Fact Sheets & Briefs

The Progressive Solution

Rick Perlstein — Fri, 16 Nov 2007 13:32:22 -0500

Progressives need to take a broad and bold approach to helping Americans establish a solid three-legged stool of retirement security.

Make the economy work. Most importantly, progressives must champion economic policies that benefit the many and not simply the few. With full employment and rising wages, Americans can save better, workers can demand better retirement benefits from employers and Social Security's projected shortfall can be reduced. Universal health care would reduce what families have to spend on health care costs and protect seniors against soaring drug and medical costs. Improved energy policies can help Americans save better by sparing them from rapidly-rising gas and home heating prices.

Strengthen Social Security. Progressives must work to strengthen Social Security and protect it from future assaults.

Hold companies accountable for pensions. Progressives must hold companies to their existing pension obligations. At the very least, progressives should require the following.

Every company must provide a retirement program for its workers, supplemented with an employer contribution.

The shop floor must be treated the same as the top floor. If the CEO has a defined benefit pension, workers should get the same; if the CEO has retirement stock options, workers should also. If worker pensions are cut back for a company in distress, CEO pensions should be as well.

Congress must require companies to fund the pension commitments they make. Congress must shore up the Pension Benefit Guaranty Corporation's balance sheet to help workers whose companies go belly-up. At the same time, worker pension commitments should be at the front of the line, not the back of the line, in corporate bankruptcy proceedings.

Help Americans save. Progressives should also champion new ideas to help with personal savings. Congress has tried to help with tax deductions for retirement accounts, but this mostly helps the affluent at the top of the pay scale. These benefits should be consolidated into one tax-free savings account, in which the government provides a partial match for the savings of low-income workers (who don't benefit from the Bush tax breaks).

Start investment accounts. Every American should be provided with an investment account at birth a small sum that will expand tax-free over time and could be tapped to pay for higher education, housing, or retirement. Conservatives will like creating a new generation of investors; progressives will like giving poor and working people a chance to build up assets from birth.

What You Might Not Have Learned About the President's Social Security Plan

Roger Hickey — Sat, 30 Sep 2006 17:57:23 -0400

Because Social Security reform is a complex issue, and because some of the President’s remarks in his April 28 press conference left room for misinterpretation, viewers of the press conference may have been left with an inaccurate impression of the President’s Social Security proposals. Some key facts that should be noted are:

The President’s plan would cut Social Security benefits for anyone born after 1950 who earns more than about $20,000.

While the President focused on the large benefit cuts his plan would impose on high-income workers, all workers earning more than about $20,000 would have their benefits cut.
The reason for this is that under the plan, the bottom 30 percent of workers — those earning below about $20,000 today — would continue to have their benefit levels determined by the current formula, known as wage indexing. For everyone else, though, benefit levels would be determined by a combination of wage indexing and price indexing (for middle-income workers) or by price indexing alone (for upper-income workers), both of which produce lower benefits than the current formula.
These benefit reductions would apply not just to retirees but also to survivors. If someone dies and leaves behind young children, those young children will see their benefits reduced under the President’s plan.
For middle-income workers, the benefit cuts would be the largest in Social Security’s seven-decade history.
The 1983 Social Security reform cut benefits for average earners (those earning roughly $36,000 today) by 17 percent over 46 years.
The President’s plan would cut benefits for these workers by 28 percent over 70 years.
For workers with incomes somewhat above average, the benefit cuts would be nearly as large as those imposed on very-high-income workers — and larger than if nothing were done to shore up Social Security.
Under the President’s plan, a worker who makes 160 percent of the average wage (or a little under $60,000 today) and retires in 2075 would experience a benefit cut of more than 40 percent. That cut is nearly as large (as a percentage of the worker's promised benefits) as the cut that would be imposed on someone making several million dollars a year.
Looked at another way, the benefit cut for a worker who makes $60,000 would be deeper than if nothing were done to restore Social Security solvency and the program paid benefits based solely on incoming tax revenue after the trust fund is exhausted.
This is true for all workers making $55,000 or more: they all would be better off if Social Security were allowed to become insolvent than if the President’s plan were adopted.
The President stated that his plan would not affect disability benefits, but the cost savings the White House claims for the plan imply significant cuts in disability benefits.
The “progressive price indexing” plan proposed by Robert Pozen — the plan upon which the President’s plan is based — would close 70 percent of Social Security’s long-term funding shortfall. Similarly, a White House fact sheet claims the President’s plan would close 70 percent of the shortfall.
However, the Pozen plan obtains about one-sixth of its total savings from cuts in disability benefits, which the White House says are not part of its plan.
This leaves three possibilities. One is that the President’s plan involves much larger benefit cuts for retirees than the Pozen plan does, to make up for its lack of cuts in disability benefits. (The benefit cuts cited above are based on the Pozen plan.) The second possibility is that cuts in disability benefits are in fact part of the President’s plan.

The third possibility is that the President’s plan would close less than 70 percent of the Social Security shortfall. A plan that included the retiree benefit cuts in the Pozen plan, a new minimum benefit to “eliminate poverty among future seniors” (which the President promised in his press conference), and no benefit cuts for people with disabilities would eliminate just 57 percent of the Social Security shortfall. In other words, the job of fixing Social Security’s long-term problems would be little more than half completed.

TOP TEN FACTS ON SOCIAL SECURITY'S 70TH ANNIVERSARY

Bill Scher — Thu, 11 Aug 2005 00:00:00 -0400

Two Steps Back: African Americans and Latinos will lose ground under Social Security 'Reform."

Eric Lotke — Thu, 14 Jul 2005 00:00:00 -0400

The DeMint plan to raid the Social Security trust fund

Alex Carter — Wed, 06 Jul 2005 00:00:00 -0400

Did the President Mislead on Social Security in His April 29 Press Conference

Alex Carter — Mon, 02 May 2005 00:00:00 -0400

How Would The President's New Social Security Proposals Affect Middle-Class Workers And Social Security Solvency

Robert Borosage — Fri, 29 Apr 2005 00:00:00 -0400

What You Might Not Have Learned About the President's Social Security Plan

Bill Scher — Fri, 29 Apr 2005 00:00:00 -0400

Social Security's Fixable Financing Issues

Bill Scher — Tue, 26 Apr 2005 00:00:00 -0400

Disability Insurance and Survivors' Benefits

Bill Scher — Fri, 01 Apr 2005 00:00:00 -0500