By Mike Hall
AFL-CIO Senior Writer
Seventy-five years ago this August, President Franklin Roosevelt signed Social Security into law. Today, the nation’s most successful safety net, a program that has provided retirement security and kept hundreds of millions of seniors out of poverty, is under attack.
Politicians like House Minority Leader John Boehner (R-Ohio) want to raise the retirement age to 70, and leading members of the federal budget deficit commission are trial-ballooning benefit cuts.
Last Thursday, Kelly Ross, AFL-CIO deputy policy director, told the U.S. House Ways and Means Social Security subcommittee that the nation’s working families will fight any attempt to weaken Social Security.
Misinformation and exaggerated fears about the federal budget deficit are being deployed as the latest weapons in a decades-old Wall Street campaign to undermine Social Security, which is not a principal contributor to deficits in the short or the long term.
As part of a broad-based coalition, the AFL-CIO stands ready to mobilize our membership to vigorously oppose any proposals that would diminish current Social Security benefits in any way. Social Security benefit cuts should most definitely not be “on the table.”
Ross said the “majority of American workers now face retirement with far less security than previous generations” and Social Security insurance has grown even more important for today’s retirees.
Fewer workers retire with employer-provided pensions, even as the financial collapse and recession has battered 401(k) and other retirement savings accounts. Plus, the housing crisis has eaten huge chunks of workers’ home equity cushions. Said Ross:
Nearly two out of three seniors depend on Social Security for more than half of their income; one-third of all beneficiaries (and half of elderly unmarried women and widows) receive more than 90 percent of their income from Social Security; and Social Security is the sole source of income for 14 percent of seniors. Social Security is the only reliable and guaranteed benefit for the vast majority of American workers.
Rep. Earl Pomeroy (D-N.D.), the subcommittee chairman, said that policymakers need to remember that Social Security “is not just a set of numbers on a ledger.”
Instead, it represents the ability of our seniors to live independently and with dignity during their retirement.
Earlier this week, the Center for Economic and Policy Research (CEPR) released a study that showed low- and middle-income families would bear the brunt of the Social Security cuts and higher retirement age proposals under consideration.
Nancy Altman, co-director of Social Security Works, told the committee that boosting the retirement age for full benefits from 65 years to 67 years would amount to a 13 percent cut in benefits.
If the statutory retirement age were increased to age 70 as Minority Leader John Boehner and others have proposed, that change would constitute another 19 percent cut in benefits for a total of around 30 percent.
Some proponents of benefit cuts, such as Alan Simpson, deficit commission co-chairman and former Republican U.S. senator from Wyoming, are painting a picture of Lexus-driving Social Security recipients living in luxurious gated communities as proof benefits can be painlessly cut.
Not only do a majority of seniors count on Social Security for more than half their income, the average annual benefit of $15,000 for men and $11,000 for women hardly boosts them into the Lexus, gated-community crowd.
As Ross told the panel, “There absolutely is no justification for reducing the already inadequate monthly benefit provided by Social Security.”
Exaggerated fears about the deficit must not be used as pretexts to further the decades-old campaign to whittle away Social Security. That campaign has now been taken up by Wall Street billionaires who benefit from tax loopholes (such as the carried interest loophole) that really do have a meaningful impact on our long-term fiscal situation.
Social Security is not the cause of the nation’s short-term or long-term deficit. The recession, the wars in Iraq and Afghanistan and Bush’s tax cuts account for virtually the entire deficit over the next 10 years, according to the Center on Budget and Policy Priorities (CBPP).
And over the long-term says Ross, Social Security is not a principal contributor to the deficit.
Its trust fund surplus is projected to grow from $2.5 trillion in 2009 to $3.8 trillion in 2020. Those surpluses represent the accumulated savings of workers that are invested in government bonds, which are backed by the full faith and credit of the United States government and will have to be repaid just like any other government bonds.
While Social Security is expected to face a modest shortfall over the next 75 years, it can pay full benefits through 2039 without any changes and more than three-quarters of scheduled benefits after that.
The loss of 8 million jobs and millions of workers forced into early retirement because of the job crisis resulted in lower payroll contributions to Social Security during the recession. In the short term, said Ross,
The best thing we can do for Social Security is to put America back to work, and to do so as quickly as possible.
Over the long term, raising the cap on the Social Security payroll tax would make a significant contribution to Social Security’s stability. Currently, all workers pay the Social Security payroll tax on the first $106,000 of their earnings. Earnings above $106,000 are exempt from the Social Security payroll tax. That means a grocery clerk or warehouse worker pays a bigger chunk of their income to Social Security than a hedge fund manager.
If the cap was raised to cover the first 90 percent of a person’s income, it would impact about 6 percent of the workers and, according to Altman, amount to about one additional week of withholding a year, or about $130. They also would earn more in benefits as a result. Said Ross:
In short, Social Security can be sustained indefinitely without reducing retirement security for the vast majority of Americans, and with only modest costs for high-income taxpayers. Moreover, this would be an entirely reasonable approach to the problem, given that high earners have benefited the most—by far—from the economic policies of recent decades.
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Re-Posted from the AFL-CIO Now Blog
Posted July 19, 2010 at 8:00 am, in From AFL-CIO
