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STRAIGHT TALK ON SOCIAL SECURITY
In
January, I watched the 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 that will
unfold over the next months:
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?
While we are still awaiting details, the administration is advocating
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.
Over the next few weeks, I will be exploring 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?).
Read the transcript from my June 29th
E-Town Hall Meeting on Social Security
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