Chairman Sanders and Ranking Member Graham:
My name is Max Richtman, and I am the President and CEO of the National Committee to Preserve Social Security and Medicare. The National Committee is a grassroots advocacy and educational organization dedicated to preserving and strengthening the earned income benefits of Social Security and Medicare, in addition to safety net programs, which are so vitally important to the well-being of our nation’s seniors.
On behalf of our millions of members and supporters, I am honored to submit this testimony for the Senate Budget Committee’s hearing: “Saving Social Security: Expanding Benefits and Demanding the Wealthy Pay Their Fair Share or Cutting Benefits and Increasing Retirement Anxiety”. I especially want to thank you, Mr. Chairman, and Representative Peter DeFazio in the House, for re-introducing the Social Security Expansion Act. This legislation ensures the programs’ long-term solvency while providing much-needed updates to Social Security’s benefits.
Now is the Time to Strengthen and Improve Social Security
Before addressing the specifics of any legislation, I would like to take this opportunity to emphasize why we believe it is critical to address Social Security’s issues now. Social Security has long been an extremely popular program across the political spectrum. It has provided security and financial stability for hard-working Americans irrespective of where they live, where they work or how much income they earn. Social Security has the power to bring our country together, and to give Congress a bipartisan issue to rally around for the good of the American people.
Every day in the United States, 10,000 people turn age 65. The Census Bureau estimates the poverty rate in 2020 was 9 percent for Americans age 65 and older. This means despite the critical support provided by Social Security, 5 million of our elderly citizens were living in poverty last year. The poverty rate for elderly women was 10.1 percent, and for African Americans it was over 17 percent, leaving almost 1 million elderly African Americans living in poverty in 2020. This is unconscionable in a country as wealthy as the United States. We simply cannot and must not sit by and allow millions of our fellow citizens, who worked hard their entire lives, to spend their golden years living in poverty.
The National Committee believes that it is vitally important that Social Security’s financial foundation be strengthened and that the benefits offered by the program be improved to meet the needs of all Americans more effectively. We also believe that it is essential that proposals to strengthen the adequacy of benefits address the needs of women, and especially women of color.
Importance of Social Security
For over 85 years the Social Security program has been protecting Americans against the loss of income due to retirement, death or disability. Over 179 million workers and their families are covered by their contributions to Social Security, and over 65 million Americans currently receive Social Security benefits.
The Social Security program provides important financial security to America’s workers by assuring them they will receive a foundation of retirement income which will allow them to live their retirement years in dignity. But Social Security was never intended to only be a retirement program. Instead, it is a contributory social insurance program, designed to protect workers and their families from loss of income due to death, disability or retirement. In fact, while most individuals who receive Social Security are retirees and their family members, over 14 percent of all Social Security beneficiaries are disabled workers and their families.
Disability insurance can be critical for workers and their families: One in four of today’s 20-year-olds will become disabled before reaching age 67. Yet the vast majority of workers have no long-term disability insurance. Individuals with a prior history of medical problems or who work in industries with a high rate of injury frequently find it prohibitively expensive or impossible to obtain coverage. Many workers don’t realize their Social Security payroll taxes are also buying them this critical protection. For a young disabled worker with a spouse and two children, the disability insurance value of the benefit they get through Social Security is over $580,000. And, unlike private disability policies and annuities, Social Security benefits are increased annually to keep up with the cost of living.
Social Security also provides life insurance to protect families from the loss of the earnings of their primary breadwinner. Nine percent of beneficiaries qualify as the survivors of deceased workers. About one in nine of today’s 20-year-olds will die before reaching the full retirement age of 67. Many workers do not have life insurance to protect their families, and many may not realize that their payroll taxes entitle their families to survivor’s benefits, providing life insurance protection worth over $725,000.
No other wage-replacement program – public or private – offers the protection Americans receive from the Social Security program.
Social Security is an enormously successful program which is essential to the retirement security of the vast majority of Americans. While Social Security benefits are modest—averaging just under $20,000 per year in 2022—Social Security is still the single largest source of income for retired Americans. Two-thirds of Social Security beneficiaries receive over half of their income from Social Security. For nearly 1 in 5 retirees, Social Security is their only source of income. Without Social Security, nearly half of the elderly would live in poverty.
