Protect Social Security – We Are All Going to Need It

The Challenge

Most baby boomers will “retire” with no pension and very little in savings. Gen Xers and millennials will have even less, given the bad economy and long-term jobs shortage. Even more than seniors, today’s workers, especially women and people of color, will really need Social Security. And yet a multimillion-dollar campaign is being waged to get the president and Congress to cut Social Security benefits for everyone, with the worst cuts aimed at those under the age of 55. The people waging this campaign are the authors of the “Bowles-Simpson” deficit reduction plan – backed up by big money coming from billionaire private equity fund manager Peter G. Peterson and other Wall Street and corporate millionaires. Even though unemployment is the number one issue on the minds of most Americans, these elite activists say we must cut Social Security in order to reduce the federal deficit.

Make the Case

Social Security is a critical system that serves us all, like the military or the Interstate Highway System. It is the foundation of American retirement security – more so today, now that pensions are disappearing and private savings, inherently risky, have been hit hard. It is basic protection for our families if we become disabled or die.

Each generation has done its part to maintain its foundations over the 77 years of its existence. During good times and bad, working Americans have paid into Social Security, and it is by far the safest, most efficient, most universal, and most reliable way for Americans to guarantee their retirement savings.

The case against the so-called “deficit hawks” is easy: Social Security doesn’t contribute one penny to the federal deficit. In fact, the program is legally forbidden from increasing the deficit. As we all know, the benefits our parents and grandparents receive each month are covered by the payroll taxes (or FICA, for Federal Insurance Contributions Act) they paid when they were working – and we pay today. This is Social Security’s dedicated stream of income. Moreover, people working today are paying extra in Social Security taxes to cover the benefits of baby-boom retirees.

Case in Point

♦ If the U.S. economy grows at a healthy rate, Social Security will be able to pay 100 percent of retirement benefits far into the future. Based on a scenario of slow economic growth and reduced immigration, those who want to cut Social Security benefits point to a possible imbalance between Social Security payouts and income that MIGHT affect the program around 20 years from now. The cutters use scary phrases like “Social Security will go bankrupt,” when, even under the worse-case scenario, the system would still be able to pay retirees 75% of their current benefits forever. That’s not exactly a crisis – it’s a possible shortfall that might not ever happen if we have a healthy economy.

♦ Deficit-cutters lump Social Security together with Medicare and Medicaid, calling them all “entitlements,” a word that implies the recipients didn’t work for their benefits. But these programs are part of a social contract Americans have built to make sure that people who have contributed to our country all their lives should have a decent standard of living. That’s why proposals to “privatize” Social Security were soundly defeated. That is also why we won’t let politicians reduce Social Security benefits – or Medicare or Medicaid.

♦ The case against cutting Social Security is a slam dunk. It doesn’t add to the deficit. But that doesn’t mean we should cut Medicare or Medicaid. Those who are worried about the costs of those programs should be calling for more thoroughgoing reform of the private health care system – including getting drug and insurance companies to compete on price, not on cutting benefits. If our health care system did as well at containing costs as European systems, the cost of Medicare and Medicaid would be cheaper and more stable, and the U.S. would not have a long-term deficit problem. (Watch for more on this in future Smart Talks.)

Counterpoint

When they say: Social Security is fueling our debt crisis. It is like a Ponzi scheme: When Social Security began, we have 16 workers for every retiree. Now we have only 2 workers for each retiree. Something’s got to give.

You can say: If the U.S. had a full-employment economy, with the millions of currently unemployed people working and paying Social Security taxes, we would not have a shortfall in Social Security revenues – not now, not ever. So the future of Social Security, like lots of things in America, requires that we invest in jobs, not slash public spending, as most “deficit hawks” want to do. It would also help to solve our immigration problem, so millions of new Americans would be paying into the system.

When they say: It is true that Social Security has its own revenue stream, but those U.S. bonds in the so-called Trust Fund are just IOUs. To pay future benefits, we are going to pay off those bonds – a cost we can’t afford.

