 During the Great Depression, Americans rallied around the principle that one generation of Americans could and should take care of another. Today, Social Security has become the success story of federal programs – a stable, efficient and successful program on which 46 million Americans rely each year. In spite of its vast accomplishments, the president has called for sweeping reforms that would allow ideology to triumph over good sense and American values.
The fact is, there is not a problem facing Social Security today that warrants an untested overhaul of the system. A recent study suggests that the program is more financially sound today than it has been throughout most of its 69-year history. The president’s private accounts, on the other hand, would require the federal government to borrow trillions of dollars for set-up costs alone, reducing the program’s solvency.
President Bush’s private accounts will destabilize and possibly destroy the current Social Security system. While benefits under the current system are guaranteed, they could be reduced by as much as 50 percent in the coming decades if privatization is passed in Congress. For those who set up private accounts, their retirement funds would be dependent on the “ups” and “downs” of Wall Street. There’s only one group of Americans that would surely benefit from such a plan – the financial industry, one of President Bush’s biggest donors.
If President Bush had his way, he would replace a proven, reliable and efficient Social Security system with a costly, risky and untesed policy. We as a nation owe it to one other not to gamble the financial security of our future generations on an experiment with no proven track record.
Learn more about Social Security.
Alternative Proposals to Privatization
Even though the crisis remains much farther down the road, there are many ways that we can responsibly strengthen Social Security to keep it solvent for many decades.
One solution would be to roll back Bush’s irresponsible tax cuts, which Peter Orzag of the Brookings Institute says will cost the treasury $11 trillion over 75 years – nearly triple the Social Security gap during that time. Other solutions to strengthen Social Security solvency after 2042 include:
• Dean Baker of Center for the Study of Economic Policy’s proposal: Raise the Social Security income cap to cover 90 percent of wage income, ($140,000) the "Greenspan level," this should keep the program solvent past 2060. If the limit on wages taxed for social security, currently $90,000, were lifted altogether, the system would be kept solvent by 2077, according to the Social Security Administrations chief actuary.
• Progressive Proposal By The Massachusetts Institute of technology Economist Peter Diamond & Brookings Institution Economist Peter Orzag: Raise the cap on wages subject to payroll taxes to about $105,000 for now. To raise more revenue, they would impose a 3 percent tax on all earnings above the $105,000. They would also slowly raise the current 12.4 percent Social Security tax rate to 14.2 percent in 2055. All new state and local government workers would be brought into Social Security system, effectively expanding the Social Security tax base to cover the 25% of government workers who are now exempt. Benefits would be cut on a scale that starts with trims of only 0.6 percent for a worker currently 45 years old but rising to 8.6 percent for a future retire who is now 25. Under complex formula, cuts would hot more affluent retirees the hardest, while benefits for low-wage workers would rise. This formula would put Social Security on a sound financial path immediately, but is not considered an attractive proposal on Capital Hill.
• Rep. Obey Plan/Robert Ball Plan, a former Social Security commissioner: Would fully fund Social Security by 2078; Lift the cap on taxable wages to 90 percent of all earnings, or about $145,000. Slow annual cost of living adjustments; Cover newly hired state and local government workers; Dedicate all inheritance taxes levied on estates worth more than 3.5 million to Social Security. If there were budget short falls, it would fill the gap through slight increases in payroll taxes.
What's Happening in Congress
“ Instead of leadership on the challenges facing Social Security, we have seen the Administration hyping a crisis without advancing a proposal. The President needs to reveal his plan now. No more catch-phrases, no more ideology – let’s put the numbers on the blackboard and see if they add up.”
- Rep. Earl Pomeroy (D-ND)
House Democrats mourn the passing of Social Security champion, Congressman Matsui. Read more.
Click here to read the letter House Democratic Leader Nancy Pelosi and 35 women Members of Congress sent to President Bush to express their concern that women would be disproportionately hurt by privatizing Social Security.
Read House Democratic Whip Steny H. Hoyer's statement in response to remarks by Office of Management and Budget Director Josh Bolten to the U.S. Chamber of Commerce.
Read Rep. Sander Levin's comments in response to Vice President Dick Cheney's speech at Catholic University.
