What America is Saying … About Social Security Privatization
What America is Saying … About Social Security Privatization
Social Security, and its possible privatization, remains a central concern to both young workers and those approaching retirement. According to Social Security’s trustees, the program will come up short in 2042, when it will be able to pay about 70 percent of the promised benefits. Numerous suggestions have been floated to solve the developing solvency gap, including allowing workers to divert a portion of their Social Security taxes into personal investment accounts in exchange for agreeing in advance to receive much-reduced benefits. This could redefine the role of Social Security, as it has historically functioned as a comprehensive system that inoculates workers against the risks associated with private investment. Below is a sampling of what America is saying about Social Security privatization.
Allentown, Pa. – Morning Call
October 22, 2004 – Opinion
"�? we’ve created such a crisis atmosphere around individual equity issues surrounding the Social Security system that we’ve lost sense of the purpose of the program. In private pensions or personal accounts each person and each generation pays for its own retirement. But Social Security is first and foremost about shared risks and shared responsibilities; its purpose is to pool risks within and among generations. It also is meant to protect certain people, including low income workers and their dependents, to allow them at least a chance of living above the poverty level �?
"Though many of us who are saving expect to be financially comfortable through our own individual savings, we could eventually confront any of life’s many income and asset draining experiences: unexpected unemployment; poor investment decisions; a precipitous drop in the market; serious illness; and/or death or institutionalization of a partner.
"At the same time, there is no doubt that despite the fact that different groups get different money’s worth from the program, overall Social Security provides exceptional money’s worth to all. It is a defined benefit that guarantees against inflation; keeps up with wages for new beneficiaries through wage indexing; protects against disability; provides life insurance for children in the event of a worker’s death; and is completely portable (no small thing with today’s downsizing and business restructuring). At the start of a person’s career, this total package could not be provided better – or more cheaply – in the private market.
St. Louis, Mo. – St. Louis Post-Dispatch
October 23, 2004 – Editorial – link not available
"Despite all the accounting folderol about a Social Security trust fund, America has a pay-as-you-go retirement system. Payroll taxes from today’s employers and workers pay for today’s retirees. In fact, those taxes produce a surplus of about $40 billion a year, which goes to fund the rest of government.
"But as more people retire, that surplus will shrink. Fifteen years from now payroll taxes will no longer bring in enough money to cover Social Security checks, and the government will have to find some more cash. That means higher taxes, cuts in benefits or more government borrowing. It’s not a pretty picture.
"If we let young people divert payroll taxes to private accounts, the crunch will be bigger and arrive sooner. Mr. Bush has never been specific how much young people might divert. But quite a few such plans have been suggested in Congress. Adopting one of the more popular suggestions could put a $1 trillion hole in Social Security over 10 years, according to the Concord Coalition, a group that promotes balanced federal budgets. How would we fill that hole? Think borrowing, taxes or benefit cuts.
"Young people opting for private accounts would presumably be entitled to less than the normal Social Security check. They’d be betting that their private accounts – invested in stocks and bonds – would earn them more than the difference.
"Now imagine that you had retired in early 2000, with your Social Security check dependent on the stock market, and then watched the market lose nearly half its value over two and a half years.
"This is obviously a bad idea."
Boston, Mass. – The Boston Globe
October 23, 2004 – Letter to the Editor- link not available
"Endorsing a system that allows individuals to create wealth for themselves is the antithesis of Social Security. The intention was for society to provide a measure of security for its citizens who pay into that system – in essence a state-sponsored pension program�?
"Social Security is, sadly, our most regressive tax. In 2003, most of us paid a little less than 7 percent of the first $84,000 of our earnings (with employers matching that contribution) into the system. That leaves billions of dollars of income belonging to people earning more than $84,000 per year untaxed. Why isn’t this income subject to Social Security taxes? It would allow "the haves" to support not only their future, but the future of people whose lifetime earnings were insufficient to set them up for a more comfortable retirement. This reform might even allow the government to reduce the Social Security tax burden on those who pay the greatest percentage of their overall income to support it now."
Hartford, Conn. – Hartford Courant
October 17, 2004 – Letter to the Editor
"�?I’ve been through 20 years of formal education and earned two graduate degrees, but the idea of managing my own Social Security account scares me to death�?
"The truth is that most of us get by trying to make sure our paycheck can cover the bills and hoping that our house may be worth enough down the line to provide a bit of a nest egg. If we’re fortunate, we have a job with a pension, and maybe a 401(k).
"We take comfort in the fact that no matter how badly we might botch our own affairs, the government assures us we won’t be left utterly penniless when we are old and frail. Asking us to manage our own Social Security accounts defeats this very purpose."
Nassau and Suffolk, N.Y. – Newsday New York
October 21, 2004 – Opinion – link not available
"�?The president appointed a commission to study privatization of Social Security�?The commission’s own findings are plain: There’s no way to have younger workers put some of their payroll tax money into personal accounts without cutting future benefits drastically, racking up trillions in more government debt – or, as Bush’s commission suggested, both�?
"And the commission made an even more astonishing admission: Introducing private accounts to Social Security doesn’t ‘save’ it from future fiscal straits at all. ‘Social Security’s fiscal problem exists independently of the debate over whether personal accounts should be part of a reformed system,’ the panel said.
"Translation: The whole rationale for tampering with Social Security is phony."
Las Vegas, Nev. – Las Vegas Review-Journal
October 21, 2004 – Letter to the Editor
"Well, let’s examine what’s happened to the money I’ve put into my Roth IRA. In May 2000 I put $2,000 into a growth mutual fund in the best-known fund family. In November 2001 I added another $2,000 to that IRA. That $4,000 investment is now worth $1,726. I have not withdrawn money from that IRA, nor added to it over the years.
"If Social Security dollars are invested when the stock market is high, and recipients have to withdraw when the market falls, no person could count on a stable income in old age when a monthly check is needed to survive. Social Security is supposed to be a ‘safety net’ to help keep the aged out of poverty. It was never intended as a means of getting rich. Besides, how many of us are astute and gifted investors, anyway? How many of us are Warren Buffetts?"
The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.