to make ends meet while searching for jobs. The Healthcare crisis in this country could be reformed so that when workers hit retirement age not quite so many of them would have to rely on social security medical benefits as do today.

The Facts:

  • Today more than 150 million people are covered by Social Security.[3]
  • More than 45 million Americans  collect retirement, survivor and disability benefits from Social Security today.[4]
  • Myth: Unless we do something bold, soon, Social Security will go bankrupt. While government projections foresee a complete depletion of the Social Security Trust Funds by 2042 despite the current yearly addition of $150 billion, if the economy fairs well in the coming decades the trust funds can be revived by at least 75%. “Therefore, what we face is a possible shortfall almost four decades in the future, not an immediate crisis or impending collapse.”[5]
  • Despite this possible shortcoming, the Social Security system has faired well through other difficult periods and has managed to make payroll taxes from workers cover contemporary beneficiaries throughout.[6]
  • Bush’s Commission to Strengthen Social Security was weighted heavily with pro-privatization advocates; three plans were proposed. [7]
  • Bush’s plan proposes supplementing the current system with the private accounts. Supposedly the gains made by private market investing would make up for the subsequent loss in traditional benefits.[8]
  • Essentially the Reform Plan 2, the plan the Bush administration is leaning toward proposing, means a sizeable loss of social security benefits for most Americans now, instead of the possible loss of benefits in 40 years. “The plan [still] provides a net loss for the vast majority of Americans.” [9]
  • Privatization of social security means big cuts to benefits and tax-free risky investing, that only presently less than 5% of employees participate in in the form of tax-free market investing in 401 (k)s or Individual Retirement Accounts.
  • Some critics have estimated that the privatization transition of social security would cost over $2 trillion dollars, only adding further to the ever-increasing national deficit. But Bush has claimed that it would cost more to continue with the present system in tact. [10]
  • It’s not surprising that the Bush administration has wrangled favorable language to describe the social security reforms and succeeded in convincing many that the proposals are appealing and necessary: “the opportunity to invest a small portion of payroll taxes in stocks.”[11]
  • The process of converting the system has severe consequences:
    1. younger generations will bear the brunt of the financial conversion costs
    2. huge increases in federal borrowing will be necessary to finance these new accounts
    3. current payroll taxes will continue to finance existing benefits for current retirees, leaving scant and risky income sources for the next generation of retirees.[12]
  • In order to fix the long term problems, either cuts in benefits or a hike in taxes is required to provide sufficiently for the Social Security Trust Fund.[13]
  • Bush is opposed to raising the cap on payroll taxes in order to get the funding for privatization, so where is the money going to come from?
    1. raising the borrowing limit? Amidst an ever increasing deficit? “The [Bush] administration is considering some creative accounting that will not count borrowed funds in the budget as part of the skyrocketing deficit. Supporters view borrowing as a pre-payment, comparing it to paying off a 30-year mortgage loan early.”[14]
  • 1 in 3 beneficiaries is not a retiree, but a survivor or person with a disability.[15]


Privatization Will Affect the Young Workers of Today!

  • Younger generations must take into account many risks when considering privatization reforms:
    1. costs not felt now will surely be felt in the future in the form of higher taxes or reduced government services
    2. uncertainty of the market presents undesirable risk when considering future income necessity and stability
    3. with the reduction in government benefits due to reliance on the resources that privatization will supposedly meet for retirees, administrative costs and annuitization may drain further the insubstantial benefits proposed by Bush administration’s privatization scheme. [16]
  • “A twenty year old just entering the labor force would lose 34% of his or her expected benefits under this plan. This would amount to almost $134,000 over a lifetime of retirement. They would have a chance to gain back, on average, about $47,000 from an individual account—provided the stock market doesn’t tank like it did from 2000-2001, just in time for their retirement.”[17]
  • One study conducted by economists compared the current system with the former-Governor Bush’s privatization proposition (similar to the proposals he is advocating for currently) and found that overall the average worker would suffer significant cuts to social security benefits if the system was reformed. For example, an average worker who retired in 2037 (age 67) would receive 20% less under Bush’s proposed reforms than under the traditional system.


Women are Affected by Social Security!

