The Challenge

Social Security is designed as the bedrock—a minimum payment, adjusted for inflation, that lasts as long as you live. Half of all workers now have no pension at all other than Social Security. The program is currently in surplus but it is projected—under very cautious estimates—to fall short around the year 2052. The situation is not as dire as conservatives sometimes pretend. The Congressional Budget Office calculates that applying the payroll tax to all income – it now only applies to the first $90,000 earned—would entirely eliminate any shortfall.

Few companies provide pensions anymore. Among those that do, many have failed to set aside sufficient funds to pay what they owe. The remainder that offer any retirement plan at all do so in the form of 401(k) plans, in which the company matches a portion of funds that workers take out of their paychecks. These plans are good as far as they go, but they provide a smaller benefit. They also shift investment risk to the worker — at a time when deregulated financial markets and conservative reticence to prevent fraudulent behavior has increased that risk to an unprecedented level.

At the same time, personal savings are way down. Stagnant wages, rising gas and home heating prices, higher health insurance premiums, increased tuition costs and rising debt have left more families living paycheck to paycheck. In 2005, Americans actually spent more than they earned—something that last occurred during the Great Depression. Needless to say, few Americans are saving enough to provide for a secure retirement.

The disappearance of pensions and personal savings only heightens the importance and necessity of protecting Social Security.