The Social Security Act is a law that takes care of human needs U.S. President Franklin D. Roosevelt January 30, 1882 – April 12, 1945 Helen Thomas, Post.

“The Social Security Act is a law that takes care of human needs”

U.S. PresidentFranklin D. Roosevelt

January 30, 1882 – April 12, 1945

Helen Thomas, Post Intelligencer, 12/16/2004

After this presentation you should understand:

What is Social Security?

Fact or myth of the privatization schemes

How to fight to save the program

Resources for additional information

OBJECTIVE

BUSH IS READY TO GAMBLE WITH YOUR RETIREMENT

We want to stop him by presenting the fact and fantasy

of his social security privatization proposalso you can stand up and fight against it

32.8 million retirees and their dependents 7.8 million disabled workers and their dependents 6.8 million survivors (widows, widowers and children) Approximately 30% of beneficiaries collect survivors or disability insurance 3 million children are under age 18 beneficiaries

• 47.4 million (1 in 6) Americans collected Social Security benefits

Social Security Act (SSA) Facts for 2004:

SSA Facts for 2004 (continued):

• SSA paid out $492 billion in benefits in 2004

• $926 is the average monthly retiree benefit for 2004

• COLA will be 2.7% for 2005, or about $25 a month for the typical retiree

• 90% of Americans 65 and older receive Social Security benefits

• 98% of Americans work in jobs that contribute to the Social Security Trust Fund (SSTF)

• SSTF’s annual administration costs are approximately 1%

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SSA Financing and Benefit Payments

FACT:

• Social Security benefits are financed through a dedicated payroll tax. Employers and employees each pay 6.2% of wages up to a taxable cap of $90,000 (in 2005) into the SSTF

• The cap needs to be removed. For example, a NBA basketball player earning approximately 10M for the 82-game season earns $121,957 per game, and exceeds the cap in the third quarter of the first game.

• Revenue is also received from income taxation of Social Security benefits and from interest earnings on the trust fund reserves that are invested in Treasury

bonds

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SSA Financing and Benefit Payments (continued)

FACT: (continued)

• While Social Security’s taxes fall hardest on those with lowest incomes, the benefits are progressive:

     replacing half the earnings of a low wage worker     one-third the income of median wage earners     24% of the earning of high wage earners

• With lifetime retirement benefits, annual cost of living increases, and family benefits, Social Security has come close to eliminating poverty among the elderly

• Nearly 2/3 of seniors rely on SS as their primary income source; only 2 in 5 receive a pension (WA St Alliance for Retired Americans fact sheet.)

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SSA Financing and Benefit Payments (continued)

FACT: (continued)

•Without Social Security, more than 50% of Senior Citizens would be living in poverty

• Women comprise the majority of Social Security beneficiaries, 58% of all Social Security recipients at age 65 and 71% of all recipients by age 85

• Women who qualify for survivor or spousal benefits know they will be paid as a matter of law (including those divorces after marriages of at least 10 years) and without any benefit reductions to their husbands or ex-husbands (Congressman Jim McDermott web statement)

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SSA Financing and Benefit Payments (continued)

FACT: (continued)

• In nearly 70 years, Social Security has never missed a paycheck!

• Social Security is an American success story!

• The real threat to Social Security is POLITICAL!

MYTH: SOCIAL SECURITY IS GOING BANKRUPT!

FACT:

• The SSA Trust Fund faces a challenge, not a crisis

• While increased longevity and reduced worker contributions are concerns, modest adjustments will provide trust fund stability

MYTH: SOCIAL SECURITY IS GOING BANKRUPT! (continued)

FACT: (continued)

• 2004 SSTF Trustee Report: $91 Billion excess in 2005; projected future financing in three stages:

2018 – Benefits cost exceeds tax revenue

2018 – Trust Fund begins to use interest (on bonds) to pay benefits. Interest expected to be $4 Trillion by 2018

2042 – Interest on bonds used up; payroll tax only funding at 73% of benefit amount. (Seattle Times 1/9/05)

MYTH: SOCIAL SECURITY IS GOING BANKRUPT!(continued)

FACT: (continued)

• The CBO (Congressional Budget Office: a bi-partisan agency) estimates that the SSTF will be fully solvent for nearly fifty years and will continue to pay 80% of benefits, if nothing is done to the system.

• The Bush proposal (reducing Social Security payroll taxes by 2%) would move the solvency date to 2021

• Taking the income cap off of Social Security payroll taxes would pay for all future insolvency. (FYI- The

Medicare payroll tax is not capped)

BUSH PROPOSAL

• Allow younger workers to invest 2% of their Social Security payroll taxes in individual private investment accounts – for someone earning $35,000 annually that equals $700 per year (Seattle Times, 12/2/04)

• Analysts estimate that it will take $2 Trillion in transition costs over 10 years to privatize the system because payroll taxes would plunge immediately while the government’s obligation to existing retirees would decline slowly

• Investment choices would be tightly controlled by the federal government

• May require workers to convert all of their “private retirement accounts” into an annuity at retirement

