WASHINGTON,
D.C. -- Mr. Chairman, I want to thank you for the opportunity to testify
before you today on the issue of Social Security benefit “guarantee certificates”
and the future of Social Security.
I
believe that our goal should be to protect and improve the financial security
of retirees, survivors, dependents, and disabled workers. For 67
years, Social Security has been the bedrock of that security. Nearly
46 million people – living in 1 out of every 4 households across this country
– today receive monthly benefits from Social Security. Social Security
provides critical insurance protections against the future loss of income
due to retirement, death or disability for 96 percent of all workers, their
spouses and their children. Social Security provides over half of
the total income for the average elderly household. For one-third
of women over age 65, Social Security represents 90 percent of their total
income. Without this program, half of older women would be living
in poverty.
Mr.
Chairman, it is our responsibility to ensure that the Social Security guarantee
is here today, tomorrow and for generations to come.
It
is our job as elected officials to enact the policies needed to maintain
that guarantee and to reject the policies that undermine Social Security.
It is not our job to spend taxpayer dollars to send out paper certificates
designed to provide a false sense of security to American seniors and their
families. We should not be engaged in a public relations campaign
but in a serious policy discussion that lets us debate how best to continue
the Social Security commitment to guaranteed, life-long and inflation-proof
benefits.
From
1985 to 1990, I served as executive director for the Illinois Council of
Senior Citizens. Given that experience, I can assure you that senior
citizens will clearly understand these certificates for what they really
are – an attempt to provide political cover for those who want to be seen
as fans of Social Security while at the same time they are promoting privatization
proposals that undermine it. They will wonder why we feel the need
to spend $10 million to say that we will follow the law, unless we decide
to change the law. And they will ask why we have $10 million to send
out meaningless certificates instead of using that money to increase services
such as meals on wheels, senior housing, or nursing home quality enforcement.
They
will also understand why the Republican leadership may feel the need to
provide their “bona fides” when it comes to Social Security.
First,
there is the budget record. Despite all the rhetoric about putting
Social Security revenues in a lockbox, the lock to that box has been picked
by the Republican budgets. It is true that the lockbox resolution
passed in the House provided certain exceptions, such as war or recession.
But it is not true that one of those exceptions was providing tax breaks
to the wealthy. The Congressional Budget Office has indicated that
the single largest factor in the disappearing budget surplus is last year’s
tax cut. As you know, the Congressional Budget Office has estimated
that, even without new taxes or spending, we will take $900 billion from
the Trust Fund over the next nine years. Now, President Bush is proposing
new tax cuts of $675 billion over 10 years and $343 billion to make last
year’s tax cuts permanent, money that will come out of Social Security
and Medicare. The Bush budget proposes to take $553 billion of the
Medicare surplus and $1.5 trillion of the Social Security surplus over
the next decade. I doubt that a certificate will assure senior citizens
that Social Security solvency is a priority given those figures.
Second,
there are those unfortunate statements by Treasury Secretary O’Neill.
Last May, in an interview with the Financial Times, Secretary O’Neill stated
that “Able-bodied adults should save enough on a regular basis so that
they can provide for their own retirement and, for that matter, health
and medical needs.” In July, Secretary O’Neill stated that “the Social
Security trust fund does not consist of real economic assets.” Again,
it is hard to argue that those are ringing endorsements of Social Security.
If the Treasury Secretary believes that the assets in the Trust Fund are
just worthless paper, why should Social Security beneficiaries have any
faith in a certificate?
Third,
despite the outcry over Secretary O’Neill’s comments last year, those pesky
statements are restated in this year’s Economic Report of the President.
Once again, we are told that “Americans must take even greater responsibility
for their own retirement security by increasing their personal saving.”
Social Security is not lauded as the most successful anti-poverty program
in our history and one that spends less than 1 percent in administrative
costs to do so. It is described as a “moral hazard: once a
person is insured against running out of money in retirement, he or she
has an incentive to retire earlier than in the absence of insurance,” thereby
raising the cost of the program. Or this statement: “The importance
of Social Security benefits in the retirement portfolios of most American
households does not necessarily mean, however, that most U.S. households
would be poorly prepared for retirement without it.” Not an argument
that one might want to use with those older women who rely on Social Security
for 90 percent of their income or those Enron retirees who are now totally
dependent on Social Security.
Fourth
and most important, there is the President’s Commission on Social Security.
All of those appointed to the Commission last May were supporters of privatization,
which may explain why none of those appointed to the Commission last May
represented recognized senior, disability, women’s, or minority organizations.
The three plans put forth by the Commission last December all include variations
on the privatization theme. All of the plans would jeopardize the
Social Security guarantee in one way or another:
-
Privatization
would drain between $1 trillion and $1.5 trillion from the Trust Fund over
the next decade alone.
