July 25, 2019 Nancy Altman
Today, the House Ways and Means Committee is holding a hearing on the Social Security 2100 Act, which expands the benefits of both current and future beneficiaries, while ensuring that all benefits — scheduled, as well as proposed — will be paid on time and in full throughout the 21st century and beyond. Today’s hearing, at which I am one of five witnesses testifying, is the first full committee Congressional hearing on expanding Social Security benefits in nearly half a century. It represents a critical milestone in the fight to increase, not cut, Social Security’s modest benefits.
Social Security is most Americans’ largest asset. Though the exact value varies with age and other important factors, Americans’ Social Security disability insurance, life insurance and joint and survivor retirement annuities have present values worth hundreds of thousands of dollars.
In addition to those extremely valuable cash benefits, Social Security is intended to provide, as its name suggests, a sense of security, peace of mind. That intangible benefit of security has been lost or at least diminished because too many Americans have been convinced, erroneously, that no benefits will be paid in the future. Restoring Social Security to actuarial balance throughout the 21st century and beyond, as the Social Security 2100 Act does, is an important step to restoring that intangible benefit of security.
It is imperative to recognize that as important as restoring Social Security to long range actuarial balance is, it is merely a means to the goal of providing America’s working families with greater economic security. Importantly, the Social Security 2100 Act restores balance without cutting benefits.
Social Security’s benefits are modest by virtually any measure. Notwithstanding how modest Social Security’s benefits are, they are nevertheless vitally important to virtually all of its 63 million beneficiaries. Social Security is unquestionably the most important source of retirement annuities, life insurance, and disability insurance for the nation’s working families, even for those fortunate to have other assets. Approximately two out of three retirees rely on Social Security for most of their income. About one out of three retirees depend on Social Security for virtually all of their income.
Social Security’s modest benefits should be expanded, not cut. When President Franklin Roosevelt signed Social Security into law, he called it “a cornerstone” on which to build. Yet the last time Congress enacted increases was 1972. Since then, Congress has cut Social Security benefits substantially — and some reductions are still being phased in. Indeed, in 2050, Social Security retirement benefits will be 24 percent lower than they would have been if those cuts had not been enacted.
In the four decades since Congress last enacted benefit increases, wages have stagnated and traditional employer-sponsored defined benefit pension plans have been largely terminated. In 1980, 38 percent of private-sector workers participated in defined benefit plans; in 2018, only 13 percent did. Many employers have replaced traditional defined benefit plans with 401(k) plans, but those have proven inadequate for all but the very wealthiest.
As a consequence of these factors, the nation is facing a retirement income crisis. Too many workers fear they will never be able to retire without drastic reductions in their standard of living. Indeed, numerous polls and surveys over recent years reveal that not having enough money in retirement leads the list of Americans’ top financial concerns.
Some argue that, if Social Security’s modest benefits are increased, the increases should be only for those at or near poverty. This focus on need, however, reveals a fundamental misunderstanding of what Social Security is. Social Security is part of workers’ compensation; it is a benefit that workers earn. Its goal is to insure wages so that if and when they are lost, workers and their families can maintain their standards of living. It is designed to replace wages, not to provide benefits based on need. It is insurance, not welfare.
The Social Security 2100 Act addresses our looming retirement income crisis by increasing benefits for every current and future beneficiary. It also updates the index used to measure increases in beneficiaries’ cost of living to reflect the real expenses, especially health care costs, which seniors face.
The Social Security 2100 Act also improves Social Security’s special minimum benefit. In 1972, when Congress enacted automatic adjustments, it added the special minimum. However, it has eroded in value and virtually no one receives it today. The Social Security 2100 Act increases the amount of the special minimum benefit so that no worker will retire at less than 125 percent of poverty after a lifetime of working and contributing to Social Security.
Social Security has stood the test of time. Next month, we will celebrate the 84th anniversary of the system’s enactment. It is more universal, efficient, secure, and fair than its private sector counterparts are or could be.
Social Security’s core structure, unchanged since its enactment, embodies basic shared American values. It rewards hard work. The more workers earn and contribute, the higher their benefits. It is prudently and efficiently managed, spending less than a penny of every dollar on administration. In addition, it is conservatively financed. Social Security can only pay benefits if it has enough income to cover every penny of its cost, including the cost of administration. It cannot borrow or deficit-spend. As a result, Social Security does not add a penny to the government’s annual deficits or accumulated debt.
The Social Security 2100 Act retains and builds on the structure and the underlying values that have made Social Security so effective and so popular. Poll after poll finds that an overwhelming majority of Republicans, Independents, and Democrats share these views. They are held by self-identified Tea Partiers and union households. All ages, genders, income levels, races, and ethnicities hold these views
In his effort at bipartisanship and responsiveness to all points of view, Chairman Larson has included in the Social Security 2100 Act features that should be attractive to conservatives. These include a tax cut for Social Security beneficiaries with incomes under $50,000 for single filers or $100,000 for joint filers, as well as a financing provision that requires all workers, not just the highest paid, to contribute more to Social Security.
I would prefer larger expansions and progressive financing. Yet I recognize the Social Security 2100 Act to be sound, thoughtful legislation, consistent with the structure, fundamental principles, and values underlying the Social Security program. Its enactment is an extremely important first step.
Some seem to believe that to be a consensus package, the proposal should include benefit reductions as well as tax increases, as President Reagan and Speaker O’Neill did in developing the Social Security Amendments of 1983. The late Robert M. Ball, who represented Speaker O’Neill and the Democrats in negotiating that package, was concerned in the years just before his death in 2008, that policymakers would take that wrong lesson from the 1983 experience.
Just months before his death, Ball wrote an op ed in the Washington Post, where he explained, “What was right in 1983 — a balanced package of benefit cuts and tax increases as part, roughly half, of the final agreement — would be wrong today.” He pointed out, “It’s the essence of responsibility, in my view, to insist on no benefit cuts,” and concluded, in the then-lead up to the 2008 election, “Presidential candidates should be expected to discuss Social Security financing. But in 2008 they shouldn’t be held to a 1983 formula. We’re in a different time, with different needs — and there are much better options available than benefit cuts.”
I am confident that if Bob Ball were alive today, he would be pleased that the major Democratic candidates for president oppose benefit cuts, as Trump has stated is his position. I am also confident that Bob would support the Social Security 2100 Act.
by Paul B. Burkhalter Managing Partner of Morgan & Weisbrod, Board Certified in Social Security Disability Law.