Click here to learn more about the Subcommittee on Social Security.
Hear What Others Have to Say
Read articles and opinions from newspapers across the country:
As White House Begins Social Security Push, Critics Claim Exaggeration
New York Times
Democrat Disputes Social Security 'Crisis'
Yahoo! News
"Bush Faces a Fight Over Social Security"
Sacramento Bee
"Social Security Could Use a Tweak, Not Major Change"
Tribune Chronicle
"A Big Push On Social Security, Private Accounts Are Bush Priority"
Washington Post
Don't Just Take Our Word for It
See what other groups are saying about the Administration's Social Security proposal:
>> Watch the National Committee to Preserve Social Security and Medicare's 60-second commentary on the latest Social Security news.
>> Learn more from Campaign for America's Future on how Social Security impacts young people.
>> Take the AFL-CIO's quiz to see how well you know the facts.
>> Read more from the Alliance on Retired Americans about why social security is not just a senior issue. |
Myths & Facts
>>Myth:There is a major crisis in Social Security today that demands drastic changes in the system.
>> Fact:A Center for Economic and Policy Research study has acknowledged that Social Security is actually more financially sound today than it has been throughout most of its 69-year history. Even though the “baby boomers” will enter the system beginning in 2008, Social Security will be solvent well into the future, remaining financially sound until 2052 without any changes whatsoever, according to the Congressional Budget Office.
>> Myth:Social Security today is not working.
>> Fact:Social Security has become the success story of federal programs – a stable, efficient and successful program on which 46 million Americans rely each year, including 4.6 million non-disabled widowers, 7 million people with disabilities and 3.9 million children. In large part due to social security, the poverty rate for seniors is at a low 10.2 percent. percent of Social Security beneficiaries are disabled workers.
Social Security is also one of the most efficient government programs, with administrative costs of only 0.6 percent of total costs. A House committee recently called Social Security the most efficient government program. Benefits have been paid on time and in full every single month for almost 70 years. Bush’s private accounts, however, could have administrative costs as high as 20 percent, creating a completely new bureaucracy.
>> Myth:Creating private savings accounts and investing in the stock market will strengthen Social Security.
>> Fact:While the President advocates private accounts to handle the question of the program’s solvency, such a proposal would require trillions of dollars in national debt in set-up costs alone and could reduce the program’s solvency by as much as 50 percent.
By relying on the naturally fluctuating stock market, President Bush’s private accounts would add one grand element to Social Security that Americans can’t get in the current system – risk.
>> Myth: Bush’s private accounts would put the power in the hands of private citizens.
>> Fact: In sharp contrast to the concept of President Bush’s “ownership society,” private accounts would not put power in the hands of citizens. It puts these citizens’ hard-earned dollars into the hands of the stock market, which is a system of winners and losers. It merely takes the security away from Social Security.
Private accounts would greatly enlarge the federal bureaucracy. Bill Spriggs of the Economic Policy Institute says that the Bush administration would have to create a completely new bureaucracy just to manage the new Social Security Private Account Program, which in addition to broadening the federal government would require billions of dollars in administrative costs.
In fact, the only big winners of Bush’s private accounts would be the firms of the financial industry, who just happen to be some of President Bush’s biggest donors. They stand to receive a windfall of up to $940 billion in additional revenue, much of it from fees they would receive from administering private accounts.
>> Myth: Social Security privatization will not lead to cuts in benefits.
>> Fact: While benefits under the current system are guaranteed, benefits could be reduced by as much as 50 percent in the coming decades for those who decide not to set up risky private accounts. For those who set up private accounts, retirement funds are dependent wholly on the ups and downs of Wall Street.
A worker who is 45 today can expect to see a cut in the guaranteed benefit of approximately 15 percent. A worker who is 35 can expect to see a cut of approximately 25 percent. A 15-year-old worker who is just entering the work force can expect a guaranteed benefit cut of close to 40 percent.
>>>More facts and resources
The Latest
>> A memo from the White House acknowledges Social Security privatization would cost up to $2 trillion and recommends cuts in Social Security benefits to offset the cost of the plan. Read the memo.
>> See what would happen to seniors in your state if the Republican plan to cut Social Security benefits was in effect today.
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