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The Future of Social Security

by The Washington Office of Public Policy

 

Contact: Office of Public Policy GBGM-Women's Division 100 Maryland Avenue, NE Room 530 Washington, DC 20002 (202)488-5660 Fax:(202) 488-5681
Contact:
Office of Public Policy
GBGM-Women's Division
100 Maryland Avenue, NE Room 530
Washington, DC 20002
(202)488-5660
Fax:(202) 488-5681

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March 2005

“The decade of the 1930s found America facing the worst economic crisis in its modern history. Millions of people were unemployed,…banks and businesses failed and the majority of the elderly in America lived in dependency. These circumstances led to many calls for change.”1  Those calls for change led to the creation of the Social Security Act which was signed into law by President Franklin D. Roosevelt on August 14, 1935.  The Social Security Act established two major social insurance programs on a national scale.  It established a Federal system of old-age benefits for retired workers and a Federal-State system of unemployment insurance.2  Since it was enacted in 1935, the Social Security Act has been expanded many times by Congress.  “Congress established the Disability Insurance (DI) program in 1956, and, for aged and disabled Social Security recipients, the Medicare program in 1965…The types of recipients eligible for benefits were expanded over the years, and benefit levels were increased periodically.”3

In 2005, the Social Security program is still the social insurance program for the nation.  “More than 156 million workers are protected by Social Security, and more than 47 million people receive retirement, survivors and disability benefits from Social Security.”4  According to the Institute for Women’s Policy Research, “women make up 60 percent of Social Security beneficiaries, and they depend more heavily on Social Security than men do for their income in retirement.  Half of the women aged 65 and older would be poor if not for Social Security.”5  Currently there is much debate over the future of Social Security in terms of funding.  In March of 2004, the Social Security Board of Trustees released its annual report on the program’s financial status and future outlook.  “The Social Security trustees’ report reaffirms that Social Security does not face a near-term crisis and can pay full benefits for the next 38 years but will eventually face a significant imbalance.”6  This does not mean that after 38 years the Social Security Trust Fund will not be able to pay any benefits.  If no changes are made to Social Security, Social Security will be able to pay 100 percent of benefits until 2042.  After 2042, Social Security will still be able to continue to pay benefits but will only be able to pay 70 percent of benefits.7  In the newly released 2005 Social Security Board of Trustees annual report, Commissioner of Social Security, Jo Anne Barnhart states, “Our grandparents and parents were confident that Social Security would be there for them.  Current retirees and near retirees can be just as confident.  But for our children and grandchildren, unless changes are made, this report shows that their promised benefits are not secure.”8 

In his State of the Union address in January of 2005, President George W. Bush, proposed private investment accounts, or “personal retirement accounts,” as his plan to strengthen Social Security’s future.  Under the President’s plan, workers would be allowed to divert up to four percent of their wages into private investment accounts.  This plan would go into effect in 2009 and annual contributions to private investment accounts would be capped at $1,000 per year.  The President proposes that the cap rise gradually over time, growing $100 per year.9       

American perspectives on how to ensure the long term future of Social Security vary.  Bob Greenstein of the Center on Budget and Policy Priorities has said, “substitution of private accounts for part of Social Security does not alter this situation.  To the contrary, most partial privatization plans require even larger revenue transfers for a number of decades to cover the large shortfall in Social Security revenue…”10  Diverting funds to private accounts will also divert funding from Social Security, causing a greater deficit in the future.  “Down the road, fewer Social Security reserves would be available to pay benefits, but public benefits would be cut by an amount roughly equal to the money previously diverted into the private accounts.  The net long run impact on the system would be zero.”11  Supporters of the President’s proposal have stated that it will benefit workers in the long-term. 

According to the Heritage Foundation’s David John, “it ‘offers younger workers an opportunity for the same retirement security that their parents and grandparents have enjoyed’ while keeping the system's promises to older workers and retirees.” 