As President Franklin Delano Roosevelt so famously stated, Social Security was created to “provide some measure of protection to the average citizen and to his family” against the hazards and vicissitudes of life. It is not merely a retirement program, it is a contributory social insurance program. And it is most assuredly not welfare. It is an earned benefit that American workers contribute to with each and every paycheck. It provides a financial bulwark against an uncertain financial world – a world in which Americans are acutely aware of their vulnerability.
To provide a more personal perspective, we at the National Committee have profiles identifying Social Security’s impact for all fifty States. These State Snapshots can be found on our website at https://www.ncpssm.org/117th-congress/social-securitys-economic-impact-states/?utm_campaign=SS-Snapshots-Graphic&utm_source=ncpssm.org&utm_medium=SS-Snapshots-Graphic. We believe you have a responsibility to these beneficiaries, along with the millions of workers and their families who will someday also receive benefits from this critical program, to work together to strengthen and improve Social Security for their peace of mind.
Social Security and Women
While Social Security is a program that is vitally important to all Americans, it is especially critical to the financial security of women. There are several reasons why this is so. First, women live longer than men. On average, women today who reach age 65 outlive men by about 2.5 years. These additional years of longevity increase the risk that women may outlive their savings or that their pensions will lose their purchasing power.
Women, and especially women of color, are less likely than men to have employer pensions. And when women do have pensions, they tend to be smaller on average than those earned by men. The picture is even more challenging for individuals from communities of color, where less than half of employed African Americans and less than one-third of employed Latinos are covered by employer-sponsored retirement plans.
Compounding these problems, women have a history of lower earnings during their working years, take more time out of the workforce to care for family members and live in more difficult economic circumstances. As a result, they enter retirement with little or no protection from private pensions, inadequate retirement savings, and smaller Social Security benefits than those received by men.
The effects of these disparities are magnified for women of color. They are disproportionally lower earners and are more likely to have worked in part-time positions. A substantial number of women of color reach retirement with little or no retirement savings. The absence of alternative financial support has the effect of leaving women of color primarily dependent upon what is usually a very modest Social Security retirement income. Further, families of color are more dependent than other families on survivor and disability benefits under Social Security.
The Social Security Expansion Act ensures program solvency
While there are other bills we support that improve benefits and extend solvency, my testimony today will focus on the Social Security Expansion Act. When enacted, this legislation will place the system on a sound financial footing while making important program improvements that will enable it to meet more fully the needs of America’s most vulnerable populations.
Of all age cohorts, young people tend to be the most concerned about Social Security not being there for them when they retire. The bill will provide some peace of mind to these younger workers who have been repeatedly told the program’s days are numbered. Sadly, there are some who take advantage of their anxiety by suggesting the only way to guarantee the program’s future is by privatizing it or cutting benefits.
Enactment of the Social Security Expansion Act would provide positive proof that Congress takes Social Security seriously, and that you can work together to strengthen and improve this program that is so important to their lives and future economic wellbeing without privatization or benefit cuts. Although the official Actuary’s report on your bill was not available to us prior to submitting this testimony we understand it will ensure the Trust Funds’ solvency for the entire 75-year valuation period. This achievement cannot be understated. This measurement benchmark has not been projected to be achieved since the late 1980’s. It is a significant accomplishment, and proof positive that Social Security’s finances can be assured for generations of workers without cutting benefits and without privatizing the program.
The Social Security Expansion Act achieves this goal by ensuring that higher-income workers are paying their fair share into Social Security. First, the bill extends the payroll tax to all wages paid to workers that are in excess of $250,000. Over time, the bill would eliminate the existing cap on wages subject to FICA since it is adjusted annually, so that all wages would be covered for Social Security tax and benefit purposes. Most Americans are shocked to discover there is a payroll tax cap at all, and public support for raising or eliminating it is strong. While the National Committee supports this provision, we believe it could be improved by providing that the additional Social Security taxable wages stemming from it be taken into account in determining workers’ benefits.
The second revenue measure would subject an individual’s unearned income above $250,000 to a tax of 12.4 percent. This is the same Social Security tax rate that applies to most earned income (when worker and employer contributions are combined) and would provide an important new stream of revenue that would help strengthen Americans’ confidence that Social Security will be there for them in years to come. This provision also better reflects the evolution of income for our nation’s workforce, as higher-income workers receive increasingly smaller portions of their income from wages. As with the previous provision, we believe providing additional Social Security benefits for the enhanced contributions would better preserve the earned nature of the Social Security program.
