Strengthen Social Security Coalition Co-Chairs'

Comments on Social Security

in response to questions by:

Spandan Chakrabarti, Publisher
The People's View. http://www.thepeoplesview.net

We regret not getting back to you sooner,

Pleased you are in agreement with the principles of the Strengthen Social Security Campaign
(www.strengthensocialsecurity.org ). And we share with you the sense of importance that it “must
remain a public program and a generational social contract.”

We are pleased to share with you why the organization we co-direct, Social Security Works
(www.socialsecurity-works.org ) and the Strengthen Social Security Campaign are so concerned about
the National Commission on Fiscal Responsibility and Reform, believing that commission poses a
major threat to Social Security protections for current and future generations.

Beyond taking the position that the projected Social Security shortfall should be addressed through
normal legislative procedures and with revenues (not benefit cuts), the coalition has not, as yet, taken a
position on specific proposals although its steering committee is exploring options. So, in responding
to your specific questions, we do so as individuals who as academics and analysts have written widely
about Social Security and related pension, retirement and population aging issues and as people who
have been staff to several commissions, including the 1982 National Commission on Social Security
Reform (a.k.a., the “Greenspan Commission”) – one of us as the top advisor to Alan Greenspan and the
other as advisor to the five members of the Commission appointed by Speaker Thomas P. O’Neill.

As background you should also know that the coalition of over 225 national and state organizations is
committed to strengthening Social Security in a manner that does not undermine it vital protections for
today's and tomorrow's retirees, working persons, persons with disabilities and other family members
such as the 4.4 million children who today receive Social Security benefits every month, primarily as
dependents of a deceased or disabled worker. It consists of a broad range of organizations who
collectively represent over 50 million members -- including the AFL-CIO, SEIU, AFSCME, NEA,
MoeOn.org, National Organization of Women, Task force of Older Women's Economic Security Task
Force of the National Council of Older Women, AAUW, NAACP, Alliance of Retired Americans,
National Committee to Preserve Social Security and Medicare, National Hispanic Council on Aging,
American Association of Persons with Disabilities, Voices for America's Children and Common
Cause.

Why we think the Fiscal Commission poses a major threat to Social Security Protections

As you know, President Obama established the National Commission on Fiscal Responsibility and
Reform by executive order earlier this year in response to members of Congress concerned about the
growing federal debt. While many of the organizations in our campaign believe the federal debt is a
serious problem that should be addressed, we are united in the belief that Social Security should not be
considered by the commission because it has not contributed one dime to the federal debt. By law
Social Security cannot borrow or go into debt. In fact, Social Security has a $2.6 trillion surplus today,
which is projected to be $4.2 trillion by 2025.
 · Social Security pays very modest benefits – less than $13,000 a year on average – to more
than 53 million Americans. This is less than the minimum wage. While most are receiving
retirement benefits, 1 out of 4 beneficiaries is a severely disabled worker, a surviving spouse caring
for dependent children, or a dependent child. Nearly 2 out of 3 seniors rely on Social Security for
half or more of their income, and it lifts 20 million Americans out of poverty. And, though often not
recognized, it is the nation’s Social Security is also nation’s most important children’s program,
insuring nearly every child against loss of income if a parent experiences severe work disability or
dies. It does all this with administrative costs of less than 1%. In short, Social Security is very
successful and strongly supported by the American people.

But the Fiscal Commission puts Social Security at considerable risk. Press reports indicate that it is
seriously considering a number of major benefit cuts, described in this fact sheet. The laser-like focus
on Social Security is not surprising since a majority of the commission members have openly
advocated cuts and/or privatization in the past. Before all commission members were appointed, both
co-chairs went on record saying that in the words of co-chair Erskine Bowles, they were going to “mess
with Social Security.” More recently, co-chair Alan Simpson referred to Social Security as a “Milk
Cow with 310 million “tits.” These are hardly impartial positions for co-chairs of a major national
commission whose decisions will impact the lives of every American.

Moreover, from the beginning of the Commission process, we have heard that the one area being
singled out for change is Social Security even though it does not and cannot contribute to the federal
deficit. We have also heard that this commission was focused primarily on addressing the projected
long-term financing shortfall via benefit cuts.

Chief among the proposed cuts is likely to be an increase in the retirement age. The so-called normal
retirement age was 65 for most of Social Security’s 75-year history; today it is 66 and it will climb to
67 by 2022. Many members of the commission seem predisposed to want to make it even higher.
Increases in the retirement age are a direct cut in benefits – each one-year increase is a 6% to 7% cut.
Increasing the retirement age to 70, as some propose, would be a 20% benefits cut on top of the 13%
cut that has already occurred. This cut falls most heavily on low-income persons who are more likely to
experience serious health problems and have more limited employment options in their late 50s and
early 60s. This proposal is popular among some policymakers because the conventional wisdom is that
we are all living longer. But data shows that life expectancy for lower-income women has
actually declined over the last three decades, and life expectancy among lower-income men rose just
one year since 1982, as the Social Security retirement age went up one year. Moreover, longer lives do
not necessarily translate to healthier lives or to available jobs for those living longer.

