Ashley Carson, OWL Executive Director, Guest Blogger
Today, the fiscal commission met to discuss how to bring our country’s finances under control, and again the conversation led directly to Social Security. This is always shocking because Social Security did not contribute a penny to our current financial woes. Instead, Social Security has created an enormous surplus that we have invested in US Treasury bonds, and the money was used to pay for many things we needed as a country, but also many things we didn’t need as a country.
Someday, our debt obligation on those treasury bonds will come due in order to cover scheduled Social Security benefits. It’s not a complicated process, just as putting money in a savings account at your local bank is not rocket science. For decades, we, the American people, have paid our Social Security taxes diligently. So much so, that a whole lot more money went into the Social Security program than was being used to pay out benefits. This is where the word surplus
comes in. The surplus, or the extra pile of cash in the Social Security trust fund, was invested in bonds to be repaid when we needed them to pay out Social Security benefits.
If you were making so much more money in your monthly budget than you were paying out in bills, you would likely put the extra in a savings account or invest it in some type of interest bearing financial product. Bonds, as you might learn in finance 101, are one of the safest and most secure long-term investment products. This is exactly what we did with the Social Security surplus. You would expect that when your bond came due, you would collect your original investment plus a little interest.
The problem is, the National Commission on Fiscal Responsibility and Reform talks about Social Security as if the American public doesn’t understand this process and instead continues to make the case that Social Security is facing a pending crisis. They claim that Social Security is in crisis because in the future we need to repay the bonds.
Now, instead of spending hours and hours figuring out how to repay the bonds as they come due, they are promulgating ideas on how to cut future Social Security benefits and therefore reduce our debt obligation. Essentially, it’s a plan to not pay back all of what’s owed on the investment bonds. This is similar to you walking into the bank to cash out your $1000 savings account and the bank teller saying, “How about I give you $800 instead and we call it good?”
Today Barry Anderson, formerly with OMB, talked about the fact that he teaches college kids nationwide that they are suckers to believe that Social Security will be there for them. Congresswoman Jan Schakowsky criticized his statement by saying, “For you to suggest to young people that Social Security somehow will be significantly diminished and they’re suckers to believe otherwise, I think is a distortion of the history of the program and the commitment of the Congress for it to be there…[W]e’re going to make sure that Social Security is a significant part of retirement security for generations to come. 77% of Americans believe that it is critical that we preserve Social Security for generations to come even if it means increasing working Americans’ contributions to Social Security...”
Our financial crisis was caused by reckless spending and inattention to proper revenues. Figuring out how to pay our debts as a nation is something we are obligated to do. In order to pay our debts we have to raise revenues and cut expenditures. One thing is certain, the American people collectively do not need cuts to future Social Security benefits. If anything, Social Security is a baseline program that a disproportionate number of older women rely upon for survival. Social Security needs to be strengthened, supported and taken off of the table as a means of any type of solution to our larger financial woes.
CATEGORY: [entitlement reform], [fiscal commission], [Social Security]
What would life for American families be like without Social Security?
If President Roosevelt had never signed the Social Security Act, we know millions of Americans – retirees, the disabled and survivors-- would be threatened with poverty today.
As we celebrate 75 years of Social Security success stories it’s important we hear from Americans of all ages to remind Washington that Social Security is especially important during tough economy times like these.
So, ask yourself, what does Social Security mean to you and your family? Then, we want you
to fill in the blank:
Without Social Security ____________________.
Your answers will be the basis for our next National Committee video
, celebrating 75 years of American success stories, shared by working Americans who live them each and every day.
Can you imagine living without Social Security? Probably not. So, tell us how Social Security fills the blank in the lives of your family, friends and loved ones and we'll share your
You can leave your comments here on the blog or on our National Committee Facebook Page
CATEGORY: [Social Security]
When someone tells you it’s no big deal for Americans to work until they’re 70, chances are that person:
(a) has an office job
(b) earns income in the top-half of American wage earners
(c) has access to generous health care coverage
This is exactly the demographic that the the Social Security Administration
says has benefited most from two decades of longevity increases that far exceed what the rest of America has seen. These demographics also explain why the idea is so popular among six-figure income Washington politicians, bureaucrats, and think-tankers, including some members of the President’s Fiscal Commission. Not so much
-- among the rest of America.
