Social Security Dialogue

I have several other Social Security blogs already, why another? It appears that I have to rescue Medicare also, as the smothering of Social Security lies at the feet of people who have ‘helped’ Medicare with kindness. I said that it was beyond my scope to do this, but all I had to do was Google ‘Repeal Obamacare’ to garner 2.9 million helpers, who are both for and against, hence dialogue. I start out with Eric’s report below where he presents his ‘Five Myths about Social Security. He should have added Medicare to the name as the two are so entwined that his comments, strictly speaking are off base, as you will find a multi-page Senate Committee Report by Nancy J. Altman, who wrote the book ‘The Battle for Social Security,’ I read a while ago detailing the history of our most popular social program. She is the daughter of Robert (?) Altman, a key figure in leading Social Security’s struggles with Politicians.
I follow the article below is followed with rebuttal by Greg Anrig who addresses Schurenberg’s hypotheses. Do some Googleing yourself, you’ll see what I mean.
James Opfell Mar. 2012


By ERIC SCHURENBERG, The Fiscal Times
March 8, 2011
Social Security isn’t the only cause of America’s fiscal problems, but it is Exhibit A in why it is so hard to fix them. No serious solution to our debt can ignore a program that will tax and spend about 4.8 percent of GDP this year and account for about 20 percent of all federal spending — and that within a few decades will count almost a third of the population as beneficiaries. But it’s maddeningly difficult to have a reasoned conversation about Social Security when policymakers — let alone taxpayers and recipients — can’t agree on the program’s effect on the budget.
A handful of misconceptions tend to crop up repeatedly — often having to do with that fiscal fun-house mirror, the Social Security trust fund. And despite the efforts of writers like Allan Sloan and experts like the Urban Institute’s Eugene Steuerle, the myths won’t die. This column won’t kill them either, but that doesn’t mean we shouldn’t take a whack. Here goes:
Myth: Social Security didn’t create the deficit — and shouldn’t be cut to close it
This is a much-loved progressive slogan. “Blaming Social Security for the deficit is like blaming Iraq for 9/11,” writes Dave Johnson of OurFuture.org in one of the cleverer examples of the genre.
Technically, the first part of the myth is true — or rather, used to be true. From 1983 until last year, Social Security revenues actually lowered the Treasury’s need to borrow in the public markets because the excess payroll taxes collected for the retirement system helped fund other government programs.
The surplus years are over, however. In 2010, payroll taxes fell short of sums paid out to beneficiaries, due largely to the recession. And while there may be small surpluses over the next few years, the deficits will resume permanently in 2015, as baby boomers begin to retire in droves. In other words, from here on out, year after year, Social Security only makes the deficit larger.
Myth: Social Security benefits are earned; reducing them amounts to confiscation
It’s not hard to see why this illusion exists, since Social Security’s own website refers to “earned credits” and sometimes calls payroll taxes "contributions." Plus, the much-misunderstood Social Security trust fund sounds like a real pot of money, some of which might rightfully be yours. But despite Social Security’s fetish for language that echoes private pensions, no one ever “vests” in Social Security. You don’t own your benefits until you cash the check.
It’s more accurate to say your benefits are an entitlement granted by act of Congress (just like Medicare) and subject to change at any time by another act of Congress. As long as voters consider benefits inviolate, they will be. But when voters decide fiscal responsibility is more important, then Social Security benefits — “earned” or not — will be up for review.
Myth: Social Security is funded until 2037
The trust fund, the ledger on which Social Security records all the surplus payroll taxes collected from wage-earners over the years, is large enough that the program need not ask for extra money to pay benefits until 2037, the year that the trust fund “runs dry” if nothing changes. But that’s not the same as being funded — at least not in a way that has any economic meaning.
As you might know, the trust fund consists of IOUs from the Treasury to the Social Security system. When Social Security needs money beyond what it expects to collect in payroll taxes, it can redeem some of these IOUs. But it’s not as if the trust fund is like having a giant 401(k). It’s more like having daddy’s credit card.
What that means is that Social Security can get what it needs from Treasury without having to ask permission from Congress. But when it redeems one of these IOUs, the Treasury has to come up the money the old-fashioned way, by raising taxes or, more likely, borrowing from the public.