  • Because of the current gender gap in salaries, one study estimates that after a 35 year investment, the average man’s portfolio would be 16% larger than the average woman’s.[18]
  • The majority of social security checks are sent to women because women tend to live longer than men.[19]
  • Women tend not to own private pensions as much as men do and so they greatly rely on social security. When women do own private pensions, their checks are, on average, half that of a man’s.[20]
  • The current system works in favor of lower income, predominantly female, earners; but a privatized system would favor higher income earners who are predominantly male.[21]
  • Cuts in order to finance the transition costs will be necessary and will affect women as the primary beneficiaries of the current system.[22]
  • Personal accounts will not overwhelmingly provide guaranteed benefits for length of your life, and those who are living longer are women.[23]
  • Women have their working years interrupted more often than men, affecting their overall social security account contributions.[24] This will only decrease with the proposed reform plan by Bush.
  • Due to annuitization and the fact that women have a longer life expectancy than men, one study showed that in 2002 if a woman at the age of 65 has her life expectancy projected to be 19 years (as compared to the 15.9 years projected for a man of the same age) the woman would receive a smaller amount of benefits per months for the duration of her life. That is a smaller income replacement for women every month, simply because they are projected to live a longer life, whether that ends up being the case in reality or not.[25]


The Elderly are Affected by Social Security!

  • If privatization were implemented, the elderly would suffer. The elderly population, in 2004, is provided with an average of $863 a month in Social Security benefits and without this the vast majority of them would plunge below the poverty line.[26]
  • In 2001, over 60% of America’s elderly depended on Social Security checks for at least half of their income.[27]
  • Due to the assistance, provided to the elderly by Social Security, poverty rates among seniors have declined from 35% in 1959 to about 10% in 2004.[28]
  • For 65% of all American seniors, Social Security provides 50% or more of their income: 2/3 of seniors depend on Social Security as an additional source of income. 1/3 of seniors depend on Social Security as their only source of income.[29]


Low Income Workers are Affected by Social Security!

  • Social Security as it currently works benefits low wage workers by distributing higher benefits to these retirees than they were able to contribute in the past. With Bush’s proposed reforms to Social Security, there would be no redistribution of retirement benefits.[30]
  • This is a problem when one considers that in 2002, 40% of American families living below the poverty line with only an average $35,000 annual income were barely able to make end meet on a daily basis. These difficult living circumstances would only be complicated further with the added stress of being unable to put sufficient funds into a private account for the future. “Privatization would create winners (those who command high wages and salaries during their working years) and losers (those who don’t).”[31]
  • Higher wage earners can contribute more to their future benefits than can low wage earners, but the Social Security formula has been set up so that lower wage earners get a higher percentage of their working-years-earnings in retirement benefits.[32]


Minorities are Affected by Social Security!

  • Among private sector workers, only 1/3 of minorities receive pension coverage in retirement, as compared to nearly half of white Americans with that coverage.[33]
  • Because this gap is apparent in pre-retirement years due to wage inequality, minorities are less likely to accumulate wealth during working years in the form of savings, stocks, bonds, etc.[34]
  • In 1996, nearly half of all minority retirees relied on Social Security for more than half of their income: 1/3 of all African and Hispanic Americans relied on Social Security for all of their income, while only 1/6 of Anglo Americans relied on Social Security for the majority of their income.[35]
  • While circumstances have gotten better in the last 50 years, African Americans still suffer from higher rates of infant mortality, persistent poverty, discrimination, dangerous job employment, and less access to medical services and insurance. For this reason, African Americans rely more on disability benefits much more than others: 25% of African Americans collect disability, as compared to only 12.5% of Anglo Americans.[36]

Research compiled while serving as the Research Associate for Oakland Institute, 2005.

(C) 2009 By Shannon Laliberte Parks. All Rights Reserved. Please Obtain Permission to Copy.


[1] Perl, Libby, “Too Good to Be True,” The Century Foundation, 11/30/04, http://socsec.org/commentary.asp?opedid=793.

 

[2] Weisbrot, Mark, “Who Wants to Cut Social Security Benefits?,” Center for Economic Policy and Research, 12/3/04, http://cepr.net/columns/weisbrot/mark_weisbrot_12_03_04.htm.

[3] “The Future of Social Security,” Social Security Administration’s Electronic Booklet, January 2004, http://ssa.gov/pubs/10055.html.

[4] “The Future of Social Security,” Social Security Administration’s Electronic Booklet, January 2004, http://ssa.gov/pubs/10055.html.

[5] “Social Security Privatization: Eleven Myths,” The Century Foundation, 3/1/04, http://socsec.org/publications.asp?pubid=338.

[6] “Social Security Privatization: Eleven Myths,” The Century Foundation, 3/1/04, http://socsec.org/publications.asp?pubid=338

[7] Weisbrot, Mark, “Who Wants to Cut Social Security Benefits?,” Center for Economic Policy and Research, 12/3/04, http://cepr.net/columns/weisbrot/mark_weisbrot_12_03_04.htm.

[8] Zuckerman, Diana, “Social Security that Works for Women Too,” Detroit Free Press online, 11/29/04, http://freep.com/voices/columnists/ezucker29_20041129.htm.

[9] Weisbrot, Mark, “Who Wants to Cut Social Security Benefits?,” Center for Economic Policy and Research, 12/3/04, http://cepr.net/columns/weisbrot/mark_weisbrot_12_03_04.htm.

