Social Security. It’s been around for 78 years. It’s a benefit that everyone (and their family members) who has worked in the United States is eligible to receive. You pay into the system when you are working and then when you retire or become disabled, you, your spouse, and your dependent children receive monthly benefits based on you earned income history. Currently almost 58 million Americans receive $816 billion annually in Social Security benefits. Most (70%) are retirees and their family members. The rest are either disabled (19%) or are survivors (11%) of a deceased spouse or parent who would have otherwise qualified for Social Security. We all like, expect, and will, if not already, depend upon Social Security to sustain our financial well-being and independence.
Dwight D. Eisenhower Supported Social Security
Yet it is under attack. And has been for almost a decade. Until 2005, both political parties fully supported Social Security. President Dwight D. Eisenhower in a letter to his brother Edgar on November 8, 1954 said:
Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes you can do these things. Among them are H. L. Hunt (you possibly know his background), a few other Texas oil millionaires, and an occasional politician or business man from other areas. Their number is negligible and they are stupid.
This was right after he responded to a letter to a constituent shortly after signing a bill into law expanding Social Security. In that letter dated September 30, 1954, President Eisenhower said:
The actual fact is that by and large the productivity of a national economy must [emphasis added], at any given time, support the people then living in the nation. This means that, roughly, the people from twenty to sixty bear the burden of supporting themselves, and in addition, support those from birth to twenty years of age, and those from sixty to eighty.
The Three-Legged Stool
At that point in our history, both sides of the aisle fully supported the idea of Social Security as the third leg of the financial stool (the other two legs being pensions and savings).
Over the years fewer and fewer people have had employment that contained a defined benefit pension. And fewer people have retirement savings. People need all three legs. With the other two legs being cut or chipped away at, Social Security remains potentially their only source of income should they retire or become disabled.
The Bush Administration Starts the Attacks on Social Security
The attacks on Social Security really started hard and heavy in 2005 when then President George W. Bush called for the privatization of Social Security and a redesign of Medicare that created the so-called “doughnut hole.” I first started working on this issue that year, organizing a protest rally on the Penn State University-University Park Campus when Bush came to town to try to tell the Future Farmers of America that Social Security was a lost cause.
Over 500 people were at that protest. Holding up signs like:
- Hands Off My Social Security
- Bush is WRONG!
- Ike was RIGHT!
- No! No! No Social Security Privatization Fiddle and
- Social Security: Don’t Gamble with OUR Future (referring to privatizing and placing Social Security payments in the volatile stock market).
Organizations and individuals fought back and Social Security was not privatized but Medicare was compromised when the prescription drug benefits (Part D) were written into law in 2006. This hole forces individuals on Medicare in 2013 to pay 100% of their drug costs once you reach their Medicare Part D plan’s initial coverage limit of $2,970 and ends when you spend a total of $4,750.
This was the opening gambit to destroy Social Security. These attacks are continuing to this day. Now it is the Tea Party Republicans who are doing the attacking. And if they succeed, women and people of color in particular will pay the penalty.
The Seven Principals to Strengthen Social Security
Rather than decimate our safety net that we all paid for and for which we are due, we should be strengthening rather than weakening Social Security. According to StrengthenSocialSecurity.org – a coalition of over 300 national and state organizations representing over 50 million Americans, there are seven principles to fully support and strengthen our Social Security system:
- Social Security did not cause the federal deficit; its benefits should not be cut to reduce the deficit. And anyone who tells you Social Security is going broke is either misinformed or deliberately trying to mislead. The Social Security Trust Fund is viable through 2033.
- Social Security should not be privatized in whole or in part. Unlike Wall St. and the stock market, Social Security is a reliable, risk free source of income. These benefits are guaranteed every month and are adjusted to the rise in the cost of living.
- Social Security should not be means-tested.
- Congress should act in the coming few years to close Social Security’s funding gap by requiring those who are most able to afford it to pay somewhat more. This means that the cap on payment into Social Security should be lifted for higher income individuals.