March 8, 2011
Dolly Madison at Daily Kos seems to think that Social Security’s need for cash can be met from the interest credited to the trust fund — that is, with more IOUs. Allan Sloan disagrees:
You know, of course, why this wouldn't work — at least, I hope you know. It's because the U.S. government ultimately has to pay its bills with cash, not with its own IOUs. In the long run, you need cash — real money — not funny money.
“Fully funded” suggests that the money to maintain today’s benefits until 2037 is already locked up. It isn’t. Redeeming IOUs from the trust fund (and the income imputed to those IOUs) will only put another burden on taxpayers who are simultaneously paying for Medicare, interest on the debt, guided-missile frigates, Congressmen’s haircuts, and all the other purposes of government. At some point, the total burden will be too much.
Myth: The trust fund is invested in Treasury bonds, the most secure investments in the world. To suggest that the trust fund wouldn’t pay is blatant fear mongering
The trust fund’s IOUs are entered on the Treasury's books as non-trading “special issue” bonds, paying interest at a rate equal to an average of outstanding Treasuries. And yes, the Treasury will undoubtedly pay if Social Security asks.
But that’s not the issue. The issue is whether taxpayers think it’s so important to maintain Social Security benefits that they will gladly absorb the burden of paying off those bonds on the current schedule. Remember, Congress (that is, you know, taxpayers) can cut benefits — and thus postpone the need for Social Security to redeem any bonds — just by passing a law.
In other words, whether Social Security continues to pay benefits at today’s rates isn’t a question of credit quality. It’s more a question of politics and priorities.
Myth: Social Security is an easy fix
Any policy wonk worth his or her spreadsheet can quickly come up with ways to bring Social Security into long term actuarial balance. You can conjure up solutions yourself using the Committee for a Responsible Federal Budget’s calculator. You’ll find it’s not that hard to wipe out the system’s long-term deficit.
The only problem is that most such solutions regard Social Security as a closed system. They assume that the trust fund is an ATM that gushes cash whenever the trustees demand, and that workers will never balk at stepping up to higher payroll taxes.
Which brings us to what may be the most destructive myth of all: Social Security is, fiscally speaking, an end in itself. In the real world that Social Security actually operates in, the government and its citizens all have other obligations. As Steuerle puts it:
Social Security as a budget issue revolves not simply around its internal accounting balances and trust funds, but rather how much of the economy it occupies and how much of future growth it absorbs.
CMS Nomination | Main | Medicaid and (Supposed) Welfare Dependence »
March 09, 2011
Five Social Security Non-Myths
by Greg Anrig

Eric Schurenberg, the editor-in-chief of BNET and CBSMoneyWatch.com, is a good friend of mine going back to the 1980s, when we worked together at Money magazine. We generally get along great -- as long as we stay away from the subject of Social Security. But since Eric has just written a piece for The Fiscal Times describing five purported myths about the program that are actually facts, and since Eric and I both started as fact-checkers, I have little choice but to set the record straight.
The confusion in the article arises from an inadequate presentation of the 1983 Social Security reforms that were signed into law by President Reagan. At the time, the program was genuinely on the verge of a crisis, with the payroll taxes financing the system months away from falling short of the amount needed to pay beneficiaries. The bi-partisan solution entailed accelerating payroll tax increases, a six-month delay in the annual cost-of-living adjustment, a phased-in hike in the retirement age (which amounts to across-the-board benefit cuts), and the imposition of income taxes on some Social Security benefits.
In addition to covering the immediate shortfall, those changes greatly strengthened the financing of the program so that it would be sustainable decades into the future as the large cohort of Baby Boomers retired. Under the reforms, working age Baby Boomers started paying taxes in excess of benefits owed to current retirees. The surplus revenue was credited to the Social Security trust fund in the form of U.S. Treasury securities. That committed the government to fully paying retirement benefits to the boomers in the future by supplementing payroll taxes with general revenues -- the interest and principal owed on the trust fund securities. In exchange for the higher payroll taxes, the creation of a large and growing trust fund would ensure that those workers received benefits after they retired. That trust fund now amounts to about $2.6 trillion and will continue to grow until 2025, peaking at $4.2 trillion. Those figures come from the latest report of Social Security’s Board of Trustees, which is written by non-political professional actuaries.
