7-08-05, 9:11 am
President Bush’s Social Security privatization plan isn’t just aimed at retirees. Millions of beneficiaries of the program are the surviving family members of workers who are disabled or die before they reach retirement age. From the outset, Bush’s plans calls for deep cuts in survivors’ benefits in order to pay for his risky scheme.
A report titled 'Social Security’s Cruelest Cut' released by the Economic Policy Institute, a non-partisan think tank, showed the harmful impact Bush’s plan would have on survivors. According to the report, the family of a worker who is now 25 but who will die at age 45 would lose 9.4% of their survivor’s benefit (more than $3,000 per year in 2005 dollars) under the administration’s plan. It also shows that the impact would be even greater for African Americans, who, because of job and wage discrimination, tend to earn less.
African Americans are more than 13 percent of those receiving survivors’ benefits. Because the wages of disabled or dead Black workers are lower than the average annual earnings, formulas used to determine the size of the benefits their survivors receive already mean that their benefits are low to begin with.
These and other benefit cuts on Bush’s proposals are based on a benefits cut index designed by Bush’s Social Security privatization commission. Bush’s proposal isn’t just about moving trillions into private, corporate-controlled accounts.
According to the EPI report, today, about 55% of Social Security recipients – over half of the beneficiaries – are disabled workers or family members of disabled, retired, or deceased workers and retirees. In December 2003, 6.8 million of the 47 million Americans receiving Social Security benefits received survivor benefits; 1.9 million of these beneficiaries were children. The average widowed parent with two surviving minor children currently receives an annual benefit of $22,572.
In addition to this cut off the top, Bush’s privatized accounts put survivors’ benefits at further risk, because disability and death are unexpected. The loss of a wage earner may come at a time when the value of the private account is low, leaving the survivors with no guaranteed income and shrinking income. Social Security, as a social insurance program, evens out risk and prevents any specific individual from unfair disadvantage due to market forces they have no control over.
Remember, under Bush’s plan, workers who opt for private accounts will not be able to control how their money is used in the market. This would be left up to corporate bureaucrats at investment firms.
Benefit cuts and radical overhaul of the Social Security system are unnecessary. While reasonable estimates say that the program, without any changes, will be able to pay the current level of benefits for decades to come, the Republicans and the Bush administration have twisted data to claim that the program’s collapse is looming.
Because Social Security’s finances depend on payroll taxes that are 'capped' to the first $90,000 individuals earn, two minor adjustments could easily prevent any potential future financial problems.
1. Create budget and trade policies that ensure real job and wage growth. 2. Eliminate the 'cap.'
The first plan seems difficult and abstract, but we know that 'free trade' policies have cost several hundred thousand jobs in this country in the last decade alone. Bush and the Republicans are now pushing CAFTA, another free trade agreement aimed at Central America. Experts say that as many as 500,000 jobs could be permanently lost in the first few years of the treaty alone. (Click here for more information on CAFTA.)
Budget priorities that favor huge corporate tax breaks to move economic activity offshore or the failure to invest in local development of infrastructure, research and development, and growth in economic activity have helped the rich get richer but have produced a stagnation in job creation.
Serious investment in public education on all levels, worker retraining, and increases in spending on the social safety net all have proven to have a stronger and longer-lasting impact on stimulating economic growth than tax breaks to the highest income brackets. Real growth means better jobs, better wages, better benefits, and so on. In the process, the Social Security Trust Fund will be strengthened.
An important aspect of this strategy for improving the economy is preserving and protecting the right of working people to form unions and to collectively bargain with companies over wages and benefits. The union difference in wages alone could have a huge impact on the strength of Social Security’s financial picture.
The second modification is less difficult and requires less political will or maneuvering to accomplish. Currently, people who earn over $90,000 do not pay a Social Security payroll tax on that amount over $90,000. According to analysis by the Economic Policy Institute, if that 'cap' were eliminated, 90 percent of Social Security’s fiscal problems predicted by the most conservative, least reasonable sources could be eliminated.
Neither modification requires radically dismembering Social Security. Neither idea calls for turning trillions over to stock market investors in risky private accounts.
And since Bush has already admitted that his privatization plan really doesn’t strengthen Social Security, why not take the reasonable approach to securing the future of retirees, the disabled, and their survivors?
--Joel Wendland can be reached at jwendland@politicalaffairs.net.