-
Privatization
would shorten the life of the Trust Fund. One plan would increase
the long-term Social Security deficit by 25 percent. Another tries
to deal with this deficit by transferring $6 trillion from the U.S. Treasury
between 2021 and 2054 to make up the deficit. Taking general revenues
might help Social Security but it would also eliminate resources necessary
for Medicare, Medicaid, the Older Americans Act, job training, education
and other essential programs.
-
Privatization
would jeopardize benefits to current and future beneficiaries. One
of the Commission’s proposals would cut benefits for future retirees by
calculating initial benefits on the basis of growth in CPI rather than
wages, which would greatly reduce standard of living. Future retirees
could face cuts of 40% or more. Those benefit cuts are not voluntary.
They would affect all beneficiaries, not just those who opted for individual
accounts.
-
Privatization
would force workers to work longer in order to maintain benefits.
-
Privatization
would reduce disability and survivor benefits.
-
Privatization
proposals also raise a number of serious practical problems that have to
be addressed. The Congressional Budget Office has identified some
of those questions (Social Security: A Primer, September 2001),
including whether people would be required to convert their private account
assets into an annuity and whether they would have to have joint annuities
to protect dependents; whether and how beneficiaries would be protected
against downturns in the stock market or outliving their assets; how the
system would handle benefits for workers’ families, for survivors of deceased
workers, and for disabled workers; and whether there would be subsidies
for people with low income and intermittent work histories, as Social Security
does now?
Sending
out glossy, slick certificates wouldn’t answer those questions. Sending
out a certificate won’t provide a guarantee if that guarantee doesn’t exist
in law itself. Sending out a certificate won’t put the money back
in the Trust Fund that has been used to provide tax cuts for millionaires.
But, if certificates are going to be provided, at least they should follow
basic truth in advertising standards.
The
certificate should state clearly that, as the Congressional Research Service
has concluded, it provides no more protection than already exists under
law. It’s not an ironclad guarantee. Senior citizens, survivors
and disabled workers can’t use it to obtain their benefits in a court of
law. The only real promise is that the Social Security Administration
will follow the law until and unless Congress changes that law. Certificates
don’t guarantee that Congress won’t act to cut benefits for current or
future beneficiaries.
Any
certificate should state clearly that Congress may pass a privatization
initiative that will reduce Social Security benefits by the amounts received
from individual accounts. Many of my constituents are just now finding
out that their $300 tax rebate last year is coming from the tax refunds
they thought they were due this year. We should be very clear and
very precise so that there are not any similar surprises in the future.
We should also make sure that beneficiaries understand that Congress reserves
the right to change benefit calculations that would cause workers to work
longer in order to stay in the same place.
And,
perhaps, instead of just sending certificates to current beneficiaries
and beneficiaries as they enroll, we should also send a warning to future
beneficiaries that we are not making them any promises. They might
be interested to know that we are not guaranteeing their benefits and that
we are making no commitment that they will not face substantial reductions
like those envisioned in the Social Security Commission proposals.
We should warn them that Social Security may not be there for them when
they need it.
Or,
instead of wasting taxpayer dollars on an election year gimmick, we could
take two steps to prove our commitment to Social Security.
First,
we can vote to reject privatization. Groups like the Urban League,
the National Women’s Law Center, the National Committee to Preserve Medicare
and Social Security, the United Cerebral Palsy Association, the Alliance
for Retired Americans and many, many others have raised serious objections
to privatization proposals.
Yesterday,
I was visited by members of the National Silver Haired Congress.
The Congress is a non-partisan organization, dedicated to representing
“the best interests of all elder Americans.” Members introduce, debate
and vote on resolutions and then present those resolutions to the President
and Congress. Helen Heyrman, the “Senior Senator” from Illinois,
introduced a resolution to “retain Social Security as a Guaranteed Benefit,”
a resolution that passed overwhelmingly as a top priority of this year’s
Congress. The text of the resolution is attached to my testimony.
I
hope that we will follow the lead of the National Silver Haired Congress
by rejecting privatization. At least, we should have a full and fair
debate where their concerns are addressed.
Second,
we can vote to reject tax cuts for the wealthy that jeopardize Social Security.
Peter Orzag from the Brooking Institution has said that the tax cuts passed
last summer but not yet implemented will exceed the entire Social Security
deficit over the next 75 years. I introduced the First Things First
Act, H.R. 2999. My bill would delay changes in the top marginal tax
rates and elimination of the estate tax (while lifting the exemption for
family-owned businesses to $4 million) until we’ve protected Social Security
and Medicare and met other critical needs, such as providing a comprehensive
Medicare prescription drug benefit. Certainly, we should not pass
the tax provisions in the President's budget that would drain $1.5 trillion
from the Trust Fund.
Mr.
Chairman, I want to thank you again for giving me the opportunity to be
here today. I hope that we can put these guarantee certificate proposals
to rest and instead work together to keep the security in Social Security
and improve the financial future for retirees, disabled workers, survivors,
and dependents. |