You can say: Hey, I worked hard, paying more taxes than needed to cover current retirees, to build up that Trust Fund, projected to grow to $4.3 trillion by 2023. My real dollars went into buying those bonds. Politicians ran up deficits paying for two wars and tax cuts for the wealthy. Now, conservatives want to raid the Social Security Trust Fund by cutting benefits and using the money to pay off the bills they ran up. When somebody tells you’re the trust fund isn’t real, they are getting ready to cut promised benefits. Social Security does not belong in the mix for reducing the federal deficit.

When they say: By ignoring the ticking time bombs of the Social Security trust fund, you are putting your head in the sand.

You can say: Social Security is NOT a ticking time bomb. The system has paid every penny of benefits owed for the last 77 years. The Social Security trustees carefully project future income and outlays based on predictions about demographics, economic growth, immigration and a host of other factors. Under one, rather pessimistic, prediction about future economic growth, there might be a shortfall in 2033 (20 years from now). But remember, even if slow growth causes that to happen, Social Security still has a revenue stream from working Americans, and we could still pay 75 percent of those projected future benefits far into the future.

Far from putting our heads in the sand, Social Security supporters have advanced lots of proposals for how to deal with this possible future shortfall – without cutting benefits. Here’s the best: make sure that millionaires and billionaires pay the same Social Security tax rate as regular people. Most of us – people making $30,000 or $50,000 per year, for example – pay Social Security taxes on 100 percent of our income. But people making $1 million per year pay taxes only on the first $110,100 of their income. If we get rid of this cap and make everyone pay the same rate, we’d have enough to fill any future benefit shortfalls – and we could increase benefits for women, the disabled, and poorer people.

When they say: We don’t want to cut Social Security benefits, we just want to “adjust” the cost of living formula – or we want to raise the retirement age because people are living longer.

You can say: Changing the consumer price index used to calculate the cost-of-living adjustment (COLA) to save money IS a benefit cut. It would cut benefits for current as well as future beneficiaries, disabled workers and widow(er)s as well as retirees. An average earner retiring at 65 would see her benefits reduced by about $600 a year after 10 years and $1,000 a year after 20 years, hitting beneficiaries hardest in late old age when they are often most vulnerable. And raising the retirement age IS a benefit cut. When the retirement age is raised, no matter when you retire, your benefits will be reduced by about 13 percent from what you are currently scheduled to receive.

The Public Pulse

♦ By a 3 to 1 margin, voters in the swing states of Ohio, Florida and Virginia, don’t believe Social Security and Medicare need to be cut to reduce our deficits (The Washington Post-Kaiser Foundation [1]).

♦ 53 percent of American adults would prefer to raise taxes than cut Social Security benefits for future generations (Associated Press-GfK [2]).

♦ 66 percent of Americans, including 45 percent of Republicans and 64 percent of Independents, favor increasing income taxes for upper-income Americans, compared with 42 percent of Americans who support making “significant changes” to Social Security (Gallup [3]).

♦ 66 percent of Americans said they were very worried about “not having enough money for retirement,” making it the issue that the largest number of Americans are concerned about (Gallup [4]).

Tweet This

Tell Congress: Keep #SocialSecurity out of a debt deal—it doesn’t contribute a penny to the deficit! #smarttalk via @OurFuture

Raise retirement age? Easy to say if you sit at a desk all day & have a congressional pension. #NotSoGrandBargain #smarttalk via @OurFuture

Instead of cutting #SocialSecurity, make millionaires pay the same rate as the rest of us. #Fairness #smarttalk via @OurFuture

Learn More

» Strengthen Social Security Campaign resources page [5]: the Strengthen Social Security Campaign’s database of fact sheets and reports.

» Economic Policy Institute’s Retirement research page [6]

» Center for Economic and Policy Research’s Social Security and retirement issue page [7]