There has been a debate going on for decades over Social Security and it’s future. Sometimes we hear that it’s going to go bankrupt; other times politicians want to scrap part of it and have workers find commercial financial instruments for their retirement; still others want to cut money paid out to retirees, their survivors and the disabled. We talk to an author and researcher about his ideas on why Social Security is important, isn’t going broke, and how it can be expanded and funded with modest increases in the future.
- Eric J. Kingson, Professor of Social Work, Syracuse University, N.Y., author with Nancy J. Altman of the book, Social Security Works! Why Social Security isn’t going broke and how expanding it will help us all.
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15-14 Social Security Works: How it can be funded and expanded
Gary Price: There’s a debate that’s been going on in Washington for decades and the focus is Social Security. There was talk years ago about doing away with all or part of the program and having employees find their own retirement instruments. At other times some members of Congress wanted to cut benefits, and still others wanted an increase in benefits and fund it by removing the cap on contributions or by having employers and employees contribute a bit more. During all of the talk about what to do with the program has been the warning that it would eventually go into the red. But is Social Security really in trouble? Will there be more retirees receiving benefits than workers to contribute? And if so, what can be done to keep the program solvent, and perhaps even expand it a bit? We asked Eric Kingson these questions. Kingson is a professor of Social work at Syracuse University in New York and co-author of the book Social Security Works! Why Social Security isn’t going broke and how expanding it will help us all. He’s also the founding co-director of the organization, Social Security Works. So, is the program in deep trouble, as we’ve heard?
Eric Kingson: The horror stories are essentially wrong, are absolutely 100 percent wrong. We built social security to provide secure retirement. It’s protection if you’re disabled, or if you die and leave young children. It’s done a magnificent job, no one has to worry about receiving their benefits during the near-collapse of our economy, so and nobody has to worry about it in the future unless the American people decide they don’t want it. It cannot go broke. It’s just that simple, because it’s an ongoing stream of revenue, based on contributions by working Americans. As long as Americans work, there’s an ongoing stream coming in.
Price: There is a greater number of baby boomers retiring in the next ten years or so, and near future, so doesn’t that affect the contributions? Won’t Social Security begin to lose money?
Kingson: Of course, like all systems, it needs to be adjusted. There is an adjustment needed going into the future, and in fact, we think there’s even more that’s needed so not only can we address a modern short-term, long-term financing problem, but we also can afford to expand the system. We’re a very rich nation that very conservatively finances the system and as part of that conservative finance system approach, it’s the only system other than Medicare that we project costs out 75 years. We don’t project costs of the Department of Defense or transportation. Imagine if we projected the Defense Department’s expenditures out 75 years. We’d have a huge deficit, and the face of social security, we project it out 75, the best estimate shows that it can meet all of the complications through 2033 and then at 75 cents coming in for every dollar the American people have earned that’s a problem, but it’s not a catastrophe at all.
Price: One of the ways that Kingson says we could fund it and even expand it is to “scrap the cap”.
Kingson: One thing that could be done that would address all of that is to ask every American to make the same payroll contributions, pay the same payroll contribution rate on all their earnings, ask all Americans to do that. Today 94 percent of Americans pay payroll contribution on all their earnings, 6 percent escape that, those who have earnings above 118, 500 pay nothing beyond 118,500. If we asked all Americans to make contributions beyond all their earnings, that would address well over ¾ of the projected shortfall.
Price: So there are millionaires and billionaires who only pay Social Security on a small fraction of their earnings. Kingson says that another part of the problem is that when workers pay their six-point-two percent of wages into the system, the employer has to match it, and that’s a big sticking point for businesses if they have to put in millions of dollars.
Kingson: There’s a real disregard for the American people I think. We see people talking about heightening your financial belts, and we hear that from a bunch of corporate C.E.O.s who have gotten in something called Fix the Debt by Mr. Cote from Honeywell – one the chief among them. Now this man is sitting on about a 70 million dollar retirement fund of his own. Actually, I think it’s more than that, but he’s running around saying Americans have to tighten their belt. What we have is a shell game and a society in which we’ve pulled resources, pulled opportunities from the middle class and from lower-income people, and we’ve seen them shift to the higher income and rather than trying to adjust for some of these problems, they’re turning around and blaming everyone else. The reason baby boomers or the generation X and Y-ers, don’t have enough retirement income security is that they’re not saving enough, so they have to save more. Well, that’s easy to say, but when your salaries haven’t gone up for thirty years on average, there’s something else going on there, especially when the salaries of the top 1 percent and the top .1 percent have been soaring.
