Why Should People Care About Social Security?
In 2007 the Widener Elder Pennsylvanian Study discovered that 46% of the retired Pennsylvanians reported that Social Security was their largest source of retirement income. In 2011 the percentage was 43% – not significantly different. Large numbers of retirees depend upon Social Security. Furthermore more than 50% of the retirees over age 70 and 60% of the women over 80 said that Social Security was their largest source of income.
Without Social Security they would be unable to purchase the basic necessities of retirement living. For those who count on retirement income from pensions, IRAs or private investments, Social Security makes it possible for them to go beyond the basic necessities and enjoy a fuller life. Looking forward to the immediate future it is likely that Social Security benefits will account for the largest source of retirement income for increasing percentages of households.
—Eric Brucker, Professor of Economics, Widener University
Social Security solvency is worth thinking about because, in my opinion, it’s an example of what’s wrong in Washington today.
Back in the 1980s, Social Security reforms were enacted to preserve benefits for the baby boom generation. That created surpluses into the Social Security Trust fund – more Social Security tax dollars going in than were being paid out. The surpluses were to be used later to pay out benefits to the baby boomers. But this pot of money was too tempting for politicians – of both parties. They turned the surpluses in IOUs; literally bits of paper that reside in a file cabinet in a West Virginia federal building. Today we read headlines about Social Security being in a deficit situation – more money being paid out than coming in. But that was why the surpluses were created in the first place – to pay out benefits as boomers retired, as they are now doing. The tricky part is that the IOUs have to be repaid somehow in order for the benefits to flow to boomer retirees. That’s the question facing Washington – where is the money going to come from?
This is a very difficult problem – one that workers and retirees didn’t make, but it seems some of us will have to live with the consequences anyway – perhaps with benefit cuts, tax increases, or some combination. What changes would be the most fair? Do we want to certain groups to take a bigger hit, while reducing the impact on others? Or should the impact be across-the-board to minimize its effect on all individuals? Not surprisingly, there’s no consensus in Washington regarding an answer – which makes it imperative for people to let their elected representatives know what they think on this issue.
—Joanne Butler, Senior Economic Fellow, Caesar Rodney Institute
Some facts that Americans should know about Social Security…
Americans earn and pay for Social Security’s guaranteed retirement benefits by making contributions out of each and every paycheck throughout their working lives. The average retirement benefit is $1,168 per month and is adjusted annually to keep pace with inflation. In addition to providing benefits to retirees, Social Security also protects workers who become disabled on the job and the families of workers who die.
Social Security’s guaranteed benefits are a rock solid commitment to American families. Companies can go out of business. Pensions can be terminated. The stock market can take a nose dive. Social Security benefits are there in good times and bad.
An average worker’s Social Security retirement benefit will only replace about $4 out of every $10 they earned while working. Social Security was never designed to be a worker’s sole source of income in retirement. Ideally, Social Security is a foundation that is strengthened when accompanied by a pension and private savings. While Social Security is the largest source of income for most retirees, for too many Americans, Social Security is all they have.
Social Security has been running a surplus and has not contributed one dime to our nation’s current deficit. While some in Washington want to reduce Social Security benefits for deficit reduction, Social Security surpluses have been masking the true size of the federal deficit for decades. Even in the midst of the current economic crisis, the current $2.5 trillion Social Security Trust Fund continues to grow and is projected to reach $4.3 trillion by 2023.
Currently, Social Security can pay full benefits for the next 25 years, and we can strengthen Social Security to ensure it will be there for our children and grandchildren with only “modest changes.” Some people in Washington who want to make big changes to Social Security say it is “going broke.” They’ve been saying that for years and years. Fact is, even with no changes, Social Security can pay out full benefits until 2037 and nearly three-quarters of promised benefits after that. A recent report by the United States Senate Special Committee on Aging confirms this and that we can make modest changes in the near term that will ensure future generations receive an adequate benefit and strengthen Social Security’s financing for the long-term.