The basic deal with the American workforce in 1983 was this: the government would raise taxes on them in exchange for a binding mechanism to ensure that they would receive adequate Social Security benefits in the future. Here is what Reagan said at the signing ceremony: “This bill demonstrates for all time our nation's ironclad commitment to Social Security. It assures the elderly that America will always keep the promises made in troubled times a half a century ago. It assures those who are still working that they, too, have a pact with the future. From this day forward, they have our pledge that they will get their fair share of benefits when they retire.”
Now that the context is clear, let’s turn to Eric’s “myths:”
1. Social Security didn’t create the deficit.
That’s a fact, not a myth. Since 1983, the Social Security surplus has actually reduced overall federal deficits far below what they otherwise would have been. The surplus payroll tax revenue, after being credited to Social Security’s trust fund, was used to finance other governmental operations. So in the absence of that surplus, the federal government would have had to either borrow more to finance the same level of non-Social Security expenses, raise taxes from other sources, or spend less than it did.
The federal government’s overall balance sheet shifted from surpluses to deficits during the early years of the George W. Bush administration because of his huge tax cuts, increased defense and homeland security spending with the launching of two wars, and the unfunded Medicare drug benefit. Then, the Great Recession caused tax revenues to crash, which made already large deficits much deeper. But throughout that period and continuing to this day, federal deficits would have been much worse if Social Security had not been collecting substantially more in payroll taxes than it paid in benefits. The federal debt would be much higher than it currently is. So, no, Social Security didn’t create the deficit.
The year 2010 was the first one since 1983 in which the program’s total expenses (for benefits and administrative costs) exceeded its income from payroll taxes plus the income taxes collected on some Social Security beneficiaries. That temporary imbalance of $41 billion was a consequence of reduced revenues attributable to the economic downturn. The gap was covered by a small slice of the interest owed on the Treasuries in the trust fund, which is payable from general revenues. That interest would have been owed by the general fund whether or not current payroll tax revenues fell short of benefit commitments.
It is worth noting that the temporary payroll tax cut enacted at the end of last year to help boost the economy will indeed add to this year’s deficit. But as long as it expires as scheduled at the end of this year, its impact on the overall governmental balance sheet will be negligible in the future.
The actuarial projections show that aside from the temporary payroll tax cut, the Social Security gap will shrink in 2011 and return to surplus in 2012. Then in 2015, revenues from payroll taxes and income taxes owed by retired beneficiaries on their Social Security income will fall short of benefits of owed and continue to fall short going forward. That will again require some of the trust fund’s interest income to cover the gap. But even still, according to the actuaries, the trust fund will continue growing for another 10 years because it will be earning more than enough interest to finance benefits owed.
The amount of interest that the federal government pays on the Treasury securities in the trust fund is relatively easy to project for the future, like many other categories of spending. To say that Social Security is “creating” deficits and causing them to become much larger in the future when all that is happening is that some of the trust fund interest is going to beneficiaries rather than the trust fund itself is deeply misleading. Just as planned in 1983, the added cost of the retiring baby boomers will begin to be financed by general revenues to supplement payroll tax income. Nothing about that long expected evolution requires a change in policy, including cutting benefits.
2. Social Security benefits are earned; reducing them amounts to confiscation.
Social Security benefits are, in fact, directly connected to past wages based on a long established formula that was tweaked in 1983. Because workers throughout their careers have financed the program through an earmarked payroll tax, they have a legitimate basis for believing that they will receive benefits when they retire that are connected to their past earnings. They also have reason to believe that a high political cost should be paid by elected officials who change the terms of that arrangement. Given the near disappearance in the private sector of old-fashioned defined benefit pensions, which also were based on past wages, Social Security is an even more necessary bedrock against the risk of facing an economically insecure retirement.
3. Social Security is funded until 2037.
Again, there’s nothing mythological about the forecasts of Social Security’s actuaries, which first mention the year 2037 as the depletion date for the program’s trust fund on page 3 and many times thereafter in their 235-page report. Here Eric quotes another former colleague from Money named Allan Sloan, an otherwise astute financial writer who has been railing for years about Social Security and the trust fund: “…the U.S. government ultimately has to pays its bills with cash, not with its own IOUs. In the long run, you need cash—real money-–not funny money.”