[10] Branigin, William, “Bush Presses Second Term Agenda: President Pledges to Fight Terrorism and Reform Social Security,” Washington Post online, 11/4/04, http://washingtonpost.com/wp-dyn/articles/A25006-2004Nov4.html.

[11] Perl, Libby, “Too Good to Be True,” The Century Foundation, 11/30/04, http://socsec.org/commentary.asp?opedid=793.

[12] Perl, Libby, “Too Good to Be True,” The Century Foundation, 11/30/04, http://socsec.org/commentary.asp?opedid=793.

[13] Zuckerman, Diana, “Social Security that Works for Women Too,” Detroit Free Press online, 11/29/04, http://freep.com/voices/columnists/ezucker29_20041129.htm.

[14] Leigh Strope, “Bush faces formidable obstacles in plan to create Social Security private accounts,” SF Gate online, 12/11/04, http://sfgate.com/-cg-bin/article.cgl?f=/news/archive/2004/12/11/national1232EST0505.DTL

[15] “The Future of Social Security,” Social Security Administration’s Electronic Booklet, January 2004, http://ssa.gov/pubs/10055.html.

[16] Perl, Libby, “Too Good to Be True,” The Century Foundation, 11/30/04, http://socsec.org/commentary.asp?opedid=793.

[17] Weisbrot, Mark, “Who Wants to Cut Social Security Benefits?,” Center for Economic Policy and Research, 12/3/04, http://cepr.net/columns/weisbrot/mark_weisbrot_12_03_04.htm.

[18] “Social Security Privatization: Eleven Myths,” The Century Foundation, 3/1/04, http://socsec.org/publications.asp?pubid=338.

[19] Zuckerman, Diana, “Social Security that Works for Women Too,” Detroit Free Press online, 11/29/04, http://freep.com/voices/columnists/ezucker29_20041129.htm.

[20] Zuckerman, Diana, “Social Security that Works for Women Too,” Detroit Free Press online, 11/29/04, http://freep.com/voices/columnists/ezucker29_20041129.htm.

[21]Zuckerman, Diana, “Social Security that Works for Women Too,” Detroit Free Press online, 11/29/04, http://freep.com/voices/columnists/ezucker29_20041129.htm.

[22] Zuckerman, Diana, “Social Security that Works for Women Too,” Detroit Free Press online, 11/29/04, http://freep.com/voices/columnists/ezucker29_20041129.htm.

[23] Zuckerman, Diana, “Social Security that Works for Women Too,” Detroit Free Press online, 11/29/04, http://freep.com/voices/columnists/ezucker29_20041129.htm.

[24] “Social Security Privatization: Eleven Myths,” The Century Foundation, 3/1/04, http://socsec.org/publications.asp?pubid=338.

[25] “Social Security Privatization: Eleven Myths,” The Century Foundation, 3/1/04, http://socsec.org/publications.asp?pubid=338.

[26] “Social Security Privatization: Eleven Myths,” The Century Foundation, 3/1/04, http://socsec.org/publications.asp?pubid=338.

[27] “Social Security Privatization: Eleven Myths,” The Century Foundation, 3/1/04, http://socsec.org/publications.asp?pubid=338.

[28] “Social Security Privatization: Eleven Myths,” The Century Foundation, 3/1/04, http://socsec.org/publications.asp?pubid=338.

[29] “The Future of Social Security,” Social Security Administration’s Electronic Booklet, January 2004, http://ssa.gov/pubs/10055.html.

[30] “Social Security Privatization: Eleven Myths,” The Century Foundation, 3/1/04, http://socsec.org/publications.asp?pubid=338.

[31] “Social Security Privatization: Eleven Myths,” The Century Foundation, 3/1/04, http://socsec.org/publications.asp?pubid=338.

[32] “The Future of Social Security,” Social Security Administration’s Electronic Booklet, January 2004, http://ssa.gov/pubs/10055.html.

[33] Helen Lachs Ginsberg and Gertrude Schaffner Goldberg, “Social Security and Minorities,” National Jobs for All Coalition, August 2001, http://njfac.org/us25.htm.

[34] Helen Lachs Ginsberg and Gertrude Schaffner Goldberg, “Social Security and Minorities,” National Jobs for All Coalition, August 2001, http://njfac.org/us25.htm.

[35] Helen Lachs Ginsberg and Gertrude Schaffner Goldberg, “Social Security and Minorities,” National Jobs for All Coalition, August 2001, http://njfac.org/us25.htm.

[36] Helen Lachs Ginsberg and Gertrude Schaffner Goldberg, “Social Security and Minorities,” National Jobs for All Coalition, August 2001, http://njfac.org/us25.htm.

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