Against privatization: the genius of Social Security

Christian Century, Sept 23, 1998 by Donn Mitchell

FRANCES PERKINS knew how difficult life could be. As a settlement-house worker in Chicago, a church worker in Philadelphia and a factory investigator in New York City, she had learned why social legislation was needed and what it took to get it passed.

When Perkins became secretary of labor in 1933, unemployment approached 30 percent. Facing the most demanding job of her life, she made arrangements for regular rest and replenishment--as she believed all people should be permitted and encouraged to do. On the advice of her pastor, Perkins spent one day a month in silent retreat at the Maryland convent of All Saints Sisters of the Poor, one of the oldest religious orders in the Episcopal Church. She continued the practice throughout her 12 years in Franklin D. Roosevelt's cabinet, where she was the principal advocate and lead architect of the Social Security Act, designed to make a secure retirement possible for nearly all Americans.

An adult convert to Anglicanism, Perkins was steeped in the Lux Mundi theology of Bishop Charles Gore and a subsequent generation of British Anglo-Catholic socialists, such as Conrad Noel, Maurice Reckitt, W. G. Peck and William Temple. She had met many of them personally through the Summer School of Christian Sociology. Perkins and her British counterparts espoused a sacramental sociology that considered not only the ecclesia but the broader community as a gift from God--an outward and visible sign through which grace is given tangible expression.

Perkins thought of insurance as a brilliant marriage of religion and science. It was a way to realize the moral ideal of neighbor helping neighbor through actuarial science. In practical terms, insurance translated mercy into money, compassion into financial assistance. The abstract became concrete, just as the Word had been made flesh.

Although the Social Security Act of 1935 did not include health insurance as Perkins had hoped, it was nonetheless her crowning achievement. Social Security issued its first pension checks the following year and, in three generations, has never missed a payment. Today, with the addition of inflation indexing and Medicare, it keeps 15 million people above the poverty line and millions more out of near poverty. Its administrative costs are less than one cent of every dollar paid in.

Despite this impressive record, 55 percent of the working public surveyed in 1995 said they were not confident Social Security funds would be there for them when they retired. This lack of confidence can be partly explained by our Vietnam-Watergate legacy of political cynicism, aggravated by two decades in which candidates have campaigned against the government as if it were the opposition party. A more serious concern is that the baby-boom generation will be depending on smaller, subsequent generations to finance its retirement benefits.

Daniel Patrick Moynihan, chairman of the Senate Finance Committee's subcommittee on Social Security, insists this fear is groundless. In a communique to his New York constituents, he noted that Perkins herself had pointed out as early as 1946 that the system would require actuarial adjustments somewhere around 1980 to keep it solvent into the next century. Those adjustments were made in 1983, and the system is currently running a handsome surplus, with 150 percent of the next year's payout already in hand. This surplus means that the retirement system is no longer pay-as-you-go, with the current generation of workers financing the benefits of the retirees. It is now a partially funded system--that is, some money is already being set aside for the retirement of people who are now working.

Currently, the system can pay full benefits until 2032 and 75 percent thereafter. A tax increase of 2.2 percent, evenly split between employers and employees, would keep benefits at 100 percent indefinitely. In practical terms, people earning $50,000 a year would pay an extra $10 a week for a retirement annuity that is fully protected against inflation and that supports their retired parents at the same time. Those earning less would pay less. The private sector does not provide (at any price) annuities indexed to inflation, nor does it provide retirement vehicles that provide income for parents while the wage earners build their own retirement credits.

Radical structural change is necessary only if Congress insists on converting Social Security to a fully funded plan. There is really no pressing need to do so. Neither education nor defense is fully funded in advance. Neither diplomacy nor the administration of justice nor any other function of government is "endowed." It is simply understood that the government will have to assess its spending needs annually and raise revenues through taxes, fees and bonds.

From both a moral and a social standpoint, there is nothing wrong with current wage earners financing the retirement of their parents' generation. The arrangement is problematic only if one believes that people should never get anything they did not personally earn--as if we all showed up ready for work at birth and paid our own way throughout life. Perkins believed that most of what we get in life is a gift. What we earn through our labors is small