Listen to the similarity between Sloan today and Alf Landon, the Republican who ran against Franklin Delano Roosevelt in 1936. Calling Social Security a “cruel hoax,” Landon’s platform stated, “The so-called reserve fund is no reserve at all, because the fund will contain nothing but the fund’s promise to pay.” In reality, Social Security has paid all promised benefits in full in the 75-years since, even as the program greatly expanded throughout that period, and there’s no basis for believing the “funny money” argument is any more credible now that it was then.
Backed by the full faith and credit of the U.S. government, the interest and principal on the Treasury securities in the trust fund will be paid back in full by taxes collected in the future -- just as the government has paid back interest and principal on all securities that the government has ever been issued. No additional burden is placed on future taxpayers due to Social Security beyond the commitment that was already made through the reforms in 1983.
We know that Social Security’s burden is going to rise very gradually, from just below 5 percent of GDP today to just over 6 percent by 2030, and remain at that level indefinitely thereafter. That’s a relatively modest and manageable increase, particularly compared to the anticipated explosion in health care costs. Medicare and Medicaid combined also amount to about 5 percent of gdp today, but are expected to roughly double to 10 percent by 2030 and continue to grow inexorably beyond that date.
4. The trust fund is invested in bonds, the most secure investment in the world. To suggest that the trust fund wouldn’t pay is blatant fear-mongering.
This is basically the same non-myth as item three. Eric writes, “The issue is whether taxpayers think it’s so important to maintain Social Security benefits that they will gladly absorb the burden of paying off those bonds on the current schedule. Remember Congress (that is, you know, taxpayers) can cut benefits – and thus postpone the need for Social Security to redeem any bonds – just by passing a law.”
Social Security is far and away the most popular government program, and virtually every cross-section of the public -- including Tea Party supporters –- by large margins supports the statement that “the costs of Social Security are worth the benefits.” Given that decisive and highly consistent public opinion, efforts to cut Social Security benefits in Washington would run counter to the preferences of average citizens. It is plausible that because our political system has become highly dysfunctional, that could still happen -– particularly when wealthy donors who are ideologically hostile to the program carry so much sway. But that scenario would not be an outgrowth of the will of the people.
5. Social Security is an easy fix.
Nothing is easy in Washington, but relative to a multitude of other public policy challenges, preventing a shortfall in Social Security after 2037 is a relatively manageable task. The projected 75-year gap between promised benefits and resources committed to the program is 0.7 percent of gdp. By way of comparison, rescinding the Bush tax cuts on only taxpayers earning over $200,000 (single) and $250,000 (married) would generate the same 0.7 percent, according to the Center on Budget and Policy Priorities. Another way to fill the gap entirely would be to remove the $106,800 cap on each worker's earnings that is subject to the payroll tax.
I’m looking forward to seeing Eric soon for lunch or a drink, and catching up on everything except the condition of Social Security.
Posted by Greg Anrig on March 9, 2011 | Permalink | Email this post

Social Security Dialogue

I have several other Social Security blogs already, why another? It appears that I have to rescue Medicare also, as the smothering of Social Security lies at the feet of people who have ‘helped’ Medicare with kindness. I said that it was beyond my scope to do this, but all I had to do was Google ‘Repeal Obamacare’ to garner 2.9 million helpers, who are both for and against, hence dialogue. I start out with Eric’s report below where he presents his ‘Fife Myths about Social Security. He should have added Medicare to the list as the two are so entwined that his comments, strictly speaking are off base, as you will find a multi-page Senate Committee Report by Nancy J. Altman, who wrote the book I read a while ago detailing the history of our most popular social program. She is the daughter of Robert Altman, a key figure in leading Social Security’s struggles with Politicians.
I follow the article below with rebuttal by Greg Anrig who addresses Schurenberg’s hypotheses. Do some Googleing yourself, you’ll see what I mean.



By ERIC SCHURENBERG, The Fiscal Times
March 8, 2011
Social Security isn’t the only cause of America’s fiscal problems, but it is Exhibit A in why it is so hard to fix them. No serious solution to our debt can ignore a program that will tax and spend about 4.8 percent of GDP this year and account for about 20 percent of all federal spending — and that within a few decades will count almost a third of the population as beneficiaries. But it’s maddeningly difficult to have a reasoned conversation about Social Security when policymakers — let alone taxpayers and recipients — can’t agree on the program’s effect on the budget.
