Forget about Social Security?

NEA Today, Feb 1999

Privatizers want you to believe that Social Security is broken. Hardly. It just needs a little fine tuning.

Is the Social Security system nearing bankruptcy? Can it only be saved by handing billions of your dollars over to Wall Street investors-with no guarantees?

You may be asking disturbing questions like these in the coming months as the 106th Congress takes up the hot issue of Social Security "reform." Chances are you already hear what retired Arizona NEA member Barbara Matteson hears from her grown children. "My kids say, `Forget about Social Securitywe'll never see it,"' laments this retired Tucson teacher.

But what you probably haven't heard are the facts about Social Security's true financial health and its positive impact on kids and working families.

"I'm old enough to remember about the Depression, and how Social Security was the most successful program ever to lift people out of poverty," says Matteson, a member of NEA-Retired's Advisory Council.

You may not be old enough to remember that-or to know that:

Social Security is more than just a retirement program. Back in 1939, Social Security was changed to a "family based economic security program" that includes far more than retirement benefits.

"Social Security," Matteson stresses, "is also a life insurance policy for survivors, for the disabled, and for minors without parents-a real blessing."

Low-wage workers pay proportionately more than the wealthy in Social Security taxes. In return, they receive proportionately higher benefits-a lifesaver when a pension, 401 (k) plan, or personal savings aren't available at retirement.

"Do away with Social Security now," warns Matteson, "and millions of people, mostly women, would go into poverty."

Social Security is extremely well funded While many other countries pay retirement benefits out of general revenues, the United States operates Social Security on a "partial reserve" basis, with more money coming in than going out. Tax revenues not needed to pay benefits are invested daily in U.S. government bonds.

Social Security won't go "broke" for a very long time, even if you make very pessimistic assumptions about the nation's economic future. Making these pessimistic assumptions, Social Security Trust Fund trustees estimate that the program will meet all its obligations until the year 2019when it will be necessary to begin drawing on trust fund reserves to pay benefits.

After 2029, trustees say, reserves may be depleted, but even if that occurs, annual tax revenues will still cover at least three-fourths of the program's total obligations.

Social Security can be kept solvent with relatively minor repairs. NEA economist Stan Wisniewski lays out three options that could do the job:

1) A I percent increase in the Social Security payroll tax deduction-now at 6.4 percent.

2) A boost in the $68,400 salary cap-above which earnings aren't taxed for Social Security.

3) Federal investment of a portion of the Social Security reserve funds in a passive index stock fund, offering higher returns than government bonds.

Privatization of Social Security isn't an answer. In the months ahead, you'll hear calls-from the same folks who support school privatization-for the creation of personal Social Security investment accounts, in which individuals assume all or part of the risk.

In such uninsured plans-lacking a guaranteed lifetime benefit-"a bad role of the dice could mean that your kids will be taking care of you in your old age," Wisniewski cautions. That's if you have kids who can afford it.

Social Security reform affects everybody. Many of the "reform" plans call for enrollment of new public employees in Social Security, even in pension systems where retirees aren't now covered by the federal program.

"Such a move," warns Wisniewski, "could mean insufficient revenue to support older people in those systems.

"We're all part of the same society," the economist adds. "Any breakdown of Social Security will impact `noncovered' employees-especially when family members who aren't school employees look to them for help."

For More Information

Visit the Social Security Administration's Web site at www.ssa.gov/ online and check out the "Social Security and You" teachers ' kit.