CHN: Social Security: A Human Needs Issue
On November 4 President Bush declared that he had “political capital” to spend on diverting a portion of Social Security benefits into private accounts. The Coalition on Human Needs held a briefing on January 7 to explore the likely impact of privatization proposals on Social Security’s antipoverty role – for retirees, widows and widowers, minorities, children, and people with disabilities. The briefing also looked at disincentives for public employment in the current Social Security system.
Social Security is one of the main reasons why elderly poverty has declined from more than 35 percent in the 1950s to around 10 percent today. But Social Security does not serve only retirees.
Over a third of the benefits paid by the program go to 17 million non-retirees. These include disabled workers and their dependents, and spouses and children of workers who are retired or deceased. Of particular concern are:
– Children, who make up 8% of beneficiaries. In fact, Social Security pays more benefits to children than does Temporary Assistance for Needy Families.
– Disabled workers, who make up 12% of beneficiaries.
– Women, who receive benefits as retirees, disabled workers, spouses and widows. About 44% of non-married elderly women rely on Social Security for 90% or more of their income. For African American women the figure is much higher, at 74%.
These non-retirees might suffer the most under the principal privatization scheme proposed by the President’s Social Security Commission. The plan would offset the traditional benefits of retirees based on the assets in their private accounts and then apply a reduction that is unrelated to the private accounts to all traditional benefits – including those of non-retirees, who will have no private accounts to access or will have accounts with very little assets. The CHN briefing highlighted the difficulties vulnerable populations will experience if benefits are cut.
The President has championed private accounts as a way to deal with a financial “crisis” that he expects to occur in the program several decades from now. But there is no crisis. The program will face a modest shortfall in 40 to 50 years and diverting funds from the program and into private accounts will do nothing to close that shortfall. The reductions in scheduled benefits that would apply to all beneficiaries are much larger than needed to close the program’s shortfall because they must also generate money to pay current retirees while the program is losing money to the private accounts. But the costs of paying current retirees while money is being diverted (euphemistically referred to as “transition costs”) are so great that the program would still need as much as $2 trillion, requiring either new taxes, which the President opposes, massive borrowing, or further cuts in benefits or other government programs.
The presenters at the CHN briefing argued that there are far less costly ways to close the Social Security shortfall, which according to the Congressional Budget Office is about the size of the recent tax cuts enjoyed by the wealthiest 1 percent of Americans.
Barbara Kennelly, President of the National Committee to Preserve Social Security and Medicare, gave the overview of Social Security and the President’s privatization plans
Marty Ford from the Arc and UCP Public Policy Collaboration discussed how privatization could affect people with disabilities. Presentation
Joan Entmacher of the National Women’s Law Center, talked about how the President’s proposals could affect women and people of color.
Al Campos of the National Education Association explained how the pensions of teachers and other public employees interact with the Social Security system.