A handful of misconceptions tend to crop up repeatedly — often having to do with that fiscal fun-house mirror, the Social Security trust fund. And despite the efforts of writers like Allan Sloan and experts like the Urban Institute’s Eugene Steuerle, the myths won’t die. This column won’t kill them either, but that doesn’t mean we shouldn’t take a whack. Here goes:
Myth: Social Security didn’t create the deficit — and shouldn’t be cut to close it
This is a much-loved progressive slogan. “Blaming Social Security for the deficit is like blaming Iraq for 9/11,” writes Dave Johnson of OurFuture.org in one of the cleverer examples of the genre.
Technically, the first part of the myth is true — or rather, used to be true. From 1983 until last year, Social Security revenues actually lowered the Treasury’s need to borrow in the public markets because the excess payroll taxes collected for the retirement system helped fund other government programs.
The surplus years are over, however. In 2010, payroll taxes fell short of sums paid out to beneficiaries, due largely to the recession. And while there may be small surpluses over the next few years, the deficits will resume permanently in 2015, as baby boomersbegin to retire in droves. In other words, from here on out, year after year, Social Security only makes the deficit larger.
Myth: Social Security benefits are earned; reducing them amounts to confiscation
It’s not hard to see why this illusion exists, since Social Security’s own website refers to “earned credits” and sometimes calls payroll taxes "contributions." Plus, the much-misunderstood Social Security trust fund sounds like a real pot of money, some of which might rightfully be yours. But despite Social Security’s fetish for language that echoes private pensions, no one ever “vests” in Social Security. You don’t own your benefits until you cash the check.
It’s more accurate to say your benefits are an entitlement granted by act of Congress (just like Medicare) and subject to change at any time by another act of Congress. As long as voters consider benefits inviolate, they will be. But when voters decide fiscal responsibility is more important, then Social Security benefits — “earned” or not — will be up for review.
Myth: Social Security is funded until 2037
The trust fund, the ledger on which Social Security records all the surplus payroll taxes collected from wage-earners over the years, is large enough that the program need not ask for extra money to pay benefits until 2037, the year that the trust fund “runs dry” if nothing changes. But that’s not the same as being funded — at least not in a way that has any economic meaning.
As you might know, the trust fund consists of IOUs from the Treasury to the Social Security system. When Social Security needs money beyond what it expects to collect in payroll taxes, it can redeem some of these IOUs. But it’s not as if the trust fund is like having a giant 401(k). It’s more like having daddy’s credit card.
What that means is that Social Security can get what it needs from Treasury without having to ask permission from Congress. But when it redeems one of these IOUs, the Treasury has to come up the money the old-fashioned way, by raising taxes or, more likely, borrowing from the public.
March 8, 2011
Dolly Madison at Daily Kos seems to think that Social Security’s need for cash can be met from the interest credited to the trust fund — that is, with more IOUs. Allan Sloan disagrees:
You know, of course, why this wouldn't work — at least, I hope you know. It's because the U.S. government ultimately has to pay its bills with cash, not with its own IOUs. In the long run, you need cash — real money — not funny money.
“Fully funded” suggests that the money to maintain today’s benefits until 2037 is already locked up. It isn’t. Redeeming IOUs from the trust fund (and the income imputed to those IOUs) will only put another burden on taxpayers who are simultaneously paying for Medicare, interest on the debt, guided-missile frigates, Congressmen’s haircuts, and all the other purposes of government. At some point, the total burden will be too much.
Myth: The trust fund is invested in Treasury bonds, the most secure investments in the world. To suggest that the trust fund wouldn’t pay is blatant fear mongering
The trust fund’s IOUs are entered on the Treasury's books as non-trading “special issue” bonds, paying interest at a rate equal to an average of outstanding Treasuries. And yes, the Treasury will undoubtedly pay if Social Security asks.
But that’s not the issue. The issue is whether taxpayers think it’s so important to maintain Social Security benefits that they will gladly absorb the burden of paying off those bonds on the current schedule. Remember, Congress (that is, you know, taxpayers) can cut benefits — and thus postpone the need for Social Security to redeem any bonds — just by passing a law.
In other words, whether Social Security continues to pay benefits at today’s rates isn’t a question of credit quality. It’s more a question of politics and priorities.