Price: Kingson says Social Security is a program that middle-class Americans of all political persuasions like and rely upon. As he said, it’s difficult for most working people to save enough because real wages haven’t kept up with the cost of living. Social Security provides that small, yet vital, safety net, but in its present form doesn’t promise a very rosy picture for families and retirees.
Kingson: Today’s older population is not living high on the hog. Many, many older people – more than a majority – are either at very limited economic circumstances or just a shock away, the loss of a spouse, an illness away from very significant financial problems. That’s a huge problem. The second problem, two-thirds of working Americans will not be able to maintain their standard of living in retirement going forward. That’s people under age 66 today. That’s a crisis. The real crisis we have in the retirement area is the retirement income crisis for the American people.
Price: Kingson says we need to expand the system to provide more benefits to retirees, the disabled, and survivors of those who paid into the program. He also advocates benefits for those who are not in those categories.
Kingson: We talk an awful lot about caring for the family, and we certainly applaud the many people who give care to others – to children, to ill family members, but we are a nation, we are the only industrial nation that doesn’t have paid family leave at a federal level. At the birth of a child, at serious illness, we allow people to leave work for 12 weeks, but if you can’t afford to leave work, that’s not family leave. We can afford this and that’s a core response we should have to our very significant pressures on our family.
Price: Kingson says that one of the reasons it’s so difficult for working people and retirees to keep their heads above water is the huge gap in wages between C.E.O.s and other executives, and the average working American.
Kingson: We are seeing today, corporate executives – where in the 1960s – they received twenty-seven times the earnings of their average employee. Today, they are receiving almost three hundred times in the major in the Fortune 500. There is a huge expansion of wealth. We’ve seen two-thirds of the income growth from 1949 to 1979, two-thirds of the income growth, went to the bottom 20 percent. Since then, none of the income growth has gone to the bottom 20 percent. Ninety percent of it has all grown from the top 10 percent. In other words, everyone else on average has lost, in fact, they’ve actually lost 15 percent. So what we have here is an inequality crisis that undermines the social security system. There is less money coming in and it undermines people’s retirement income security because they’re making less money, they’re less able to save, but they’re also paying less money into Social Security than they would otherwise, and that means they have lower benefits coming.
Price: Kingson says we expanded Social Security in years when we, as a country, were less well off than we are today. He says a modest expansion is doable if we “scrap the cap” and introduce small increases in contributions.
Kingson: If we ask Americans to pay a little bit extra, 50 cents more a week over 20 years – meaning in year one, out of your paycheck there’s an extra 50 cents that goes out each week, in year two, a dollar. You see do that slowly over 20 years and you increase Social Security contributions by a very significant amount that allows you to expand benefits. It allows you to do some things like provide family leave, like increase monthly benefits by roughly 10 percent, perhaps forwarding it to $150. It allows you to have a cost of living adjustment mechanism that actually reflects the inflation impact of people with disabilities and older people.
Price: One of the benefits of having a national program like Social Security is that it’s a very cost-effective system to run – especially when you compare it to other retirement financial instruments such as 401Ks and annuities.
Kingson: A little less than a penny is spent on administration – less than 1percent. No pension system even begins to come close to that. No private pension system can do that, and there are a lot of folks who have an interest in pulling this apart. And then, I think you also have a lot of angst. People who have heard the story and the drumbeat, over and over again, we can’t afford this system, we have to tighten our belts. I think it’s a distraction; it’s a distraction from the reality that Americans work harder than just about any other people in the world. We have very modest wage adjustments in the past 30 years – if we’ve had them at all. The problems have much more to do with how we’re distributing the fruits of our work, not the lack of Americans’ savings or the inability of our society to pay for a modest Social Security system.
Price: You can read more about why Social Security is important, as well as ideas on how to maintain and expand the program in Eric Kingson’s and Nancy Altman’s book, Social Security Works! It’s available now in stores and online. Kingson invites listeners on both sides of the issue to visit their website at socialsecurityworks.org. For more information about all of our guests, you can log onto our site at viewpointsradio.org. You can also find archives of past programs there and on iTunes and Stitcher. I’m Gary Price.
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