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Social Security

Click here to see McDermott asking questions and offers perspectives on Social Security during recent House Ways and Means Committee hearings.

Also, click here [Adobe Reader®] to see a Congressional Black Caucus Foundation paper that outlines importance of Social Security to African Americans.

Congressman Jim McDermott delivered the following remarks at a forum on Social Security in Seattle on February 19, 2005

In his State of the Union Address, President Bush talked a lot about freedom. He used the words "freedom or liberty" 28 times and "security" 14 times during his speech. Mr. Bush evoked Franklin Delano Roosevelt by saying that the road of Providence leads to freedom.

Now – we’re all for freedom and security.

But the freedom to which President Bush refers appears to merely refer to the political kind and his security seems to omit the notion of economic security.

When Franklin Roosevelt stood before the Congress in his 1941 State of the Union Address he spoke of four essential freedoms we should fight for:

Click here to see larger image of a 1936 Social Security Administration poster

Freedom of Speech
Freedom of Worship
Freedom from Want, and
Freedom from Fear.

During the President’s State of the Union speech, he never once used freedom or liberty in connection with Social Security.

In 1934, The New Yorker magazine editorialized in support of Roosevelt’s proposed social security proposal by saying “Fear accumulates in a man's life, like fluff balls in his pocket, and the [Social] Security program will, for multitudes of people, wipe out the long, insistent dread of eventual poverty.”

At a time when America was in the midst of its worst economic crisis, with seniors in desperate economic circumstances, a leader emerged with a new vision for America, where we took on the responsibility to provide seniors with an economic safety net.

Today I believe we are at a defining moment in American history. Social Security means We. Privatization means Me.

As your elected official in the other Washington, I need to know I am speaking out for Us. Social Security was not some grand social experiment. Social Security was- and is- a bedrock of American Democracy. Social Security is about today, but more about tomorrow, and no one said it better than FDR.

"This law represents a cornerstone in a structure which is being built but is by no means completed--a structure intended to lessen the force of possible future depressions, to act as a protection to future administrations of the Government against the necessity of going deeply into debt to furnish relief to the needy--a law to flatten out the peaks and valleys of deflation and of inflation--in other words, a law that will take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness."

Those words were spoken on August 14, 1935. Since then the Congress working together—Republicans and Democrats--- have made adjustments to strengthen Social Security. No one has ever seriously proposed dismantling the program--- until now.

I’d like to start today’s discussion with a brief primer on how the Social Security system works today. I’ll then explain the President’s privatization proposal, and discuss where we go from here.

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The Social Security Act was enacted in
1935 .It’s been amended and modified dozens and dozens of times to meet the changing needs of our growing nation. Social Security is a safety net for young Americans, disabled Americans and Distinguished Americans.

Nearly one third of Social Security expenditures provide benefits to the disabled and survivors.

Two thirds of Social Security benefits go to people in retirement. Average benefits are less than $1,000 per month--- modest is one way of describing the average benefit.

Primary is another way of describing it.

In fact, for 70% of all the seniors receiving Social Security, the amount they get represents at least half of their available money in retirement.

And, Social Security is the only source of retirement income for 1 out of 4 retirees. It’s that important and we can’t be cavalier in correcting the problems facing Social Security because lives—literally—hang in the balance.

Today’s Social Security – or payroll taxes pay for the benefits of today’s retirees.

The last time Social Security was significantly modified was in the mid 1980s. It was then that we adjusted the payroll tax rates and employed the Social Security Trust Fund as a means to save for the retirement of the Baby Boom generation.

Since that reform and through at least 2018, Social Security collects more revenue than the benefits it provides and puts the extra money into the Social Security Trust Fund.

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Beginning in 2018, Social Security benefits begin to exceed the payroll taxes collected. We’ll begin using money directly from the Trust Fund, just as we planned to do in the 1980s.

With payroll taxes and the Trust Fund, the government will have enough money to pay 100 percent of benefits for at least the next forty years.

If we do nothing--- which has never happened since 1935--- there will be enough money to provide 100 percent of benefits for the next forty years, and 80 percent of payments after that -- forever. That’s means, well, forever.