Myth: Social Security is an easy fix
Any policy wonk worth his or her spreadsheet can quickly come up with ways to bring Social Security into long term actuarial balance. You can conjure up solutions yourself using the Committee for a Responsible Federal Budget’s calculator. You’ll find it’s not that hard to wipe out the system’s long-term deficit.
The only problem is that most such solutions regard Social Security as a closed system. They assume that the trust fund is an ATM that gushes cash whenever the trustees demand, and that workers will never balk at stepping up to higher payroll taxes.
Which brings us to what may be the most destructive myth of all: Social Security is, fiscally speaking, an end in itself. In the real world that Social Security actually operates in, the government and its citizens all have other obligations. As Steuerle puts it:
Social Security as a budget issue revolves not simply around its internal accounting balances and trust funds, but rather how much of the economy it occupies and how much of future growth it absorbs.
CMS Nomination | Main | Medicaid and (Supposed) Welfare Dependence »
March 09, 2011
Five Social Security Non-Myths
by Greg Anrig

Eric Schurenberg, the editor-in-chief of BNET and CBSMoneyWatch.com, is a good friend of mine going back to the 1980s, when we worked together at Money magazine. We generally get along great -- as long as we stay away from the subject of Social Security. But since Eric has just written a piece for The Fiscal Times describing five purported myths about the program that are actually facts, and since Eric and I both started as fact-checkers, I have little choice but to set the record straight.
The confusion in the article arises from an inadequate presentation of the 1983 Social Security reforms that were signed into law by President Reagan. At the time, the program was genuinely on the verge of a crisis, with the payroll taxes financing the system months away from falling short of the amount needed to pay beneficiaries. The bi-partisan solution entailed accelerating payroll tax increases, a six-month delay in the annual cost-of-living adjustment, a phased-in hike in the retirement age (which amounts to across-the-board benefit cuts), and the imposition of income taxes on some Social Security benefits.
In addition to covering the immediate shortfall, those changes greatly strengthened the financing of the program so that it would be sustainable decades into the future as the large cohort of Baby Boomers retired. Under the reforms, working age Baby Boomers started paying taxes in excess of benefits owed to current retirees. The surplus revenue was credited to the Social Security trust fund in the form of U.S. Treasury securities. That committed the government to fully paying retirement benefits to the boomers in the future by supplementing payroll taxes with general revenues -- the interest and principal owed on the trust fund securities. In exchange for the higher payroll taxes, the creation of a large and growing trust fund would ensure that those workers received benefits after they retired. That trust fund now amounts to about $2.6 trillion and will continue to grow until 2025, peaking at $4.2 trillion. Those figures come from the latest report of Social Security’s Board of Trustees, which is written by non-political professional actuaries.
The basic deal with the American workforce in 1983 was this: the government would raise taxes on them in exchange for a binding mechanism to ensure that they would receive adequate Social Security benefits in the future. Here is what Reagan said at the signing ceremony: “This bill demonstrates for all time our nation's ironclad commitment to Social Security. It assures the elderly that America will always keep the promises made in troubled times a half a century ago. It assures those who are still working that they, too, have a pact with the future. From this day forward, they have our pledge that they will get their fair share of benefits when they retire.”
Now that the context is clear, let’s turn to Eric’s “myths:”
1. Social Security didn’t create the deficit.
That’s a fact, not a myth. Since 1983, the Social Security surplus has actually reduced overall federal deficits far below what they otherwise would have been. The surplus payroll tax revenue, after being credited to Social Security’s trust fund, was used to finance other governmental operations. So in the absence of that surplus, the federal government would have had to either borrow more to finance the same level of non-Social Security expenses, raise taxes from other sources, or spend less than it did.
The federal government’s overall balance sheet shifted from surpluses to deficits during the early years of the George W. Bush administration because of his huge tax cuts, increased defense and homeland security spending with the launching of two wars, and the unfunded Medicare drug benefit. Then, the Great Recession caused tax revenues to crash, which made already large deficits much deeper. But throughout that period and continuing to this day, federal deficits would have been much worse if Social Security had not been collecting substantially more in payroll taxes than it paid in benefits. The federal debt would be much higher than it currently is. So, no, Social Security didn’t create the deficit.