ANNUITIES

• Require an annual administration fee to an insurance company that averages 10-20%

• Are not adjusted for inflation

• Often are not inheritable

• Penalize women

Women earn 72 cents for every dollar men earn – about $250,000 less in a lifetime to save and invest

Women who take time out, or work part-time, due to care-giving responsibilities, have less to invest

THE DISABLED

• About 16% of Social Security beneficiaries are disabled workers and their dependents

• Three in ten of today’s 20 year olds will become disabled before reaching age 67 (source: SSA)

• Current Social Security disability benefits are calculated using the same formula as retirement benefits

• Annuities are not designed for disabled persons

• If future retirement benefits are cut, disability benefits would also be reduced unless the disability program is separated from the proposed privatization plan

• How would investment accounts be structured for disabled persons? (source: Seattle PI, 1/18/2005)

Concerns With Privatization Proposals

• Privatization that is meant to replace Social Security benefits is wrong

• Privatization will take approximately $2 trillion from the SSTF in 10 years and move it into the stock market

• Chile privatized its government retirement fund 25 yrs ago. Today, pensioners with private account receive

approximately 50% less than those who stayed with the old system. (source: Seattle PI , 1/31/2005)

Concerns With Privatization Proposals (continued)

• Privatization will endanger benefits for current beneficiaries and would directly cut benefits by 50% for future retirees -- even for those who set up private investment accounts

• Such a transfer of monies out of the SSTF would exhaust the SSTF 21 years sooner than currently projected

Concerns With Privatization Proposals (continued)

• Stock market investment is dangerous:

Senator Frist invested his PAC (Political Action Committee) contributions, also called campaign money, in the stock market and lost $460,000 in 2004

An AARP study found that 20% of older Americans who lost money in the stock market between 2000 and 2002 postponed their retirement dates

The stock market has a history of twenty year swings. Those who retire when their investment is on the

down side will have less retirement investment than those who retire at the top of the curve

Concerns With Privatization Proposals (continued)

• Stock market investment is dangerous (continued):

     Wall Street interests stand to gain millions in new administration fees under the Republican proposal. (Every $100 paid in benefits equals 60 cents in administration fees) --Dean Baker, Economist – Seattle, 12/13/2004

The beneficiary of the Republican scam is NOTNOT you, but the WALL STREET BACKERS (the return to them is estimated to be as high as $940 Billion).

Seven out of the top ten donors to the Bush campaign were Wall Street firms

Concerns With Privatization Proposals (continued)

• Stock market investment is dangerous (continued):

     Private accounts make no provision for disability or survivor benefits

     Annuities charge high premiums if such benefits are offered    

What Others are Saying About Social Security Privatization…

U.S. Senator Lindsay Graham (R- S. Carolina): an ardent advocate of private accounts, he recently departed from Bush by suggesting that higher taxes might be preferable to soaring debt. See: www.graham.senate.gov

Robert "Bob" Bynum, former SSA Deputy Commissioner for Operations and now a member of the National Committee to Preserve Social Security and Medicare: “I hope that I'm wrong, but I'm convinced that high-level politicians want to do away with the system and this is what this privatization talk is all about. Social Security isn't broken, congressional and White House studies have found that, if nothing were done, the Social Security Trust Fund would have enough money to pay 100 percent of benefits for at least the next 42 years. And if nothing were done, it would still have enough left beyond that time to pay out 70 percent of benefits.”

The Birmingham News 1/1/05

What Others are Saying About Social Security Privatization… (continued)

“PRIVATIZING SOCIAL SECURITY – replacing the current system, in whole or in part, with personal investment accounts – won’t do anything to strengthen the system’s finances. If anything, it will make things worse.”

“Nonetheless, the politics of privatization depend crucially on convincing the public that the system is in imminent danger of collapse, that we must destroy Social Security in order to save it.

There’s nothing strange or mysterious about how Social Security works: It’s just a government program supported by a dedicated tax on payroll earnings, just as highway maintenance is supported by a dedicated tax on gasoline…”

Paul Krugman, Syndicated ColumnistDecember 8, 2004, The New York Times

What Others are Saying About Social Security Privatization… (continued)

Senator Max Baucus (D-MT) whose support was key to passing Bush’s tax cuts and Medicare legislation, opposes the President’s Social Security Plan saying,

“It would exacerbate the problem, not solve it.”

(Source: Washington State Alliance for Retired Americans Alert, 1/7/2005)

Democrats Want:

• To receive a detailed proposal from the President about his privatization plan

• To save, strengthen and secure the Social Security Program.

• To work together with Republicans to ensure that America honors its promise to those who have worked hard and played by the rules that all workers are paid the Social Security benefits they were promised

Democrats Want: (continued)

• To work to reduce the deficit in order to protect the SSTF.