Social Security has been a bedrock program protecting the financial security of American workers in the case of retirement, disability or death. However, the last major Social Security reform was almost four decades ago and the value of some of its benefits has eroded over the years. It is well past time for the program to be updated to meet the needs of today’s workers and beneficiaries
The provisions most important to the membership of the National Committee include:
- An across-the-board increase for all beneficiaries, current and future, of about 1 percent of the average benefit, a change that is projected to yield a monthly increase for the typical retiree of about $200. Our country is facing a retirement crisis, and this provision is critical to strengthening the one leg of the retirement system that is universal and not subject to the unpredictability of Wall Street.
- Adoption of the Consumer Price Index for the Elderly (CPI-E) to replace the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to calculate cost-of-living adjustments (COLAs), a change which is projected by the Social Security actuaries to increase the COLA by an average of 0.2 percentage point per year. This change is necessary to more accurately reflect the goods and services purchased by seniors and the disabled.
- An increase in the special minimum benefit so that it equals up to 125 percent of the poverty level for an individual, with additional provisions that keep the special minimum benefit up to date by indexing it to future growth in wages. This provision is essential to reducing the poverty rate among those aged 65 and older.
While our members support all benefit improvements in this bill, a fairer COLA is at the top of their list. COLAs are all about protecting Social Security benefits from being eroded by inflation. But, sadly, the current CPI-W has fallen far short of providing needed inflation protection because it fails to adequately measure the spending patterns of seniors, who typically spend more on out-of-pocket health care costs than other Americans.
When I attend policy forums held with seniors throughout the country, the question most often asked is: “Why does Congress give me an inadequate Social Security COLA? I need it to get by on!” Seniors simply don’t understand why “Washington” believes seniors did not experience inflation in 2010, 2011 and 2016 when there was no COLA. This problem is even apparent this year despite the generous COLA of 5.9 percent for 2022. The substantial $21.60 (or 14.55 percent) increase in premiums for Medicare’s Part B for 2022 significantly reduced that Social Security increase for many beneficiaries, leaving them still facing skyrocketing prices for food, housing, prescription drugs and other necessities with few additional resources. The continuing high inflation numbers only make matters worse, and seniors are frustrated that nothing has been done to fix this problem.
Other Proposals Affecting Social Security
In addition to your bill, the National Committee has strongly supported comprehensive legislation introduced by Senators Richard Blumenthal and Chris Van Hollen in the Senate and Representative John Larson in the House (S. 3071/H.R. 5723), the Social Security 2100: A Sacred Trust Act. This legislation would also correct the formula for calculating COLAs by utilizing the CPI-E, increase benefits across the board, increase the special minimum benefit, increase benefits for the oldest of the old, provide benefit improvements for widows/widowers, and eliminate the Government Pension Offset and Windfall Elimination Provision, all while improving solvency by slashing the long-range actuarial deficit by one-half. We believe your bill and the Social Security 2100 Act provide a solid benchmark for strengthening Social Security and improving benefits for today’s beneficiaries and for future generations of workers.
Unfortunately, the only proposals put forward by those on the other side of the aisle would inevitably result in benefit reductions for millions of Americans. Senator Rick Scott’s so-called “11 Point Plan to Rescue America” proposes sunsetting all federal legislation, including Social Security and Medicare, every five years. As you well know, Mr. Chairman, enacting even relatively noncontroversial legislation in a closely divided Congress is extremely challenging, and would subject both beneficiaries and workers and their families to the extreme stress of wondering whether these critical programs would be there for them every five years. The value of earned benefits would evaporate, as opponents of Social Security and Medicare could hold these programs hostage in exchange for program cuts that would otherwise not be achievable because of their lack of support among the American people.
The only other major piece of legislation introduced recently by Republican Members to address Social Security is S. 1295/H.R. 2575, the so-called TRUST Act of 2021, introduced by Senator Mitt Romney. S. 1295 simply represents another mechanism by which those whose goal is to cut Social Security and Medicare benefits hope to achieve their end while shielding their supporters from the political consequences of casting such massively unpopular votes.