The year 2010 was the first one since 1983 in which the program’s total expenses (for benefits and administrative costs) exceeded its income from payroll taxes plus the income taxes collected on some Social Security beneficiaries. That temporary imbalance of $41 billion was a consequence of reduced revenues attributable to the economic downturn. The gap was covered by a small slice of the interest owed on the Treasuries in the trust fund, which is payable from general revenues. That interest would have been owed by the general fund whether or not current payroll tax revenues fell short of benefit commitments.
It is worth noting that the temporary payroll tax cut enacted at the end of last year to help boost the economy will indeed add to this year’s deficit. But as long as it expires as scheduled at the end of this year, its impact on the overall governmental balance sheet will be negligible in the future.
The actuarial projections show that aside from the temporary payroll tax cut, the Social Security gap will shrink in 2011 and return to surplus in 2012. Then in 2015, revenues from payroll taxes and income taxes owed by retired beneficiaries on their Social Security income will fall short of benefits of owed and continue to fall short going forward. That will again require some of the trust fund’s interest income to cover the gap. But even still, according to the actuaries, the trust fund will continue growing for another 10 years because it will be earning more than enough interest to finance benefits owed.
The amount of interest that the federal government pays on the Treasury securities in the trust fund is relatively easy to project for the future, like many other categories of spending. To say that Social Security is “creating” deficits and causing them to become much larger in the future when all that is happening is that some of the trust fund interest is going to beneficiaries rather than the trust fund itself is deeply misleading. Just as planned in 1983, the added cost of the retiring baby boomers will begin to be financed by general revenues to supplement payroll tax income. Nothing about that long expected evolution requires a change in policy, including cutting benefits.
2. Social Security benefits are earned; reducing them amounts to confiscation.
Social Security benefits are, in fact, directly connected to past wages based on a long established formula that was tweaked in 1983. Because workers throughout their careers have financed the program through an earmarked payroll tax, they have a legitimate basis for believing that they will receive benefits when they retire that are connected to their past earnings. They also have reason to believe that a high political cost should be paid by elected officials who change the terms of that arrangement. Given the near disappearance in the private sector of old-fashioned defined benefit pensions, which also were based on past wages, Social Security is an even more necessary bedrock against the risk of facing an economically insecure retirement.
3. Social Security is funded until 2037.
Again, there’s nothing mythological about the forecasts of Social Security’s actuaries, which first mention the year 2037 as the depletion date for the program’s trust fund on page 3 and many times thereafter in their 235-page report. Here Eric quotes another former colleague from Money named Allan Sloan, an otherwise astute financial writer who has been railing for years about Social Security and the trust fund: “…the U.S. government ultimately has to pays its bills with cash, not with its own IOUs. In the long run, you need cash—real money-–not funny money.”
Listen to the similarity between Sloan today and Alf Landon, the Republican who ran against Franklin Delano Roosevelt in 1936. Calling Social Security a “cruel hoax,” Landon’s platform stated, “The so-called reserve fund is no reserve at all, because the fund will contain nothing but the fund’s promise to pay.” In reality, Social Security has paid all promised benefits in full in the 75-years since, even as the program greatly expanded throughout that period, and there’s no basis for believing the “funny money” argument is any more credible now that it was then.
Backed by the full faith and credit of the U.S. government, the interest and principal on the Treasury securities in the trust fund will be paid back in full by taxes collected in the future -- just as the government has paid back interest and principal on all securities that the government has ever been issued. No additional burden is placed on future taxpayers due to Social Security beyond the commitment that was already made through the reforms in 1983.
We know that Social Security’s burden is going to rise very gradually, from just below 5 percent of GDP today to just over 6 percent by 2030, and remain at that level indefinitely thereafter. That’s a relatively modest and manageable increase, particularly compared to the anticipated explosion in health care costs. Medicare and Medicaid combined also amount to about 5 percent of gdp today, but are expected to roughly double to 10 percent by 2030 and continue to grow inexorably beyond that date.
4. The trust fund is invested in bonds, the most secure investment in the world. To suggest that the trust fund wouldn’t pay is blatant fear-mongering.
This is basically the same non-myth as item three. Eric writes, “The issue is whether taxpayers think it’s so important to maintain Social Security benefits that they will gladly absorb the burden of paying off those bonds on the current schedule. Remember Congress (that is, you know, taxpayers) can cut benefits – and thus postpone the need for Social Security to redeem any bonds – just by passing a law.”
