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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:
- 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.
- 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.
- 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.
- 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.
- 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.
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