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Social Security Can’t Continue to Do More with Less

by Barbara B. Kennelly, NCPSSM President/CEO

I was on the Hill today testifying before the House Ways and Means Subcommittee on Social Security. At issue is legislation that requires the Social Security Administration to administer a national employment verification system. The National Committee has not taken a position on the underlying goals of any of the immigration bills before Congress. However, this employee verification issue demands our response.

I cannot say strongly enough what a serious disservice would be done to America’s seniors and others if Social Security was required to carry the burden of this enormous, costly and unrelated immigration workload. According to the Congressional Budget Office, the cost to SSA of one of the leading immigration proposals would be more than $1 billion in just the first year of amount equal to nearly 10 percent of the agency’s administrative budget. Experts have concluded that the E-Verify process, with its millions of notifications about mismatches of employee information...would result in a deluge of phone calls and visits to Social Security field offices around the country, swamping other crucial SSA activities.

The Social Security Administration is already facing significant challenges, primarily because of years of insufficient funding which isn’t keeping up with the increasing workloads. Chief among these challenges is a disability claims crisis. Disability cases are piling up and needy people are waiting years to receive their benefits. At the same time, SSA is facing the retirement of 80 million Baby Boomers who will also be expecting swift and accurate processing of their retirement claims.

Historically, the Social Security Administration has the government’s best reputation of solid service to its beneficiaries. However, the strains of recent years have taken their toll. I say enough is enough.

Here are some important links on this issue: CBO and GAO Reports on verification legislation, our National Committee Viewpoint on SSA funding, and my full Congressional testimony.

Shedding Crocodile Tears for Medicare

Health and Human Services Secretary Michael Leavitt continues the entitlement crisis call, this time in an address to conservative think-tankers who’d rather see Social Security and Medicare just go away entirely. While using language like “drifting toward disaster” and “serious danger” to describe the program he’s overseen for almost 8 years, he conveniently ignores the role the Bush Administration has played in worsening Medicare’s financial condition.

It’s very hard to take these clarion calls very seriously when it was this administration that implemented and continues to fight to protect $150 billion in industry subsidies to insurance companies providing private Medicare coverage. These subsidies alone steal almost two years of solvency from the Medicare program. If Secretary Leavitt and the Bush administration are really worried about Medicare’s about putting that $150 billion back into Medicare rather than private insurers’ pockets?

Secretary Leavitt also expressed concerns there could be a generational divide on funding entitlement programs:
“The kind of division I worry about is when we begin to see one generation pitted against another or when you begin to see economic classes pitted against each other. Those are the kinds of divisions that have classically divided and undermined nations.”
No kidding. Maybe this administration should’ve considered that before making a generational divide and conquer strategy a key component in the President’s failed Social Security road tour three years ago. Lamenting your own strategy, so long after the fact is disingenuous at best.

There’s also an interesting discussion of Medicare and the Secretary’s remarks, from a beneficiaries point of view, at Time Goes By. It’s definitely worth a read.

Social Security Avoids the Wall Street Roller Coaster

For baby-boomers who’ve been watching their retirement investment income lose money week by week, the fact that Social Security remains stable and predictable while Wall Street is anything but is critically important. Former Labor Secretary Robert Reich calls the failure to privatize Social Security “the best thing that didn’t happen during the Bush administration”:
“... had we privatized, they’d (retirees) be totally reliant on the stock market. And look what’s happened to the market: Compared to stock values ten years ago, the S&P 500 has risen a little over 1 percent a year, adjusted for inflation. Even Treasury bonds have done better. Go back nine years and there’s been no gain at all. Go back eight years and the market has been off an average of 1.4 percent a year.”

This isn’t a unique analysis. Even a member of President Bush’s own Social Security Commission and a private accounts supporter, co-authored an analysis for the National Bureau of Economic Research which showed promises of higher returns with private accounts just didn’t hold up to scrutiny:

“...the popular argument that Social Security privatization would provide higher returns for all current and future workers is misleading, because it ignores transition costs and differences across programs in the allocation of aggregate and household risk.” The paper states: “A popular argument suggests that if Social Security were privatized, everyone could earn higher returns. We show that this is false.”

