Social Security provides a great social need

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Midland Daily News, February 19, 2005

President Bush wants to reform social security. Let's take a look into the issues involved.

What it was

The original idea of social security was a safety net for older people. It was an "old age pension".

 

According to the government website, Social Security was established in 1935 during the days of the Great Depression, although the first monthly check wasn't issued until January 1940. Survivor benefits were added in 1939. In 1956 disability benefits were added.

 

Paul Starr, co-editor of The American Prospect, says, "One of the signal achievements of Social Security, hardly noticed today, is that poverty has fallen dramatically among Americans over age 65." He goes on to say that the reason for lower poverty among seniors is that benefits are based on equity and adequacy. Equity means that the more a person pays in, the more the benefits; adequacy means that adjustments are made to allow for years that a person didn't work and for those with low wages.

 

Nearly two-thirds of those receiving social security benefits (including survivor and disability) count on it for more than half their income; a third rely on it for 90%", says Time (1/24/05).

 

Social security is really a government sponsored insurance program.

What has changed

Life expectancy has increased dramatically since 1940. The reason is the great reduction in infant mortality. Age 65 life expectancy is less than three years longer than it was in 1940, according to the Social Security website. If we compare the life expectancy of 21 year olds in 1940 and today, 20% more of them live to age 65. There are more than 35 million Americans over 65 compared to 9 million in 1940. 

 

The Social Security Trust Fund became part of the general fund in the 1960's. This allowed Congress and the President to spend this money without raising income taxes by merely putting an IOU in the Trust Fund.  Currently those are $1.6 trillion. The Detroit News reported that by law social security wouldn't go broke.

 

There are already numerous ways that individuals can save for retirement on a tax favored basis: IRA's, 401k's, 403b's, and more. This presumes, of course, people have the extra income to do so. Millions of people do not have the kind of income to make any investments. They are living from pay day to pay day.

What it is not

Social security is not just a retirement plan. It provides survivor benefits to widows and children as well as disability benefits to the worker, spouse, and children.

It is not a plan just for individuals. It is truly a social plan that benefits society by raising the standard of living for millions of people, especially older people.

What crisis?

Social Security is one of the most efficient government programs, spending less than 2% on administration.

 

The so-called bankrupt year of 2018 is false. That's the year that social security taxes are projected to be less than the benefits paid out but, According to Mark Weisbrot of AlterNet, the Social Security Trust Fund in 2018 will have "$3.6 trillion in assets, as well as $206 billion in interest income that year." The extra amount needed to be paid out in benefits will be less than a tenth of the interest earned that year! Benefits can continue in full under the current plan until 2052, according to the non-partisan Congressional Budget Office.

 

There is a long-term problem, however, of continuing benefits. The solution easily involves raising the ceiling on wages subject to social security tax, raising the retirement age, changing benefits, subsidy from general revenue, or any combination of these. These actions must be taken before any consideration of personal accounts, according to Sen. Lindsey Graham (R-OK).

Personal accounts

"Private investment accounts are a terrific idea, if you can afford them and they are carefully regulated," says Joe Klein in Time (1/24), but the President's plan fails the "social" and "security" aspects of our current system. It is not a reform of the system, but a gutting of it.

 

These accounts will take money away from the system - exactly the opposite of what the system needs. Private accounts ignore the risk of poor investing, unless they are closely regulated (then why have them?). They also take away the safety net of minimum benefits. And of course they will not guarantee a lifetime income, as social security currently does.

In an interview by Chris Wallace on Sunday, Feb. 6, Vice President Dick Cheney said, "We're going to borrow $758 [b]illion over the next 10 years to set up the personal retirement accounts.... Trillions more after that." If those billions were added to the Trust fund, they would extend the period of payments way beyond mid-century.

Let's not be quick to trash a program that has been one of the best government plans of the twentieth century. Let's rather keep the "security" in social security.

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