It is difficult to fully understand why some academics and elected officials seem determined to cut this essential program. Some have argued that Social Security should be converted into the equivalent of a welfare program – providing some benefit improvements to lower income beneficiaries in exchange for sharply reducing or eliminating benefits for others. The underlying reason for this point of view appears to be the notion that older Americans are in fact much better off financially than the numbers reflected in the official estimates, and therefore do not need Social Security. If all you do is look at cumulative numbers or averages it is true that overall elderly Americans appear to be in better shape financially than they were almost nine decades ago when Social Security was created to help pull us out of the depths of the Great Depression.
But merely citing statistics showing older people as a group have more money does not begin to take into account the financial inequality American workers experience that follows them into retirement – inequality which you, Mr. Chairman, are well aware of have repeatedly argued against. According to the Federal Reserve, wealth inequality has worsened over the last two decades. One-half of Americas’ working families have no retirement savings at all. Even among families who have saved, the median account balances were $65,000 in 2019 – which means one-half are below that amount and the other half above.
Looking purely at the numbers also ignores the financial vulnerability seniors experience every day. They are faced with finite resources – what they have at retirement must last them for the rest of their lives. Few seniors are able to work, especially those who worked at grueling blue-collar jobs their entire lives. Even if they are healthy enough and willing to work, few employers are willing to hire the elderly when younger workers are available. That leaves even those who are reasonably financially stable today well aware that this could be a very temporary condition. One fall could land them in a nursing home, and the average annual cost of $100,000 would rapidly wipe-out any savings they may have accumulated.
The other item that raw numbers fail to recognize is the role private retirement savings plays for the average family. While 401(k) and IRA balances have grown overall, they did not represent a net increase in retirement security for many families because they supplanted the traditional pensions that so many blue-collar workers previously relied on. This shift did not provide additional retirement security for these workers – it was one more example of the increasing risk transferred from employers to their workers, who now had to not only save for retirement on their own, but also were faced with the risk of poor investments or a drop in the stock market. The loss of the third leg of the so-called “retirement stool” (Social Security, pensions and private savings) means Social Security, the only secure leg remaining, must be strengthened.
There are those who still advocate for privatizing Social Security by transferring payroll taxes to private accounts – a notion President George W. Bush promoted during his second term in office. Large majorities of the American public resoundingly opposed his efforts, and the more he promoted his plan, the steeper was the drop in public support. Americans understand full well that ownership also means you alone bear the risk of a market downturn, which was painfully evident to anyone who was forced to retire right after the crashes in 1987, 2000 and 2008 and which we may be witnessing again today. Many may be willing to take on some level of risk to see higher rewards, but not as a substitute for a robust Social Security benefit.
It is very disingenuous to suggest, as some have done, that the best solution to improve Social Security’s finances is to cut or eliminate benefits for wealthy seniors. There simply aren’t enough super-rich retirees to make a dent in Social Security’s long-range finances. To do that, you need to significantly cut benefits for workers making $40,000-50,000 a year – or in other words, the heart of middle-class America. These are the workers who have been left most vulnerable by decades of stagnant wages and rising income inequality. These are the workers least likely to have been able to create a meaningful retirement nest egg during their working lives. To suggest cutting their Social Security to help protect their poorer neighbors would just add insult to injury.
In closing, Mr. Chairman, I wish to congratulate you and your Committee for holding this hearing on “Saving Social Security: Expanding Benefits and Demanding the Wealthy Pay Their Fair Share or Cutting Benefits and Increasing Retirement Anxiety”. For years, our members have told us that they want and need their Social Security benefits boosted – not just for themselves, but for their children and grandchildren too. They want fairer cost-of-living adjustments that reflect retirees’ true living expenses. They want benefit improvements for those who need help the most, including those with low lifetime earnings. They want the wealthy to start paying their fair share in Social Security payroll contributions. The Social Security Expansion Act achieves all of that — and more.
Not only do our members support this bill, the American public has affirmed the principles that it embodies in poll after poll, across party lines and age groups. Meanwhile, the public has roundly rejected proposals for “reforming” Social Security, including privatization, raising the retirement age and imposing stingier COLA formulas.
The Social Security Expansion Act represents the consensus of an overwhelming majority of Americans by closing Social Security’s funding gap and improving Social Security benefits. Mr. Chairman, the National Committee supports the provisions included in your bill and proudly endorses it. We look forward to working with you and members of the Senate to enact this commonsense legislation.