Counting On Our Future -Talking Points

The State of Social Security from “America Beyond Capitalism” by Gar Alperovitz
· Although Social Security provides substantial support for some retirees, in many ways it is best understood as a bottom line guarantee against true disaster for the elderly. The maximum monthly benefit in 2001 was $1,538; half of those on Social Security received less than $900 a month.
· A traditional pension once provided many Americans with a certain level of guaranteed income that could be counted on in retirement. However, in 1975 just under 40% of private sector workers had some form of pension plan. By 2003 only 20% of private sector workers

For more about existing social security benefits, see the Facts at a Glance portion of “Facts About Social Security Benefits,” from the Economic Policy Institute at: http://www.nwlc.org/pdf/SocialSecurityBetterDeal2004.pdf

Three Reform Models

In December 2001, a bipartisan, 16-member commission issued its recommendations for reforming and strengthening Social Security. Their report included three reform proposals. Currently, workers and their employers pay 12.5 percent of their income as payroll tax. Under Reform Model 2, the leading plan drafted by President Bush's Commission on Social Security, up to a third of that money could go into private accounts. This model establishes a voluntary personal account without raising taxes or requiring additional worker contributions.

Reform Model 2 –The Bush Administration Plan

· Workers can voluntarily redirect 4 percent of their payroll taxes up to $1,000 annually to a personal account. No additional worker contribution required.

· In exchange, traditional Social Security benefits are offset by the worker's personal account contributions, compounded at an interest rate of 2 percent above inflation.

· Plan establishes a minimum benefit payable to 30-year minimum wage workers of 120 percent of the poverty line.

· Benefits under traditional component of Social Security would be price indexed, beginning in 2009.

· Temporary transfers from the general budget would be needed to keep the Social Security Trust Fund solvent between 2025 and 2054.

Source: 2001 report of the President's Commission to Strengthen Social Security. (As reported on NPR 11/11/04 “Bush Eyes Privatizing Social Security in Second term)

To view the complete summary of the three models, see: “Bush Eyes Privatizing Social Security in Second Term” at NPR.org http://www.npr.org/templates/story/story.php?storyId=4164384



Need for change – need for privatization?

· According to the Social Securities trustees report, Social Security could pay all benefits through the year 2042. However, the formula is based on what some critics call overly pessimistic assumptions about our economic future: The SSA expects the U.S. economy to expand at an average annual rate of just 1.8% from 2015 to 2080—far slower than the 3.0% average growth rate the economy posted over the last 75 years. The Congressional Budget office calculates all benefits would be paid through 2052.
· On average less than a cent per dollar paid out by Social Security goes to pay administrative costs. The Bush Administration estimates a 5-cent per dollar loss on their individual investment account plan.
· Under the Bush Administration plan, a middle class worker retiring in 2022 would see a guaranteed benefit cut of 9%. A retire in 2075 would receive only half of the benefits promised.
· Under the Bush Administration plan a 45 year old worker today would see a cut in benefits of 15 percent – a 15 year old today would loose close to 40% when retiring – a loss of $160,000 in benefits.

For more on Social Security and the Privatization Plan, see “Basic Facts on Social Security and Proposed Benefit Cuts/Privatization” from the Center for Economic Policy and Research at: http://www.cepr.net/publications/facts_social_security.htm

For the impact of proposed Privatization plans on women and families, see the National Women’s Law Center report at: http://www.nwlc.org/pdf/SocialSecurityBetterDeal2004.pdf

For more on the formulas used to anticipate the demise of Social Security, see “The Social Security Administration’s Cracked Crystal Ball,” from the magazine, Dollars and Sense at http://www.dollarsandsense.org/1104econ.html