- Social Security’s retirement age, already scheduled to increase from 65 to 67, should not be raised further. Increasing the retirement age disproportionately affects low-income women. The life expectancy for low-income women has decreased over the last 25 years and they are more likely to have jobs that compromise their health. Increasing the retirement age would amount to a 15% benefit cut for low-income women workers.
- Social Security’s benefits should not be reduced, including [benefit-reducing] changes to the COLA or the benefit formula. Republican leaders want to impose a less accurate COLA formula – the chained-CPI. The current COLA (Cost of Living Alliance) formula is based on the Consumer Price Index (CPI) which estimates the price of stuff we need (like food) changes over time. The chained-CPI assumes that when the prices of something goes up, people will automatically replace it for something cheaper (e.g., beef would be substituted with chicken and maybe even eventually with dog food); therefore the COLA can be calculated at a lower rising level. That con only work for the short-term since in some cases (e.g., health care) there are no substitutes and for others (e.g., the food example), people either can’t or won’t go that far without compromising their lives. Over a 30-year retirement, that means that a person would be losing a full month’s worth of Social Security every year. For senior women who often don’t have extra savings or a pension, the gap between their regular expenses and what would be covered over time under a chained-CPI would be disastrous.
- Social Security’s benefits should be increased for those who are most disadvantaged. This would include low-income workers, LGBTQ families in states that don’t recognize same-sex marriages, college students whose working parent has died, and people who have to drop out of the workforce to provide caregiving to their family members.
Increasing the Benefits for the Most Disadvantaged
I’d like to look at this last principle in more depth by focusing on women and Social Security because women make up the combined majority of people in these four groups. So, why should benefits for these four groups be increased?
Low Income Workers
Low Income workers are disproportionately made up of women and people of color. Living hand to mouth, this group of working-age people have little ability to build up any retirement savings. So one leg of the stool is cut very short. And unlike high-income workers who worked at a company with full benefits, they are less likely to have any retirement pension at all. The second leg is also cut very short. As a result, nearly 80% of a low-income worker’s retirement income is made up entirely of Social Security benefits. And because of the cutbacks in Medicare with the aforementioned doughnut hole, this group of retired people – mostly women who live longer – are further squeezed. This group of retirees, rather than having their livelihood threatened by a chained-CPI reduction should, instead have and enhanced benefit by creating a Special Minimum amount of Social Security benefits for lifetime low-income earners.
In 2012, the National Organization for Women Foundation, the National Committee to Preserve Social Security and Medicare, and the Institute for Women’s Policy Research released a report called “Breaking the Social Security Glass Ceiling: A Proposal on How to Modernize Women’s Benefits.” This report presents a proposal to enhance this baseline level of Social Security benefits for low-income workers. They suggest improving the Special Minimum Benefit by:
- Increasing the benefit to equal 150 percent of the aged poverty level for workers with 30 years of credit;
- Reducing the wages required to receive a year of credit toward the minimum benefit to the amount required for four Social Security credits;
- Indexing future increases in the minimum benefit to growth in wages rather than the CPI;
- Providing up to ten family service years of credit toward the computation of the benefit; and
- Increasing the Supplemental Security Income (aka SSI) general income exclusion to $100 and adjust it in future years for inflation.
In June, the US Supreme Court, in a case known as United States v. Windsor, overturned the federal Defense of Marriage Act. They declared that committed same-sex couples who have had their relationships legally recognized as marriage must receive all of the federal benefits, including Social Security, associated with legally-recognized marriages.
Same-sex couples, who live in states that don’t recognize their marriages, however are currently out of luck. In the 37 states without marriage equality, same-sex couples and their families are considered legal strangers. A same-sex household with one wage earner forfeits $675 monthly, the equivalent of two months’ worth of groceries for two people.
The Glass Ceiling report makes the following proposal to address continuing discrimination in these 37 states that don’t recognize same-sex marriages:
- Amend the Social Security Act to define “wife,” and “husband” so that they no longer rely on gender-specific pronouns;
- Provide eligibility to spousal benefits to individuals who are members of same-sex marriages, domestic partnerships, civil unions, or any other such relationship as the states, by law, may prescribe;
- Extend to the children of these relationships, benefits under the same terms and conditions as children of heterosexual couples; and
- Directly address the issue of disparate state-based DOMA laws by declaring that all federal family eligibility determinations under Social Security be exempted from the provisions of state-based Defense of Marriage Acts.