The Fiscal Commission is a stacked deck, notwithstanding a handful of its members being strong
Social Security supporters. It has been given extraordinary – and undemocratic – powers. If the Fiscal
Commission reaches agreement on a proposal it will be put on a fast-track, up-or-down vote in
Congress during the lame duck session – bypassing the Committee process, floor amendments and the
type of deliberation that should precede such momentous legislation. This would be unprecedented in
the history of Social Security, which has always had the benefit of regular order. If the commission
reaches substantial sup-majority agreement on a Social Security package, there is a very real chance
that Social Security will be changed dramatically in December during the lame duck session of
Congress and that this change will lead to greater economic insecurity. Moreover, even if the
commission does not reach agreement, there is every likelihood that a majority recommendation from
the commission will go on to serve as the basis of legislative proposals to be discussed in the new
Congress

"Strengthen Social Security Coalition" Silent on Specifics

1. When you say "social security should not be privatized," most people understand that to mean
individual accounts and private management. But if the government (i.e. the Social Security
Administration) were to gradually invest 15-20% of the SSI trust fund in the stock market, would your
coalition be against it? Many countries' public pension systems invest part of the money in the stock
market.

There is opposition to this idea by persons believing that government should not invest trust fund assets
in private equities. However, we like you, think that serious consideration should be given to
diversifying trust fund investments and agree that this is very different than establishing “personal” or
“private accounts.” Gradual and modest diversification would in all likelihood result in greater returns
to the trust funds. Also, because government would bear the risk, individuals would not be impacted
by market fluctuations.

2. I agree with the idea of not means-testing social security, but what is the coalition's position on the
idea of linking benefit increases for wealthier recipients to a price index while keeping lower income
beneficiaries' increases tied to a wage index, as they are now?

The coalition does view “Progressive Price Indexing” as a large benefit cut, falling most heavily on
younger workers and those that follow. Over time, it would also radically alter the structure of
Social Security and undermine support for Social Security as everyone would eventually receive
roughly the same low benefit. In short
 There’s nothing “progressive” about the “Progressive Price Indexing” (PPI) that President
Bush proposed and now Congressman Paul Ryan and others propose to fund their
privatization schemes. PPI drastically cuts the benefits of everyone earning over $25,000,
maintaining current-law benefits only for the very lowest wage earners.
 PPI proposals cut the benefits of youngest workers the most because the impact is
cumulative. Under the plan proposed during the Bust privatization effort, a worker who
earned the average wage throughout his or her career and retired in 2040 would receive a
benefit 24 percent lower than under the current benefit formula. If the worker retired in 2070,
his or her benefit would be 43 percent lower than the benefit the worker would receive under
current law.
 PPI radically alters Social Security into a program where benefits are increasingly
unconnected to wages and contributions. Rather everyone eventually gets the same low
benefit, unrelated to wages, similar to what welfare programs provide.
 PPI raises only $3 billion in 2025, but over time it fundamentally alters the nature of Social
Security by undermining what the program is designed to do – provide a reasonable level of
insurance protection against loss of wages.
3. I am a little at a loss that you speak out strongly against any benefit cuts, yet do not seem concerned
at all that in 2037, if nothing is done, social security will only be able to pay 75-80% of the benefits. Is
that not effectively a cut?

We share your concern that Social Security’s modest projected deficit be addressed, ideally sooner
rather than later. We also cannot image that congress will not act prior to 2037. There are many ways
to address the problem. For example currently only the first $106,800 of earnings are subject to Social
Security’s payroll tax contributions for the employer and employee. Taking, the “cap” off of Social
Security and treating all earnings as taxable for Social Security purposes, just as is done with Medicare
would completely address the projected shortfall. Another way to think about the magnitude of the
projected tax cap is to compare it to the cost of the Bush tax cuts for the richest Americans. Ending the
Bush tax breaks for the richest 2% of Americans would save the same amount of money that is needed
to guarantee full Social Security benefits for the next 75 years.[i] Those tax breaks are equivalent to
0.6% of GDP – the same as the cost of making Social Security solvent for the next 75 years.

4. You have published a paper by the EPI suggesting that increasing revenue can be done either by
increasing the cap to which wages are taxed or by increasing the tax *rate* or a combination of both.
Will the coalition support the recommendation (if it's given) to raise the social security tax *rate* for
workers who are currently under the cap?

As with any large group, there may be differences of opinion as regards raising the tax rate. As implied
above, we certainly agree that the cap should be raised. Personally, we also think that placing a small
payroll tax increase (e.g. ¼ percent on employer and employee) thirty or forty years from now is worth
considering.

5. Are there any measures at all you support or are willing to consider to bridge the long term social
security trust fund shortfall other than (or in addition to) raising the wage cap or tax rate?

Yes, again as individuals we believe there are many modest ways worth considering – including
restoring the estate tax to the 2009 levels so that it will affect only individuals with estates worth more
than $3.5 million ($7 million for couples) and dedicating the income from the tax to Social Security; a
financial transaction tax with proceeds dedicated to Social Security ; and treating salary reduction plans
like 401(k)s.

We hope this information is helpful.

Nancy Altman and Eric Kingson

Co-directors, Social Security Works (www.socialsecurity-works.org )
Co-chairs, Strengthen Social Security Campaign (www.strengthensocialsecurity.org )