By Arthur Webb
With Social Security these days, it’s hard to sort out the facts from the hype and fear, and the logic from the ideology.
According to its trustees, the Social Security Trust Fund has sufficient funds until 2042. Starting around 2018, however, reserves will have to be tapped to pay benefits. In 2042, those reserves will be depleted, which is where the “crisis” hype comes in. This, says Bush, this will be the tipping point at which the current rate of taxation will only cover 73 percent of all benefits. The arrival of the Baby Boomers at retirement age will create legitimate concerns requiring creative adaptations by our government and society at large. Therefore, Social Security needs more than ever to be seen as a bedrock program that will guarantee the baby boomers comparable support to what their parents received.
How important is Social Security? According to the Wall Street Journal, the Employee Benefit Research Institute calculates that two-thirds of all Social Security beneficiaries aged 65 and older rely on their monthly check for more than half of their income. In other words, Social Security benefits are essential for retired, disabled, and widowed Americans.
A cornerstone entitlement for retired Americans, Social Security was established in 1935 around central concepts of equity, certainty, predictability, and fairness. By definition, it is a program for social insurance; it is not welfare. Designed to provide a basic income level for everyone at retirement age, along with several million others who are disabled or widowed, the program recognizes that there is a social contract from one generation to the next. In an effort to protect the older generation, government assumed the authority to ensure proper and effective management of the trust fund.
Social Security is an icon of the social justice that we expect in our society; it protects the dignity of those who have contributed lifetimes of work and productivity to our society. FDR said in June 1934, prior to the passage of Social Security, that this government program would ensure “… the security of the home, the security of livelihood, and [the] security of social insurance.” Since then, millions of Americans have been shielded from the threat of poverty by Social Security.
Do we have a crisis?
The short answer is no. The sweeping changes promoted by President Bush and his proposed introduction of private savings accounts are not truly needed. Critics of the Bush plan call it “privatization.” And indeed, a close examination reveals this to be less of a solution, and more of a fundamental shift away from Roosevelt’s vision. Social Security is a dynamic program that, from the beginning, has required repairs to protect its benefits for future generations.
The Greenspan Commission in 1983 provided the last major set of improvements to address the solvency of the trust funds. Those 1983 modifications set in motion a plan to protect Social Security for 75 years, which has been and continues to be successful.
President Bush has embarked on a vigorous campaign to “sell” his program to the American people. We ought to be skeptical; the Bush program is not designed to solve long-term financial difficulties, but to undermine the program as the entitlement it was intended to be.
Social Security is a pay-as-you-go program in which workers and employers contribute equally. The biggest issue for those who promote major reform highlights the point that in 2003, there were only three workers for every beneficiary. Interestingly, immigration is a major factor that does and will continue to offer a partial solution because it will maintain or increase the worker-to-beneficiary ratio.
One way to look at the broader economic balance of interests for all Americans is to see how Social Security benefits compare to Social Security taxes as a percentage of the Gross Domestic Product (GDP). Economists report that percentages are very close to each other, meaning that there is a fair balance between taxes and benefits, as there should be. From a different vantage point, one might ask how big is the deficit in Social Security as a percentage of the GDP? Assuming that nothing is done, the deficit is only 0.7 percent of the GDP (according to the Center on Budget and Policy Priorities, 2003). This amount can be managed with some modest changes to the current Social Security program.
Another body like the Greenspan commission of 1983 is needed where wisdom and cooler heads can come together to present a plan for reform. But it must convene with the goal of preserving the social-contract framework and the social-insurance concepts that were created by FDR in 1935.
Arthur Webb is president and CEO of the not-for-profit organization, Village Care of New York, Inc. He is also the former chairman of the Continuing Care Leadership Coalition, whose members provide services to people of all ages throughout the New York
Metropolitan area.
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