Testimony of Barbara B. Kennelly, President and CEO National Committee to Preserve Social Security and Medicare

Hearing on The SAFE Commission Act (H.R. 3654) and the Long-Term Fiscal Challenge Committee on the Budget U.S. House of Representatives

June 24, 2008

Mr. Chairman and Members of the Budget Committee, the National Committee to Preserve Social Security and Medicare is pleased to have the opportunity to submit testimony for your hearing on “The SAFE Commission Act (H.R. 3654) and the Long-Term Fiscal Challenge”.

The National Committee is made up of millions of senior citizens around the country who are care deeply about Social Security and Medicare and want to see them preserved and strengthened for future generations. Unfortunately, much of the discussion in recent years has not focused on increasing Social Security solvency but rather on using Social Security's funding gap as a pretext for unraveling the program. Similarly, those who are philosophically opposed to Medicare have used rising health care costs in the general health care system to promote their proposals to privatize Medicare.

The National Committee is very concerned about the inflated fiscal rhetoric surrounding Social Security and Medicare. Often the future costs of these programs are inappropriately combined to generate an enormous multi-trillion dollar number to advance the notion that spending on entitlements is out of control. While Social Security and Medicare, in combination, are designed to provide older Americans with a sound foundation in their old age, they are in fact two very different programs.

Contrary to some accounts, Social Security is not facing bankruptcy but has a funding gap which is both modest and manageable. This gap is based primarily on demographics. Medicare, on the other hand, is a health care program. Most of its cost increases are being driven by the inflation in overall health care, not demographics. The reasons for these health care cost increases are many and complex and need to be addressed in a larger context. Cutting Medicare benefits without addressing this larger problem will only shift additional costs onto Medicare beneficiaries.

The younger generation has been led to believe that the demographics of the Baby Boomer generation will condemn them to a desolate future. Nothing could be further from the truth. Baby Boomers have been with us for a long time. The bulge produced by that generation has been working its way through society ever since the Baby Boomers were born. When they needed schools, this country built them. When they needed homes, this country helped finance them. While some would have us focus on the declining ratio of workers to retirees, the more correct measure is the ratio of workers to the total number dependents of all ages. That ratio remains the same as it was in the 1950s when the Baby Boomers were in school.

The millions of members and supporters of the National Committee remain very concerned that the overheated debate on entitlement reform will lead to privatization of Social Security. Thus, they are opposed to the establishment of a commission or task force on entitlements that offers a backdoor path to the enactment of private accounts.

Representatives Jim Cooper and Frank Wolf have introduced the SAFE Commission Act (H.R. 3654) which would create a bipartisan entitlement commission. The legislation would empower a small group of individuals to write legislation on Social Security, Medicare, Medicaid and taxes.

The National Committee has several concerns about this proposed process. The commission's legislation would be fast-tracked through the Congress. No amendments would be permitted with the exception of substitutes from specified officials. Moreover, committees of jurisdiction, including those Members of Congress who are the most familiar with the workings of these programs, would be effectively left out of the process.

Most importantly, the National Committee strongly opposes any commission which is allowed to consider privatizing Social Security among its options. After a long national discussion when President Bush offered his privatization proposal in 2005, Social Security private accounts were soundly rejected by the American people. That is because privatization would dismantle our nation's most successful retirement security program and would do nothing to improve Social Security solvency. Private accounts have no place in any conversation intended to strengthen Social Security for future generations. Any commission that does not specifically preclude private accounts will certainly be interpreted by America 's seniors as a surreptitious effort to resurrect this failed initiative.

We believe that a commission that focuses on Social Security and Medicare in the context of the federal budget, with little regard for the critical role these programs play in the income and health security of future retirees, would be inherently biased and would inevitably result in a reduction in the standard of living of older Americans.

In this debate, we sometimes lose track of the reasons Social Security was enacted in the first place. It is important to repeat a few things about Social Security and its beneficiaries. Social Security is the largest single source of income for older people. Among lower-income people, Social Security is almost 85 percent of their income. Social Security pays a monthly benefit that lasts as long as you live – which is particularly important for women who live longer and find their small assets dwindling. Social Security benefits are modest – the average Social Security retirement benefit is only about $12,000 a year. Social Security provides disability benefits for those who lose wages due to a disabling condition, and it provides benefits to young spouses and children if a worker dies. Finally, without Social Security, over half of seniors would live in poverty.

Similarly, Medicare provides basic, affordable, universal health care to a population largely shunned by private health care plans. About 70 percent of Medicare beneficiaries have incomes under $25,000 and 85 percent have incomes under $40,000. Almost two out of three elderly households have incomes under $20,000, and they are already spending 30-50 percent of their income on health care.

Arbitrarily cutting Medicare without getting at the root of the continuing upward trend of health care costs will have real impacts on real people – most of whom have nowhere else to go for coverage and limited options for increasing their resources.

The National Committee and it members and supporters care deeply about the future. We favor balanced and responsible action to address the funding gaps facing Social Security and Medicare. However, we are dismayed by the overblown rhetoric about entitlements because we believe that it stands in the way of real changes that would strengthen these essential programs. We look forward to working with the Congress to ensure the continuation of Social Security and Medicare for the benefit of both current and future generations.

The National Committee is a nonprofit, nonpartisan organization that acts in the interests of its membership through advocacy, education, services, grassroots efforts and the leadership of the board of directors and professional staff. The work of the National Committee is directed toward developing a secure retirement for all Americans.