While higher income Americans may indeed be ready, willing and able to extend their work-lives to age 70...what about your 56 year old uncle who’s a mechanic (bricklayer, plumber, truck driver, waiter...you get the idea) who’s knees (or high blood pressure, stroke, Alzheimer’s, diabetes) will force an early retirement at 62? Unfortunately, it’s these working Americans who will pay the price for years of fiscal irresponsibility in Washington, if we raise the retirement age to 70 to reduce a deficit that has nothing to do with workers or their Social Security benefits.
This is the topic of the latest video in our 75th Anniversary Celebration
series “Keeping the Promise”. Take a moment to watch and then share it with your friends and family.
CATEGORY: [Aging Issues], [Retirement], [Social Security]
Nancy Altman, Guest Blogger
Despite its name, Social Security’s statutorily-defined “Retirement Age” has nothing to do with when people must or can retire. It is most accurate to think of Social Security as having a band of retirement ages. Benefits are adjusted depending on the age a worker chooses to begin to receive benefits, whether that age is age 62, age 70, or some age in between.
If there were no adjustment, benefits claimed at earlier ages would be more valuable because they would be received for a longer time. The adjustments are as close as the actuaries can come to ensuring that the benefits have the same overall value, taking into account when a worker begins to receive them.
Because of these actuarial adjustments, raising the “Retirement Age” is indistinguishable from a substantial across-the-board benefit cut. Currently, “Retirement Age”, which until 2000 was age 65, is gradually being increased to age 67. If Minority Leader John Boehner has his way, the “Retirement Age” will increase to age 70. The chart below illustrates the impact of the current-law increase to age 67, and the proposal to increase the “Retirement Age” to age 70.
(You can also see the full-size chart here)
As the chart reveals, the increase in the “Retirement Age” from age 65 to age 67, by itself, amounts to about a 13 percent cut in monthly benefits A worker aged 62 who would be eligible for $800 a month, if the “Retirement Age” were age 65, will receive only $700 a month, once the “Retirement Age” is age 67. That same worker who waited until age 70 would receive $1400 a month if the “Retirement Age” were age 65, but only $1240 a month, once the ““Retirement Age” is age 67.
If the statutory “Retirement Age” were increased to age 70, that change would constitute another 19 percent cut in benefits, for a total of around 30 percent. That same worker who would have received $800 a month, if the ““Retirement Age”” were age 65, would receive only $565 a month, if the “Retirement Age” were age 70. If that same worker chose to wait until age 70, he or she would receive $1400 a month if the “Retirement Age” were age 65, but only $1000 a month, if the “Retirement Age” were age 70.
Instead of the misleading debate over what the “Retirement Age” should be, I believe we should be debating what we think an appropriate and affordable benefit should be. The average monthly benefit received by all beneficiaries is $1054 or $12,648/year. Given how low Social Security’s average benefit is, and the trillions of dollars that have been lost in 401(k) plans and home equity, we should be discussing raising Social Security, not cutting it further!
CATEGORY: [Aging Issues], [fiscal commission], [Retirement], [Social Security]
As part of our month-long commemoration of Social Security's 75th anniversary, the National Committee will be running a radio ad campaign highlighting the program and efforts in Washington to cut benefits under the guise of "fiscal responsibility". You can listen to our radio ad, which hits the airwaves today, here:
NCPSSM SocSec radio ad 07-13-10
Why is the President’s fiscal commission talking about cutting Social Security benefits to reduce the deficit when Social Security didn’t cause the problem?
This is Barbara Kennelly.
For 75 years Social Security has been a success. Millions count on receiving their modest benefit checks, now and in the future. Benefit cuts, including raising the retirement age, are the wrong solution for a fiscal mess Social Security never created.
Go to the National Committee dot org to learn more.
CATEGORY: [fiscal commission], [Social Security]
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