Still not convinced? Here’s the Center on Budget and Policy Priorities analysis:

“This paper explains the basis of findings that economists broadly agree upon — that the type of rate-of-return comparison that some Administration officials and other private-accounts proponents are using is not valid, and that when analytically valid comparisons are made, the supposed differences in rates of return essentially disappear.”

Social Security is an insurance program, not an investment vehicle. Social Security is not supposed to make you rich, it is supposed to prevent you from slipping into poverty. Social Security is the one insurance program that provides some measure of economic support for Americans if a family wage earner dies or becomes disabled. Privatizing Social Security turns a safety net for everyone into a golden parachute for a few.

Social Security Hodge Podge

There are a number of Social Security items of note today...first this Wall Street Journal article regarding “payday lenders” and continuing attempts to take advantage of seniors who receive direct deposit payments from Social Security each month. The WSJ reports:

“Social Security recipients with direct deposit can effectively use future benefits as collateral for short-term, high-interest loans. Some lenders require borrowers to have their Social Security checks deposited directly into banks that partner with the lenders. Typically, the banks are in other states and provide no checks or ATM cards to the borrowers. Thus, borrowers can get their monthly Social Security benefits only by visiting the lenders to pick up what remains after loan payments, interest and fees are deducted. Some lenders 'attempt to exercise too much control' over payments sent to beneficiaries and
then automatically transferred to the lenders, Social Security said”.

You can expect lenders to fight any changes. So far, SSA has only asked for public comment in a Federal Register notice and the agency says it has not decided what changes to make.

It’s Not Too Late

A reminder to’s not too late to file for a stimulus check. Even though the IRS April 15th tax deadline has come and gone you have until the end of the year to file for a stimulus check. The IRS Stimulus Information Center advises Social Security recipients:

“The sooner you file the sooner you can receive your stimulus payment. But if you are filing to establish your eligibility for the stimulus payment, filing by Oct. 15 means the IRS can process your return and issue a stimulus payment before the end of the year”

You can also download the 1040A form, all of the details you need to file a stimulus request from the IRS and free software to process an online filing here.

Social Security False Alarm

While much has been written about this year’s Social Security and Medicare Trustees Report (we’ve already highlighted some of the coverage here ) there is another piece of recommended reading. This commentary highlights a constantly overlooked aspect of the “entitlement” debate...the fact that regardless of the “sky-is-falling” certainty expressed by those opposed to Social Social Security, the Trustees’ actuaries know solvency and the economic issues underlying the 2017/2041 dates are moving targets, especially in a 75-year or infinite window. Marketwatch economist Dr. Irwin Kellner writes:

“I would like to point out that this year, as has been the case every year in the past, the actuaries have made and released not one but three projections. They call them low cost, intermediate and high cost. The projection that has provoked these alarms is the intermediate projection. This reflects the trustees' consensus views regarding such inputs as economic growth, productivity, inflation, earnings, employment and interest rates.”

He continues:

“The intermediate projection assumes that the economy will grow by an annual rate of 2.3% per year between now and 2085. This may be higher than the 1.9% per year that was projected as recently as three years ago, but it is still well below the 3.4% that the economy grew on average between 1960 and 2005. The actuaries' own low cost projection assumes an average annual growth rate of 2.9% between now and 2085. This is higher than the 2.3% pace embodied in the intermediate projection, but it is still well below the 3.4% average of the past. Guess what? Under the actuaries' low cost projection, the Social Security system never runs out of money!”

Does that mean we should ignore the Trustees’ annual projections? Of course not. But that really is the point here...these are estimates and projections that should be used in a responsible way to ensure the long-term solvency of Social Security, which millions of Americans and their families depend on.

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