—Cristina Martin Firvida, AARP Director of Government Relations for Economic Security
People should care about Social Security because it affects 56 million people including retirees, widows, disabled workers, and children. The income that supports Social Security comes from payroll contributions (FICA), income taxes and interest on U.S. Treasury bonds held in the Trust Fund. The Trust Fund will need an increase to meet its obligations in 2036. Until then it is solvent but it will need minor adjustment for long term solvency. Thus, there are many hysterical attacks on the system by those who have long opposed the entire concept of social insurance. There are a number of adjustments that are being discussed such as raising the retirement age, increasing the FICA from 12.4% to 14.55% or increasing the cap in income upon which the FICA is collected. Each of these adjustments should be considered carefully. One way to consider the possibilities is to examine the political and social goals of the founders and the past implementations of the system. The founders were of the opinion that any social system may need adjustments over time, but these needed changes should be considered and implemented by those who value the goals of the system and not by those who have never understood nor valued the system.
—Dr. Alice Hoffman, Retired professor of labor history from the Department of Labor Studies at the Pennsylvania State University and board member of the Pennsylvania Alliance for Retired Workers
Social Security faces a problem in 2040, but not a crisis. To solve the 2040 problem, Congress can and should take steps now to schedule a future modest slowdown in the growth of benefits and a future modest increase in payroll tax revenues. The claim that Social Security is “a Ponzi scheme” that must someday collapse is false. The claim that the U.S. Treasury bonds held by the Social Security Trust Fund are “worthless pieces of paper” is false. The claim that Congress has “raided” the Social Security Trust Fund is false. Social Security is a fundamentally sound and sustainable program but requires the above reforms to fix its 2040 problem.
—Laurence Seidman, Professor of Economics, University of Delaware
Understanding Social Security: Why should people care?
DFM News is hosting a forum entitled Understanding Social Security this Friday, November 4th at Arsht Hall on the University of Delaware’s Wilmington campus. The event is open to the public and will be available via live webcast at DFM News.
This week, DFM News will be offering a variety of stories and commentary in preparation for Friday’s discussion. Today, an e-mail forum featuring panelists participating in the event:
With a struggling economy, rising cost of living, and a Senate super committee tasked with finding over $1 trillion spending cuts in the federal budget, Social Security has become an increasing topic for debate among many Americans. Political opinions on Social Security range from calls for measured changes to program to secure its solvency to claims that it is akin to a “Ponzi scheme” and will eventually collapse, making it likely that Social Security will among the top issues in the coming 2012 election cycle.
To help provide the public a better grasp of Social Security and the issues its faces, DFM News is hosting a forum entitled Understanding Social Security on Friday, November 4th. Prior to the forum, we asked some of expert panelists appearing at the event to answer one simple question: “Why should people care about Social Security?” Their responses, submitted via email, are below.
Why Should People Care About Social Security?
In 2007 the Widener Elder Pennsylvanian Study discovered that 46% of the retired Pennsylvanians reported that Social Security was their largest source of retirement income. In 2011 the percentage was 43% – not significantly different. Large numbers of retirees depend upon Social Security. Furthermore more than 50% of the retirees over age 70 and 60% of the women over 80 said that Social Security was their largest source of income.
Without Social Security they would be unable to purchase the basic necessities of retirement living. For those who count on retirement income from pensions, IRAs or private investments, Social Security makes it possible for them to go beyond the basic necessities and enjoy a fuller life. Looking forward to the immediate future it is likely that Social Security benefits will account for the largest source of retirement income for increasing percentages of households.
—Eric Brucker, Professor of Economics, Widener University
Social Security solvency is worth thinking about because, in my opinion, it’s an example of what’s wrong in Washington today.
Back in the 1980s, Social Security reforms were enacted to preserve benefits for the baby boom generation. That created surpluses into the Social Security Trust fund – more Social Security tax dollars going in than were being paid out. The surpluses were to be used later to pay out benefits to the baby boomers. But this pot of money was too tempting for politicians – of both parties. They turned the surpluses in IOUs; literally bits of paper that reside in a file cabinet in a West Virginia federal building. Today we read headlines about Social Security being in a deficit situation – more money being paid out than coming in. But that was why the surpluses were created in the first place – to pay out benefits as boomers retired, as they are now doing. The tricky part is that the IOUs have to be repaid somehow in order for the benefits to flow to boomer retirees. That’s the question facing Washington – where is the money going to come from?