Social Security not only provides benefits for retirees but also provides benefits for workers and their spouses and children when a worker becomes disabled, dies or retires.  According to the Social Security Administration 1 in 3 Social Security beneficiaries is not a retiree.  About seven million people get monthly survivors benefits, and more than seven million workers and family members get disability benefits.12  According to some organizations, privatizing Social Security would have an effect on these populations receiving Social Security benefits.  The National Women’s Law Center states that “the plan developed by the President’s Commission would mitigate these harsh cuts for some lifetime low earners and some widows, but still would cut their benefits below current levels over time.”13  The Institute for Women’s Policy Research outlines four central problems with privatizing Social Security.  These include, “increased risk, the high costs associated with the transition from a pay-as-you-go to a pre-funded system, and the high costs of administrating individualaccounts and purchasing life and disability insurance in the private market.”14

Social Security provides crucial benefits to many people.  Social security benefits “lift nearly 13 million seniors age 65 and older above the poverty line.”15  5.5 million disabled workers received Social Security benefits in 2003.16  About 5.4 million children under the age of 18 receive part of their family income from Social Security.17  Privatizing Social Security would affect all of these beneficiaries.  According to the Center for Retirement Research at Boston College, “Introducing private accounts alone will not bring more money into the system or reduce outflows from the program.  It may increase returns on assets but at the cost of additional risk, so it does not improve the overall financial status of the program.”18 

ACTION

•Call or write to the White House and tell them how changes in Social Security will affect you. 

White House Telephone:         (202) 456-1111

White House Address:             1600 Pennsylvania Ave., NW, Washington, DC 20002

•Call or write your Representatives and Senators and tell them how changes in Social Security will affect you.

•Contact United Methodist Senator Debbie Stabenow’s (MI) office for more information on Social Security Reform and to sign onto her petition, Keep the Security in Social Security! 

You may visit her website for more information at http://stabenow.senate.gov/socialsecurity/ 

To write or Call Senator Debbie Stabenow in Congress:

133 Hart Senate Office Building, Washington, DC 20510
Telephone: (202) 224-4822
e-mail: senator@stabenow.senate.gov

•For additional information on Social Security Reform contact the Older Women’s League at 1-800-825-3695 or the Institute for America’s Future at (202) 955-5665.

•Read the Book of Resolutions 2004 #230 Women and Social Security in the United States.

1 Social Security Administration website  http://www.ssa.gov/history/briefhistory3.html
2 Social Security Administration website http://www.ssa.gov/history/pdf/histdev.pdf
3 Kollmann, Geoffrey, Social Security: Summary of Major Changes in the Cash Benefits Program, May 18, 2000.
4 Social Security Administration website http://www.ssa.gov/pubs/10055.html
5 Institute for Women’s Policy Research, Research-in-Brief, Why Privatizing Social Security Would Hurt Women, March 2000.
6 Greenstien, Robert, What the Trustees’ Report Indicates about the Financial Status of Social Security, Center on Budget and Policy Priorities, March 31, 2004.
7 Munnell, Alicia H., A Bird’s Eye View of the Social Security Debate, Center for Retirement Research at Boston College,  December 2004.
8 Social Security Administration News Release, Little Change in Social Security Solvency: Trustees Recommend Timely Action, March 23, 2005. 
9 The White House web site (www.whitehouse.gov) Strengthening Social Security for the 21st Century February 2005.
10 Greenstien, Robert, What the Trustees’ Report Indicates about the Financial Status of Social Security, Center on Budget and Policy Priorities, March 31, 2004.
11 Munnell, Alicia H., A Bird’s Eye View of the Social Security Debate, Center for Retirement Research at Boston College,  December 2004.
12 Social Security Administration website http://www.ssa.gov/pubs/10055.html
13 National Women’s Law Center Why Privatizing Social Security Would Hurt Women and Their Families January 2005
14 Institute for Women’s Policy Research, Research-in-Brief, Why Privatizing Social Security Would Hurt Women, March 2000.
15 Sherman, Arloc and Isaac Shapiro, Social Security Lifts 13 Million Seniors Above the Poverty Line:  A State-by-State Analysis, Feb. 24, 2005
16 The Urban Institute, Key Questions for Social Security Reform, March 2005.
17 National Women’s Law Center Why Privatizing Social Security Would Hurt Women and Their Families January 2005
18 Munnell, Alicia H., A Bird’s Eye View of the Social Security Debate, Center for Retirement Research at Boston College,  December 2004


Date posted: Mar 30, 2005