The 2004 U.S. deficit is $413 billion. It would have been much higher if the budget had not been

supplemented by more than $200 billion in Social Security and Medicare trust funds (Seattle Times, 12/27/2004)

Return to fiscal discipline and strong pay-as- you-go budget rules (pay for what you spend rather than borrow)

Restore the $1 trillion in irresponsible tax breaks that were partially paid for

by borrowing from the SSTF

Democrats Want: (continued)

• To encourage private savings such as 401k and IRA accounts without cutting Social Security

• To provide clear and unbiased information on retirement investment options

BUT DEMOCRATS CAN NOT

• Support any plan that relies on massive and irresponsible increases in debt that could destabilize markets and lead to large tax increases

• Allow citizens to be guinea pigs for a political experiment

What You Can Do:

• Organize! Ensure that all community, union, and political organizations are aware of the fraudulent Republican campaign

Spread the truth! Educate others on the unacceptable costs of private accounts:

--Cuts in guaranteed benefits--Unacceptable levels of stock market risk

What You Can Do: (continued)

• Challenge the media assumption on the “the crises”

• Share your Social Security story. Write a letter to the editor about what it means to you and its importance to your children and grandchildren. 

• Visit/contact your U.S. Senators and Representatives and let them know you are against the privatization, in any

manner, of the Social Security Trust Fund.

“For Social Security is a government program that works, a demonstration that a modest amount of taxing and spending can make

people’s lives better and more secure.”

“And that’s why the right wants to destroy it.”

Paul Krugman, Syndicated Columnist December 8, 2004, New York Times

Brief history of Social Security  

“…FDR, motivated by his great empathy for less fortunate Americans, strove to establish ‘cradle-to-the-grave’ social security. ”

“Gauging the political winds and taking into account the prevailing 1930s wisdom about economic policy, he calculated how much social security would be accepted by the American people, the economy, and the political power brokers, and got the most progressive law anyone could reasonably have expected in 1935…” FDR and the Origins of Social Security by Bill Hunot, Social Security Administration

April 25, 2002  

Brief history of Social Security (continued):

     1929 - U.S. Stock Market crash - millions of Americans out of work, living in poverty, standing in bread lines for

handouts to feed their families. President Hoover believed the situation would correct itself and suggested charity and voluntary relief efforts; Unemployment rose to 25% and discontent increased

• 1932 - FDR elected by promising a “New Deal” that included a Social Security System based on principles of “social insurance” Germany adopted in 1889

     1934 - Congress passed the Social Security Act by a margin of 372-33 in the House, 77-6 in the Senate

     1935 - President Roosevelt signed law. SSA - 70 yrs old!   

History (continued) • The law also created the federal unemployment system, the

Aid to Families with Dependent Children Program (AFDC) and now abolished, and grants to states to pay for medical care

• 1937 - first payroll taxes collected

• Lump sums were paid to retirees for the first few years of the program

• 1939 - Spouses and children of retired workers were added as beneficiaries

• 1940 - first monthly benefit ($22.54) paid to Ida May Fuller who lived to be 100 years.

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History (continued) 

• 1950 - Congress authorized a 77% increase to adjust for higher cost of living

• 1956 - disabled workers aged 50-64 added as beneficiaries

• 1961 – President Eisenhower removed disability age requirement and authorized dependents of disabled workers as beneficiaries

• 1965 - SSA administers Medicare which became law that year

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History (continued) • 1970 - SSI (Supplemental Security Income) new program

administered by SSA (SSI, a program for poor elderly and disabled, is supported from general tax revenues)

• 1975 - annual COLAs authorized

• 1983 - President Reagan reduces benefits (college-age dependent children dropped)

Due to SSTF Trustees increased: payroll tax to 12.4%, future retirement age to 67, and wage cap to $90,000

• 1999 - end of paper checks- all directly deposited into bank accounts

For Additional Information, Contact:

AARP: www.aarp.org The Alliance for Retired Americans: www.retiredamericans.org - 206.448.0859The Economic Opportunity Institute: www.EIOonline.org - 206.633.6580, Marilyn WatkinsOlder Women’s League (OWL): WWW.OWL-NATIONAL.ORG -

206. .781.6679US Senator Patty Murray: http://www.murray.senate.gov US Senator Maria Cantwell http://www.cantwell.senate.gov US Congressman Jim McDermott: www.house.gov/mcdermott - 206.553.7170US Congressman Jay Inslee: www.house.gov/inslee US Congressman Adam Smith: www.house.gov/adamsmith UW House of Representatives legislative information: http://thomas.loc.gov/US Congressional Budget Office: www.cbo.govSocial Security Administration: www.ssa.govUS Senator Lindsay Graham: www.graham.senate.govKCDCC: http://www.kcdems.org

Sources: 

The Seattle Times - 12/12/04, 12/19/04, 12/27/04The Seattle Post-Intelligencer - 12/10/04, 12/26/04The New York Times – 12/8/04, 12/30/04The Tri-City Herald – 1/2/05Dean Baker, Economist – Seattle, 12/13/04OWL letter to President Bush 12/16/04 (see Owl website)The Social Security AdministrationThe Economic Opportunity InstituteThe Alliance for Retired Americans The Washington State Alliance for Retired Americans [[email protected]]US Congressman McDermott’s websiteUS House Budget and Ways and Means Committee Democratic staffAARP