This is a very difficult problem – one that workers and retirees didn’t make, but it seems some of us will have to live with the consequences anyway – perhaps with benefit cuts, tax increases, or some combination. What changes would be the most fair? Do we want to certain groups to take a bigger hit, while reducing the impact on others? Or should the impact be across-the-board to minimize its effect on all individuals? Not surprisingly, there’s no consensus in Washington regarding an answer – which makes it imperative for people to let their elected representatives know what they think on this issue.
—Joanne Butler, Senior Economic Fellow, Caesar Rodney Institute
Some facts that Americans should know about Social Security…
Americans earn and pay for Social Security’s guaranteed retirement benefits by making contributions out of each and every paycheck throughout their working lives. The average retirement benefit is $1,168 per month and is adjusted annually to keep pace with inflation. In addition to providing benefits to retirees, Social Security also protects workers who become disabled on the job and the families of workers who die.
Social Security’s guaranteed benefits are a rock solid commitment to American families. Companies can go out of business. Pensions can be terminated. The stock market can take a nose dive. Social Security benefits are there in good times and bad.
An average worker’s Social Security retirement benefit will only replace about $4 out of every $10 they earned while working. Social Security was never designed to be a worker’s sole source of income in retirement. Ideally, Social Security is a foundation that is strengthened when accompanied by a pension and private savings. While Social Security is the largest source of income for most retirees, for too many Americans, Social Security is all they have.
Social Security has been running a surplus and has not contributed one dime to our nation’s current deficit. While some in Washington want to reduce Social Security benefits for deficit reduction, Social Security surpluses have been masking the true size of the federal deficit for decades. Even in the midst of the current economic crisis, the current $2.5 trillion Social Security Trust Fund continues to grow and is projected to reach $4.3 trillion by 2023.
Currently, Social Security can pay full benefits for the next 25 years, and we can strengthen Social Security to ensure it will be there for our children and grandchildren with only “modest changes.” Some people in Washington who want to make big changes to Social Security say it is “going broke.” They’ve been saying that for years and years. Fact is, even with no changes, Social Security can pay out full benefits until 2037 and nearly three-quarters of promised benefits after that. A recent report by the United States Senate Special Committee on Aging confirms this and that we can make modest changes in the near term that will ensure future generations receive an adequate benefit and strengthen Social Security’s financing for the long-term.
—Cristina Martin Firvida, AARP Director of Government Relations for Economic Security
People should care about Social Security because it affects 56 million people including retirees, widows, disabled workers, and children. The income that supports Social Security comes from payroll contributions (FICA), income taxes and interest on U.S. Treasury bonds held in the Trust Fund. The Trust Fund will need an increase to meet its obligations in 2036. Until then it is solvent but it will need minor adjustment for long term solvency. Thus, there are many hysterical attacks on the system by those who have long opposed the entire concept of social insurance. There are a number of adjustments that are being discussed such as raising the retirement age, increasing the FICA from 12.4% to 14.55% or increasing the cap in income upon which the FICA is collected. Each of these adjustments should be considered carefully. One way to consider the possibilities is to examine the political and social goals of the founders and the past implementations of the system. The founders were of the opinion that any social system may need adjustments over time, but these needed changes should be considered and implemented by those who value the goals of the system and not by those who have never understood nor valued the system.
—Dr. Alice Hoffman, Retired professor of labor history from the Department of Labor Studies at the Pennsylvania State University and board member of the Pennsylvania Alliance for Retired Workers
Social Security faces a problem in 2040, but not a crisis. To solve the 2040 problem, Congress can and should take steps now to schedule a future modest slowdown in the growth of benefits and a future modest increase in payroll tax revenues. The claim that Social Security is “a Ponzi scheme” that must someday collapse is false. The claim that the U.S. Treasury bonds held by the Social Security Trust Fund are “worthless pieces of paper” is false. The claim that Congress has “raided” the Social Security Trust Fund is false. Social Security is a fundamentally sound and sustainable program but requires the above reforms to fix its 2040 problem.
—Laurence Seidman, Professor of Economics, University of Delaware