Human Needs Report Article

The Human Needs Report is the Coalition on Human Needs' newsletter on national policy issues affecting low-income and vulnerable populations. It is published every other week while Congress is in session.

Senate Panel Takes Up Social Security (4/29/05)

On Crucial Day of Debate, Members of CHN Take Active Roles Both Inside and Outside the Capitol

As Congress took up the Social Security privatization debate for the first time, members of the Coalition on Human Needs took active roles both inside the intense debates within the Capitol and in the rallies taking place just outside in the Senate Park and in 34 states.

The Senate Finance Committee, which will shape any legislation to overhaul Social Security and is chaired by Charles Grassley (R-IA), held a hearing on Social Security on Tuesday, April 26 that included testimony from Joan Entmacher of the National Women's Law Center and four other witnesses.

Entmacher pointed out that the private account plans frequently touted include benefit reductions to bring the program closer to solvency, with no guarantee that such benefit reductions would not harm people receiving disability insurance benefits or widows, widowers, and children who receive survivor benefits. She focused on how private accounts would not make up for these losses, especially for women who on average live longer and earn less than men, and who often have not paid into the system long enough to become entitled to a benefit on their own record. Under the current system, women often rely on spousal benefits and survivor benefits that are based on the work record of their spouse. “Yet the Administration has said nothing about how its plan for private accounts would affect benefits for spouses and surviving spouses,” Entmacher said.

Criticisms of the President's private accounts proposal came from all sides. Committee members of both parties expressed grave doubts over his private accounts proposal and even the witnesses who supported private accounts sometimes seemed to criticize the White House. One witness who supports private accounts -- Robert Pozen -- implicitly criticized the White House for its strategy of pushing private accounts and dealing with solvency later.

Another witness who supports private accounts -- Peter Ferrara -- criticized the White House for talking too much about solvency and criticized Pozen's plan for not diverting enough money out of the traditional Social Security to create large accounts. Ferrara's plan would have workers divert the entire 6.2 percent of their payroll that they pay into Social Security into private accounts, creating a $7 trillion shortfall over 75 years that would have to be made up by spending cuts. Senator Grassley took the opportunity to criticize Democrats for not offering a plan to deal with Social Security's solvency, to which Senator Kerry responded that the President had not offered a solvency plan either. Two of the Committee's Republican members, Snowe (R-ME) and Thomas (R-WY) expressed apparent opposition to private accounts funded out of Social Security.

Meanwhile, thousands demonstrated support for Social Security in its current form. The event was orchestrated by Americans United to Protect Social Security (AUPSS), a coalition of organizations like the Campaign for America's Future, AFSCME, USAction and others. The event drew an estimated 3,500 supporters in the Capitol and was accompanied by other pro-Social Security rallies in 34 states. The rally in Washington, D.C. was also joined by 120 Democratic members of the House and Senate, led by House Minority Leader Pelosi (D-CA) and Senate Minority Leader Reid (D-NV), who signed a "Declaration of Unity to Protect Social Security and Stop Privatization." (To read the Declaration, click on the link to AUPSS.) None of the Republican legislators who were invited to the rally attended.

The pro-Social Security organizing efforts seem to be having their intended effect. Senator Grassley expressed doubt that he could pass a private accounts plan out of his committee, saying, "I could fail. If we can't get some Democrat support, I do fail." Democrats in the committee and in the Senate generally remain unified in their opposition to negotiate any Social Security plan until the President drops his insistence on including private accounts.

With the latest poll showing a continuing drop in support for his handling of Social Security, President Bush attempted damage control on Thursday night with a rare press conference. In the statement that received the most attention from the media, the President expressed support for cutting the scheduled future benefits of middle- and upper-income people while apparently retaining the current benefit structure for low-income workers.

This idea is based on Robert Pozen's proposal for "progressive price indexing" of benefits. Under this proposal, the initial benefit level for low-income workers would continue to increase to match increases in average wages. People at the higher end of the earnings scale would have an initial benefit level pegged to increases in prices (which typically rise more slowly than wages) and those workers with incomes somewhere in the middle would be subject to a mix of the two methods. Analysis by the Center on Budget and Policy Priorities shows that the Pozen plan would eventually cut benefits for a medium earner (one who earns $36,000 today) by 21 percent, and would cut benefits much more for higher earners.

These benefit cuts would apply to all beneficiaries, not just those opting to have private accounts (despite the President's repeated claims that his proposal is "voluntary"). Those choosing private accounts will be subject to a second cut in the guaranteed benefits to pay for the accounts.