Social Security not in crisis
By Congresswoman Lois Capps
Santa Barbara News Press
February 16, 2005
Every month some 37 million senior citizens, disabled persons, and surviving spouses and children receive a check from the Social Security Administration. That check keeps a promise to a senior after a lifetime of work, makes a long term commitment to a family with a disabled child, and offers a helping hand to a widow trying to raise her children all alone.
All that may soon end if President Bush has his way on the future of Social Security. The President claims the system is "in crisis" and on the verge of bankruptcy. He proposes to address this "crisis" by privatizing the program, claiming this is our only option. He is about as right on this issue as when he said we would find weapons of mass destruction in Iraq.
First, there is no immediate Social Security crisis. According to the Congressional Budget Office, the program as currently structured is solvent until 2052. This year Social Security, as it has for the last 20 years and will for the next 13, takes in more taxes than it pays out in benefits. This is intentional and helps to prepare for the baby-boomers' retirement.
These excess funds, more than $1.6 trillion to date, are credited to the Social Security Trust Fund, and will ensure full payments of promised benefits until the middle of the century. After that, incoming Social Security taxes would still be able to pay between 70 percent and 80 percent of promised benefits. We should act soon to make Social Security fully solvent beyond 2052, but that hardly constitutes an immediate crisis that requires radical overhaul.
A word about the Social Security Trust Fund. Detractors like to say it is full of nothing but "worthless IOUs." Those "IOUs" are bonds from the Treasury Department. They are backed by the full faith and credit of the U.S. Government which has never, in our 216 year history, defaulted on a debt.
The second problem with the President's proposal is that it does nothing to address this so-called "crisis." In fact, establishing private accounts would actually make things worse. It would speed up the day when the Trust Fund runs out of money by a decade or two and add nearly $5 trillion to the national debt over the next 20 years. That is because diverting substantial portions of today's Social Security taxes into private accounts would leave less to pay today's benefits and less to put into the Trust Fund to pay tomorrow's benefits.
The President's handpicked Social Security Commission, which recommended the plan he is pushing, recognized that private accounts would actually worsen the program's long term fiscal picture. The Commission's solution was to slash benefits by up to 50 percent over the next 40-50 years. Although he won't admit it, benefit cuts of that magnitude seem to be the inevitable outcome of the President's proposal.
Finally, the President's Social Security privatization proposal demonstrates a fundamental misunderstanding of the current program. Yes, Social Security is a pension program for retirees. It was intended to be just one leg of the 3-part "retirement stool," the others being personal savings and some sort of retirement plan like a company pension or today's more common 401k plans. While it is often not the largest part of a senior's retirement plan, Social Security continues to be the most reliable: it is a guaranteed monthly benefit, annually indexed for inflation, and good for as long as you live.
But Social Security is much more than just a pension program: it is a social insurance program. Today, nearly one-third of beneficiaries are not retired senior citizens - they are disabled persons, the blind, mentally challenged, and others who cannot earn a living for themselves. They also are the surviving spouses and dependent children of working people who died prematurely. Social Security also pays benefits to the spouses of beneficiaries equal to half of the beneficiary's benefit. And it provides a relatively more generous benefit for lower income workers who probably have less opportunity to accumulate private savings over their lives.
We all benefit from this social insurance aspect of Social Security, whether we know it or not. Think of your Central and South Coast neighbors - the family down the street with a mentally challenged child, the woman with three children whose husband died at age 35, the worker permanently injured and unable to go back to his job, and the widow who was a stay-at-home mom all her life and has no pension to fall back on. All these people receive a sometimes small, but critically important, level of support from their fellow citizens through Social Security. And those benefits are available for all of us should circumstances require. As a society we have decided that a future of destitution for our most vulnerable is not acceptable. There is simply no equivalent in a privatized Social Security.
The President touts the power of the market and a person's ability to create a secure retirement through it as a rationale to privatize Social Security. The market is indeed a powerful tool and I have supported increasing Americans' access to it by making it easier to save more though IRAs, 401Ks and the like. But Social Security is designed to be one thing that isn't at risk in the inevitable ups and downs of the market.
Social Security has served America well for over 70 years. It has adapted to our changing society but never abandoned its core principle as a guaranteed safety net for millions of Americans. We should keep it that way.
Lois Capps is a U.S. Representative for Ventura, Santa Barbara, and San Luis Obispo Counties.