Originally Published: April 5, 2010 10:30 p.m.
Ed Kahn, in his March 31 letter, called Social Security a socialist boondoggle and advocated for its abolishment.
He wrote that FDR and Congress determined that the "typical American was too stupid, too lazy or too greedy" to save for old age. Mr. Kahn apparently lives in a parallel universe where history and facts are irrelevant. Mr. Kahn's assertions are an insult to millions of Americans and an outright assault on our history.
Looking back at the origins of the program, I read the opening testimony of Edwin Witte before the Ways & Means Committee for hearings on the "Economic Security Bill" in early 1935. Dr. Witte was the director of the Committee for Economic Security. The committee was charged with looking at unemployment, support for children and old-age security, among other tasks.
After the stock market crash of 1929 and the ensuing Great Depression, the primary concern was unemployment and job related disability, with old-age security running close behind. In the 1920s, 18 million unemployed people, or 44 percent of all workers, exclusive of farmers/ranchers, earned less that $1,000 annually. Seventy percent earned less that $1,500 annually. Even in 1920's dollars, that was not a comfortable income, and saving toward one's old age would have been next to impossible. By 1932, the average income for all workers was $1,200. As Dr. Witte said then, there was no room for contingencies. In 1933, the unemployment rate was 25 percent.
What about now? Approximately 52.5 million receive Social Security benefits, including 6.4 million survivors of deceased workers and 9.7 million disabled workers and their families. The average monthly payment for a retired worker and spouse is $1,892, or $22,704 a year. Ninety percent of our population older than 65 receive benefits. I wonder if Mr. Kahn feels those are excessive benefits. Mr. Kahn doesn't say, but would he propose cutting off all of these recipients, or does he just want to stop the program for anyone new? If it's the latter, how does he propose to pay the benefits of those who will remain on the program? Maybe he wants some panel to review each recipient's situation and make a determination as to their worthiness to receive benefits.
Social Security was always meant as a safety net for the elderly, and not some sort of program to provide anyone with a so-called comfortable living. For those of us who had good jobs, we always knew that SS alone wouldn't be enough to support a comfortable retirement. We found jobs, if we were lucky, that offered pensions, deferred compensation options, health insurance after retirement and if anything was left over, we invested. And many of us stayed with one or two employers for the duration of our working lives. For many of today's younger workers, they do not have these kinds of supports because they usually change jobs multiple times and employers are cutting back sharply on non-salary benefits.
Social Security is in trouble. Today, 150 million workers are paying SS taxes to support payments to 52.5 million beneficiaries. By about 2017, payments will start to exceed receipts from payroll taxes. As more and more boomers retire, the shortfall will increase to about $250 billion by 2030, using inflation adjusted dollars.
As anyone who has managed a budget knows, the longer we wait to confront this issue, the more difficult and painful the solutions will be. President Obama has just appointed a bi-partisan panel to study the problem and offer recommended solutions. This has been done before, but Congress didn't have the stomach to face the problem, or, as it's commonly known, the third rail of politics. That metaphor is about one's probability of having a good day while stepping on the electrified middle-rail of the subway tracks. No politician, regardless of his leanings, wants to take benefits away from current or future recipients.
President Bush tried to establish alternative retirement savings accounts, but after the last couple of years watching the stock market, that's a very unpopular option now.
It looks like some combination of four measures may be needed, including reducing and/or stopping benefits for high income workers, extending the age to receive benefits, increasing payroll taxes and maybe re-establishing the trust fund in some form and investing those monies.
The Trust Fund exists today in name only, because Congress changed the rules such that SS payroll taxes now go directly to support ongoing government operations. Any attempt to re-establish an actual Trust Fund, or allow younger workers to use alternative accounts would be, in effect, a reduction in revenues for ongoing operations and require commensurate cuts.
There are no painless options, but killing the program altogether is not going to happen, nor should it.
Tom Bromley is a retired mental health administrator who has lived in Prescott for the past nine years.