In My Opinion: Let's Not "Fix" Social Security by Destroying It

Having staked his political capital on the notion that the presidential sex scandal was the biggest concern to the American people, Newt Gingrich has departed from politics.

There’s no question, in the wake of the 1998 elections, what Americans really care about. In the congressional races, they voted on the issues that matter most to their lives and to their families — preserving Social Security and Medicare, and improving education for their kids.

Of these issues, the question of maintaining the solvency of Social Security for the next century now is attracting the brightest spotlight because of the array of radical and controversial proposals to “fix” the system — even though it’s not broken, or broke either.

Listening to proponents of privatizing Social Security (through individual investment accounts instead of guaranteed benefits) you’d think that the program is about to go bankrupt. As part of the hype, the privatizers keep citing a mythical survey in which more young people supposedly believe they have a better chance of riding in a UFO than receiving a Social Security check.

In fact, the Social Security system is secure. There is more than enough money in the Social Security Trust Fund to pay out benefits at current tax levels, and — even under the most pessimistic and conservative economic forecasts — this will be true for at least 30 more years.

If we do nothing at all in the meantime, after 2029 it is possible that the Trust Fund reserves could be depleted, meaning that annual tax revenues would only cover three-quarters of the program’s total obligations on a pay-as-you-go basis.

What would it take to solve the problem and keep Social Security completely funded for at least 75 more years? Even if we decided to do nothing more than raise payroll taxes to avoid the shortfall, the increase would amount to a small 1.1 percent, or for the average worker about $300 per year. And there are other modest reforms being proposed that could offset tax increases, short of radical restructure.

This is hardly a “crisis” — so why the hyperbole and the drive for radical change?

Let’s follow the money. It has been estimated that Wall Street firms stand to make some $20 billion per year in fees if a portion of Social Security taxes were put into individual accounts invested in the stock market — as proposed in several legislative measures — according to the Washington Post.

It’s not surprising that the main backers of privatization are organizations like the Cato Institute, which gets 25 percent of its funding from Wall Street financial firms, and such investment companies as Morgan Stanley, American Express, Quick & Reilly Group, and State Street Boston Corp.

What the privatizers aren’t advertising, however, is that the fees and administrative costs associated with their scheme would require slashing Social Security benefits. As they say, there’s no such thing as a free lunch. Cuts would be required because changing to a system of private accounts would cause workers to pay twice — once to fund benefits to current or near-term retirees, and a second time to fund the new accounts. (Never mind the introduction of risk associated with tying benefits to the stock market.)

The privatization plans that have been offered to date all call for increasing the retirement age — in several cases to age 70 or more — and require cutting guaranteed benefits and cutting, or eliminating, cost of living increases. One plan would reduce basic benefits by 48 percent, and another would cap benefits at $410 per month, according to the Economic Policy Institute.

Probably the harshest and most unfair aspect of these proposals is that of raising Social Security eligibility for full benefits to age 70 or higher. That may sound fine to the white collar professionals and policy makers who write these proposals, but for many blue collar workers in physically demanding jobs, and people in poor health, it’s a prescription for hardship and despair.

Consider the toll of a lifetime of work on construction workers, workers in steel mills and poultry plants, health care workers who lift patients from beds to wheel chairs, and millions of victims of repetitive motion injuries of various kinds. Working past 65 isn’t an easy option when your body has simply worn out.

Such a proposal also discriminates against various groups, for example, African American males, who have a shorter average life-span than their white counterparts.

Social Security for 62 years has been the nation’s most important and successful social program. It’s vital to the two-thirds of older Americans who rely on benefits for more than half their income, and to millions of other disabled workers and dependents who otherwise would exist in extreme poverty.

With moderate reforms, we can maintain Social Security for the next century and beyond. There’s simply no need to “fix” this essential program by tearing it apart.