Straight Talk on Social Security
I remember watching the president's 2005 State of the Union Address from the floor of the House of Representatives. There, the president warned that Social Security could go bankrupt. In the days following the address, the president intensified his language in a five-State campaign swing on behalf of his plan to privatize Social Security.
Let me speak just as plainly as the president: yes, Social Security must be fixed. But it does not face bankruptcy and it is not going "broke" and "bust" as he says.
The president is right when he says the long-term solvency of Social Security is in trouble. But his response -- privatizing the program -- is like sounding the alarm when you detect smoke and then proposing to burn down the house. Social Security needs to be fixed, not dismantled. It needs to be preserved, not privatized.
Here are six questions to keep in mind during the debate about Social Security Reform:
1. Is Social Security Really Working?
Social Security is a guaranteed federal retirement benefit to help keep seniors out of poverty. Since 1940, Social Security has provided economic security and independence for senior citizens upon their retirements. According to the Social Security Administration, only 11 percent of American senior citizens live in poverty; without Social Security, it would be nearly 50 percent.
2. If Social Security Has Worked So Well Since 1940, What's the Problem Now?
Social Security has worked extraordinarily well based on a simple formula: each generation of retirees is supported by the generation of workers behind them who pay into Social Security. My FICA taxes are helping to pay for my parents' current Social Security benefit, and my children's FICA taxes will help pay for my retirement. (Yes, contrary to Internet rumors, Members of Congress pay Social Security taxes just like everyone else.) This is a covenant Americans have with their parents and their children. It was created because no generation should condone high levels of poverty for their parents and grandparents. The problem we now face is the result of longer life expectancies (the longer we live, the more Social Security benefits we need), the large number of "baby boomers" who are retiring and changing demographics (there will be fewer workers paying the Social Security retirement benefits of a larger population of retirees).
3. So, is Social Security Going Bankrupt? Will My Benefits Be Ended As a Result?
No. According to the non-partisan Congressional Budget Office, Social Security revenues will fund all benefits until about 2020. At that point, there will be fewer workers able to support the "baby boomer" retirees, and we will have to tap into the Social Security Trust Fund. The Fund will pay full benefits until about 2050, and then it will be exhausted. Then, Social Security revenues will only be able to pay out 80% of expected benefits.
4. What Is the Administration Proposing?
The administration ha advocated allowing workers to divert a percentage of the money they pay for Social Security benefits into stock market accounts. The administration argues that the stock market will pay higher yields, and that people should be able to control their own accounts.
5. So What's Wrong With That?
Two things: the math...and the risk.
First, the math: The administration would let current workers divert some of their Social Security taxes away from current benefits. That means either a cut in current benefits, or having to borrow the money to make up the difference. Some have suggested borrowing between $750 billion and $2 trillion to sustain benefits. But we already have a $7 trillion long-term debt (nearly 40% of which is owned by foreign interests). And every dollar we borrow today is a tax hike on our children who will have to repay those obligations tomorrow. So the administration's proposal robs Peter to pay Paul. It raises their taxes to repay the debt that funded their stock market accounts and lowered their benefits. It increases our national debt to purportedly reduce a Social Security debt. Kind of like going to a bank and saying, I can't afford to pay my mortgage so I'd like a loan to make my car payments.
And consider the risk: under the president's plan, if you divert your Social Security payments into the stock market, you specifically receive a lower Social Security benefit from the federal government and hope for the best from your stock market account. To that, I have one word: Enron.
6. OK, Steve, But You Say Social Security Does Need To Be Fixed. What Are You Proposing?
I will work constructively with both sides of the aisle on any proposal that:
a) does not turn Social Security into a stock market risk;
b) does not raise our kids' taxes by borrowing more money;
c) preserves the premise of Social Security as a safety net that allows seniors a secure and safe quality of life.
I will continue to explore a variety of options, including steps to increase personal savings (abysmally low in the US) and reprioritizing budgets (how is it that we are told we can't afford Social Security but we can afford massive and lavish subsidies to giant global agriculture and oil companies?).