Strengthen Social Security No. 129
Social Security, often mischaracterized as only a retirement program, is essential to the economic security of disabled individuals, senior citizens, and survivors, and survivors of wage earners who die prematurely. It must be preserved and strengthened.
Social Security faces no crisis, except the one created by the Bush administration. Based on the false claim that the program is currently unsustainable, President Bush proposes to partially privatize Social Security by diverting a portion of its revenue into private accounts that each worker would be free to invest in the private market.
Social Security is currently accumulating a surplus, specifically designed to address our increased longevity. It will continue to run a surplus until 2037.
For more than sixty years, Social Security has been America's most successful program; annually it saves some 15 million Americans from poverty, and millions more from near poverty; almost two-thirds of retirees rely on Social Security for more than half of their total income. Social Security is the sole income source of one-fifth of the elderly, 25% of non-married elderly women, and 38% of elderly African-Americans and Hispanics. More children receive benefits from Social Security than from federal welfare programs.
President Bush and his corporate allies are waging a campaign to convince Congress and the public that Social Security is so under-funded that it must be "privatized." This campaign is cynically trying to instill fear among young people that Social Security will not be there for them. It is sowing intergenerational mistrust, instead of intergenerational community.
The danger comes from the privatizers themselves rather than funding shortfalls or program flaws. Millions of average Americans inexperienced in the whims of the stock market will be at the mercy of brokers and luck.
By promising to maintain benefits for current beneficiaries while diverting payroll taxes into private accounts, privatization would also generate transition costs that would add billions of dollars to the already bloated federal deficit. The principal beneficiaries of this proposal would be the stockbrokers, bankers, and mutual funds that stand to earn millions gambling ordinary American's retirement security.
The Administration has proposed saving money by means of a hoax they call "progressive indexing." We oppose this proposal that would preserve benefit levels for the lowest earners while slashing benefits for all others. Such a change would transform Social Security into a welfare program, destroying its universality and undermining its political support. No doubt other deceptive hoaxes will be proposed.
To address the long-term financial health of Social Security, ADA urges the elimination of the cap on income on which the Social Security tax is levied. Currently, Social Security is funded by a flat tax applied only to the first $90,000 of wages and salaries (indexed and revised annually), with a highly regressive impact. This means that average workers pay Social Security taxes on their entire earned income, while the wealthy only pay Social Security on a fraction of their earnings. Eliminating the income cap would make the Social Security tax les regressive and would add billions of dollars of revenue to help secure Social Security's long-term health. Although some funds raised in this way will go toward higher benefits for those higher earners, benefits should continue to tilt progressively toward lower earners.
ADA also opposes proposals for a "balanced" approach that would cut Social Security's modest benefits while raising the payroll tax. Today a low-wage earner receives $737/month, and a maximum earner receives $1,825/month. From these amounts, the Medicare Part B premium is deducted, which in 2005 was $63.30/month. Higher earners are now charged more for Part B, a principle ADA endorses. These benefits are hardly extravagant, but they are guaranteed, secure, and inflation-proof.
Americans for Democratic Action opposes partial or total privatization of Social Security and any proposals to reduce Social Security benefits. ADA will exert major efforts to inform Congress, the President, and the public of the importance of preserving Social Security.
Note: For additional information, see background paper entitled "Social Security: The True Story" at www. Adaction.org.
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Social and Domestic Policy Commission