College Students and their Parents
Up until 1981, students attending college whose working parent had died, become disabled, or retired were eligible for Social Security benefits under their parent’s Social Security until they reached the age of 22. That year, all post-secondary benefits were eliminated. Most of the recipients of this benefit were disproportionately children of parents in blue-collar jobs, African-Americans, and those with lower incomes than other college students. As a result of this change in the law, single parents—again most often women—would often defer saving funds for their own retirement in order to assist their kids through college. This decision results either in a a lower level of retirement funds for his/her parent(s) and/or a reduced likelihood of the student attending college if the parent and child are unable to fund the student’s post-secondary education.
The Glass Ceiling report makes the following proposal to address this issue:
- Reinstate benefits for children of disabled or deceased workers until age 22 when the child is attending a college or vocational school on a full-time basis.
In addition to the disparity in pay between men and women, one of the main reasons women’s Social Security benefits are lower on average than that of men is that they are more likely to take time off from work to care for children or elderly and sick adult family members (spouses, parents, in-laws, and other family members). The Social Security Administration uses a calculation known as the “average Indexed Monthly earnings primary insurance amount” (aIMe PIa) to calculate the benefit levels of all beneficiaries. Because of the way that the Social Security Administration calculates the benefit level, any temporary interruption in one’s income can significantly reduce how much Social Security a person can receive.
This affects single women as well as married women since both can and do have children and do have other family members that may need some care. Currently the only way to compensate for this care-giving duty is to provide the caregiver a spousal add-on benefit. This unfair treatment of caregivers in the Social Security formula needs to be changed so that we can continue to care for our family members without jeopardizing the financial security of the caregiver. The Glass Ceiling report also addresses this issue by recommending a change in the way the aIMe PIa is calculated:
- Compute the AIME PIA by imputing an annual wage for each family service year so that total earnings for the year would equal 50 percent of that year’s average annual wage index. Family service years would be those in which an individual provides care to children under the age of six or to elderly or disabled family members. Up to five family service years could be granted to any worker.
These Improvements are Affordable: With Some Changes
We can pay for these improvements, and simultaneously ensure the solvency of our Social Security system for 75 years or more. Changes to how Social Security could be funded are well-known. We just need to do it! The funds for these changes are available IF we:
- Remove the cap on wages subject to the Social Security payroll tax. Rather than capping employee, employers, and the self-employed person’s payroll taxes on the first $113,700 of income, the law should be changed to entirely remove this cap and require millionaires and billionaires to pay the same rate as the rest of us. This one change would provide most of the needed resources. According to Virginia Reno and Joni Lavery of the National Academy of Social Insurance, “this option [by itself] would eliminate much of Social Security’s current actuarial deficit by producing revenue equal to about 2.17 percent of taxable payroll.”
- Slowly increase the Social Security contribution rate by 1/20 of one percent over the next 20 years. This option, according to Reno and Lavery “would provide revenue equal to 1.34 percent of taxable payroll.”
- Treat all salary deductions like 401(K) plans. Currently we pay Social Security and Medicare taxes on any retirement plan, such as a 401(K), a 403(b), or a 527 plan. We do not pay these taxes on that portion of our salary we put aside to pay for any flexible spending account, such as a medical savings account. If we were to treat and tax flexible spending accounts just like our retirement plans, Reno and Lavery report that we would provide an about an additional 0.48 percent of taxable payroll.
These three changes amount to 3.99% of payroll taxes and would fully close the current actuarial deficit (2.67 percent of payroll) according to Reno and Lavery. The additional 1.32% would fund the proposals to strengthen Social Security as recommended in the Glass Ceiling report without hurting women, people of color, LGBTQ people, caregivers, college student, and low-income families.
The funds are there. Let’s make it happen. Let’s strengthen, not weaken Social Security for everyone.