Privatization of social security puts the survival and general welfare of some of the most vulnerable members of our society at risk. Can you imagine what might have happened if Social Security had been privatized when the banking system went into meltdown in 2008?
There are many common sense contra-indications against privatizing Social Security. Social Security is entirely solvent (because it has collected $1.5 trillion more in surplus from paycheck contributions than it paid out in benefits checks) and will pay full benefits at least through 2042; the Congressional Budget Office has estimated that Social Security should be able to pay out all benefits through 2052.
In 2018 at earliest, monthly benefit checks sent out will be higher than the monthly payroll taxes collected by the Social Security trust fund. However, the surplus will keep growing until 2028 because of the interest that the Social Security trust fund earns in US Treasury Bonds. [...] If nothing at all is done to “reform” social security, it will still be able to pay 70% of full benefits after 2042, at worst case.” (source)
Social Security is funded through payroll taxes (that’s what “FICA” means on your paystub). Right now, FICA is capped at $97,000 / year (this is called the payroll tax cap). If we raised the payroll tax cap to $200,000 / year, Social Security would have NO funding gap for more than 100 years. President George W. Bush refused to raise the payroll tax cap, because he felt it would be “unfair” to the wealthy.
President Bush was also in favor of privatization, which means diverting Social Security funds into private savings accounts, where these funds would be invested in stocks (like 401(K) accounts). Besides the risk associated with the stock market (something many of us felt very keenly after 2008, when our investments and savings lost most of their value), any payroll taxes (FICA) diverted from Social Security’s private fund would mean fewer resources available to pay full benefits to the people who faithfully paid their FICA payroll taxes every year of their working lives. Benefits might get cut as little as 15% or as much as 46%, and we already pay our elderly retirees, disabled, and surviving spouses and children far fewer benefits per month than do most other First World industrialized countries worldwide. (source)
Privatized accounts would require paying service fees to banks, trustees, investment bankers, account administrators and other money changers; these administrative fees have been estimated to cost as much as 20 – 30%, which would also mean, by necessity, a reduction in benefits available to citizens who have earned these benefits by paying into the system with each paycheck.
Conservatives tend to forget that Social Security is not welfare or some type of unearned gift: Social Security is an earned benefit.
Most compelling, perhaps, is that the majority of Americans believe that Social Security should not be privatized and see no reason to “reform” a reliable, trustworthy system that’s not broken. (source)
- Under long-standing Federal law, Social Security is not part of the federal budget and thus does not contribute to the federal deficit or the national debt.
- Social Security is an independent self-financed insurance program which is financed by worker paycheck deductions and not by taxation. As Sen. Sanders explains, Social Security has a “dedicated funding system”: “Workers and employers each pay half of a 12.4 percent payroll tax on the first $110,100 of a worker’s wages. The tax rate for employees was reduced to 4.2 percent in 2011 and 2012, but is scheduled to return to 6.2 percent in January.” (source)
- Social Security is prohibited from borrowing funds and must pay recipients from its own private trust fund.
- Social Security can not increase the deficit by tapping general funds to pay earned benefits to recipients.
- Social Security operates in a fiscally responsible manner. The budget and Social Security are separate entities and must be handled separately.
- Social Security is not welfare: Seniors earned their benefits by working hard and paying into the system before they retired.
- The average monthly Social Security payment is $1,200, which is very low by international standards.
2: Social Security does more to reduce poverty among children than any other government program except the Earned Income Tax Credit (EITC).
3: Social Security is more than just a retirement program: one-third of Social Security beneficiaries receive survivors benefits or disability insurance benefits. 10 million beneficiaries are adults below the age of 65, and 4 million are children. The Social Security Administration estimates that almost one of every three young workers will become disabled before reaching retirement age.
4: For two-thirds of the elderly, Social Security provides the majority (50% or more) of their income. For one-third of the elderly, it provides nearly all of their income (90% or more). For 22 percent of seniors, Social Security is the sole source of retirement income.
5: Social Security provides a progressive benefit that keeps up with increases in the cost of living. Social Security retirement benefits are calculated based on a progressive benefit formula. Once benefits are computed, they are automatically adjusted for inflation annually, helping to ensure that people do not fall into poverty as they age. In contrast, most annuities sold by private insurance companies are very expensive and do not increase with inflation. Translation: privatization would be less fiscally responsible than the current system which is already in place and which is quite solvent.
6: Social Security is an extremely efficient program, with administrative costs equaling only 0.6 percent of retirement and survivors benefits. Even private account plans with very limited choices and services would have administrative costs more than ten times as high.
Republicans better keep their paws off my mother’s Social Security benefits.
She has worked for nearly 55 years. I’m just sayin’.