Problem--- not crisis---- problem --- not Fear.

The Democratic view on this issue is not to “kick the can down the road,” as the President has suggested.

Our view is that we should take our time and make modest changes to Social Security to improve its financing in a way that strengthens the program and is fair for everyone.

So, despite the Republican effort to make people afraid of losing their economic security in retirement, the system is on sound financial footing for quite some time.

The President started the discussion on Social Security by saying that the system would soon be bankrupt and that the system faced a crisis. That’s bad math and bad policy to scare people for no reason.

The Social Security system needs to be strengthened. That’s not a crisis. That’s the truth.

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The press recently got its hands on a confidential White House memo that clearly states that privatization will not fix Social Security, and is indeed just a way to dismantle the program and provide Bush with a legacy of ensuring that people will rely on the stock market rather than each other for their economic security.

Social Security singlhandedly lifts America’s elderly out of poverty. It’s a system that works and is one of the most efficient government programs.

The manner by which Social Security is financed says a lot. It says that we all are in this together. It shows that we were, and we remain, responsible to each other.

Currently, 12.4 percent of a worker’s wages goes to Social Security. Half comes directly out of our paycheck; the other half is paid by our employer.

The president’s privatizing proposal would allow individuals to only pay 8.4 percent of their wages and put 4 percent of their wages into a private account that would be invested in the stock market.

As I mentioned before, since today’s payroll taxes are funding today’s Social Security benefits, the President’s proposal to divert taxes from Social Security into the stock market would make Social Security’s funding problem worse, not better.

Do you think it ironic that the President is trying to use the long-term funding shortfall as a reason to privatize Social Security, when indeed privatization does not fix the problem. And don’t just take it from me. The White House readily acknowledges this, when it must.

First the press got a hold of a confidential White House memo which detailed this. In our budget hearings, the president’s cabinet has admitted it, too.

So what is the President’s proposal to fix the funding shortfall forty years from now? He has not sent anything specific up to Capitol Hill, but he has pointed to a blue print that he likes, which would entail massive benefit cuts.

Well, under current law, Social Security aims to replace pre-retirement income. So when it looks at your lifetime wages, it places a higher value on your wages before retirement, not when you were right out of school, bussing tables. Social Security administrators call this “wage indexing.”

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The President has proposed eliminating the wage indexing system, which would, over time, reduce Social Security retirement benefits by more than 40 percent.

When I asked the White House about this, they admit that the guaranteed benefit would decline under their proposal, but said that individuals might be able to make up for the benefit cut if they do well in the stock market.

Okay, sure. But I ask all of you to consider two things. First, if the stock market represents one thing – it’s uncertainty. It does not represent freedom from insecurity.

If you or I knew what the stock market was going to do-- Bill Gates would be just another guy driving across the I-90 bridge.

Second, under the President’s proposal, if one chose private accounts, they would receive two benefit checks in retirement: one from the private account, and one from Social Security. But what the White House has tried to hide is that your Social Security check would be reduced by the amount of money you contribute into your private account plus 3 percent interest, annually.

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It would be very, very difficult to come out ahead under the President’s proposal, which seems to be supported by Republican leaders in the Congress.

So what do we do? Democrats and I will oppose any privatization scheme put forward by the Republicans.

Second, there are many options before the Congress. The tax cuts proposed by the President equal three times the funding shortfall facing Social Security. That tells us one of two things: Either the enormous size of the tax cuts or that the funding shortfall facing Social Security really isn’t that big. Regardless, those tax cuts are set to expire by end of this decade, far before Social Security faces any solvency issues.

The president and the Republicans in Congress continue to push for making these tax cuts permanent. It’s in the President’s budget proposal and Republicans are twisting arms to ensure they are enacted.

Click here to see how much you could lose under the President's privatization plan for Social Security.

This picture represents just some of the choices before our country. We know what the Republicans want to do. Cut taxes, cut benefits, cut your economic security. We know their priorities. Democrats have different ones, and I think you do, too.

Together, you can talk to our friends and our neighbors about this issue. You can educate them about how the system works.

Together we can protect and truly strengthen Social Security for every generation. Together, we can protect and defend freedoms for economic security.