Issue Position: Social Security
The President has made Social Security reform one of the major focuses of his Administration. As a member of the House Ways and Means Committee, I have been actively involved in this debate by participating in Committee hearings and speaking about the importance of Social Security on the floor of the House.
First and foremost, let me first dispel a few myths put forward by those who seek to privatize the system. President Bush and his supporters would have Americans believe that the Social Security system is in desperate crisis and immediate action - immediate privatization, in their view - is needed. This is simply not true. Independent financial experts say that Social Security is not in crisis. The trustees of Social Security released a report in 2005 stating that the system can pay full benefits until 2041.
While this positive forecast does not mean that we should sit back and wait for the system to go broke decades from now, privatization is not the answer. Americans deserve an intelligent, thoughtful debate on solutions to strengthen the system.
There are five critical points that must be considered when talking about creating so called private accounts:
1. Risk. Privatization would expose individual workers and their families to much greater financial risk. Under privatization, Social Security benefits would no longer be determined primarily by a worker's earnings and the payroll tax contributions he or she made over their career. Rather, benefit levels would be determined by the vagaries of the stock market, or by a workers skill (or luck) in making investments and the timing of their decision to retire.
2. Benefit cuts. Social Security operates largely on a "pay as you go" basis. The vast majority of the payroll taxes paid by current workers are used to make payments to current beneficiaries whether they are retirees, survivors or the disabled. That means if less money were to go into the system, there would be less money to pay benefits. The president's own commission on Social Security revealed that even partial privatization of Social Security would mean substantial benefit cuts.
3. Privatization hurts women and minorities. Women constitute the majority of elderly Social Security beneficiaries. Women over a lifetime earn less than men, but live longer. This means that women are more reliant on Social Security in their retirements; a more than a quarter of women 65 or older count on Social Security for 90 percent of their income. Reducing benefits would significantly impact women. Also, Social Security is the single most important source of income for African-American and Hispanic retirees, providing three quarters of their retirement income.
4. Disability and survivor's benefits. Social Security doesn't just affect seniors. In 2002, 30 percent of beneficiaries - 14 million people - were receiving benefits because they or a family member are severely disabled or because a family member died prematurely. Even if the disabled and survivors were insulated from benefits cuts, that would mean even greater cuts for retirees.
5. Social Security is a mammoth system affecting millions and millions of Americans and privatizing it would be the largest and likely the costliest undertaking in the history of the U.S. financial market, generating tremendous administrative and management costs that would likely be passed on to those the program is intended to serve.
Private accounts that remove money away from the system do have the potential to benefit some individuals, but for millions of others that will not be the case. Needed retirement benefits will be lost, Social Security will be destabilized and benefits will be cut. We're told to do the math. The fact of the matter is that creating private accounts will drain $2 trillion dollars from the system over 10 years and up to $15 trillion over 40 years.
Social Security is intended to be part of a three-legged stool for retirement security, along with private pensions and personal savings. It is the only guarantee of the three. Americans who work hard and play by the rules and through no fault of their own find their companies collapse and then have no pension or whose have their personal savings consumed by care emergencies need Social Security as the safety net it was intended to be. Privatization would end that guarantee.
With the "Baby Boom" generation on the brink of retirement, I believe we must address the long term health of Social Security to ensure it is there for future generations - to cripple the system now through privatization is not the answer.