Social Security is far and away the most popular government program, and virtually every cross-section of the public -- including Tea Party supporters –- by large margins supports the statement that “the costs of Social Security are worth the benefits.” Given that decisive and highly consistent public opinion, efforts to cut Social Security benefits in Washington would run counter to the preferences of average citizens. It is plausible that because our political system has become highly dysfunctional, that could still happen -– particularly when wealthy donors who are ideologically hostile to the program carry so much sway. But that scenario would not be an outgrowth of the will of the people.
5. Social Security is an easy fix.
Nothing is easy in Washington, but relative to a multitude of other public policy challenges, preventing a shortfall in Social Security after 2037 is a relatively manageable task. The projected 75-year gap between promised benefits and resources committed to the program is 0.7 percent of gdp. By way of comparison, rescinding the Bush tax cuts on only taxpayers earning over $200,000 (single) and $250,000 (married) would generate the same 0.7 percent, according to the Center on Budget and Policy Priorities. Another way to fill the gap entirely would be to remove the $106,800 cap on each worker's earnings that is subject to the payroll tax.
I’m looking forward to seeing Eric soon for lunch or a drink, and catching up on everything except the condition of Social Security.
Posted by Greg Anrig on March 9, 2011 | Permalink | Email this post


1
STATEMENT OF NANCY J. ALTMAN, J.D.
CO-DIRECTOR, SOCIAL SECURITY WORKS
CO-CHAIR, THE STRENGTHEN SOCIAL SECURITY COALITION
HEARING ON
PERSPECTIVES ON DEBT REDUCTION: SOCIAL SECURITY
UNITED STATES SENATE
COMMITTEE ON FINANCE
MAY 10, 2011
Chairman Baucus, Ranking Member Hatch, and Members of the Committee:
Thank you for holding today’s hearing on how Social Security relates to the federal debt
subject to a statutory limit which will be reached in a matter of months.1 Social Security
is of vital importance to the American people, and its relationship to the federal debt is
crucial to understand, yet widely misunderstood.
As co-director of Social Security Works, I co-chair the Strengthen Social Security
Campaign, a broad-based coalition of over 300 national and state organizations
representing 50 million Americans, including seniors, workers, women, people with
disabilities, children, young adults, people of low-income, people of color, communities
of faith, and others. I also chair the Board of Directors of the Pension Rights Center, and
serve on the Board of Directors of both the National Academy of Social Insurance and
the Foundation of the National Committee to Preserve Social Security and Medicare.
In 1982, I had the honor to serve as the top assistant to Alan Greenspan in his capacity as
the Chairman of the so-called Greenspan commission, whose recommendations formed
the basis for the Social Security Amendments of 1983. Prior to that, I had the privilege to
serve as a legislative assistant to Senator John C. Danforth (R-MO.).
Social Security is a Pension Plan whose Income and Assets, like Those of Private
Pensions, are Legally Required to be Segregated from Those of the Plan Sponsor
Those arguing for the inclusion of Social Security in comprehensive deficit legislation
often seek to justify their position by asserting that “everything” should be “on the table.”
But that facile phrase fails to recognize that Social Security is a pension plan. For sound
1 While economists sometimes artificially divide the federal debt into subcategories, such as debt held by
foreign entities, pension trusts, individuals, the public, and so on, the law does not. The category of debt
which is recognized by the law is the government’s total debt which is subject to a statutory limit. That is
the amount of debt which the United States cannot exceed without an Act of Congress raising the debt
limit. That is the category of debt on which this statement focuses.
2
reasons, the law requires that private employers who sponsor pension plans keep plan
income and assets segregated from the company’s general operating fund. For the same
sound policy reasons, the law requires that Social Security’s income and assets be kept
segregated from the general operating fund of its plan sponsor, the federal government.
Both private pensions and Social Security are required to keep plan assets in pension
trusts overseen by plan trustees. Like any prudent plan sponsor, the federal government
carefully accounts for those plan assets. Several dozen civil servants at the Department
of Treasury and the Social Security Administration keep precise and meticulous track of
the income and assets of Social Security. Every year, the trustees of the Social Security
trust funds are required by law to report to Congress on the program’s current and
projected operations. In addition to those measures, Congress has required that Social
Security’s income and outgo not be part of the federal budget. The law unambiguously
states that Social Security “shall not be counted…for purposes of - (1) the budget of the
United States Government as submitted by the President, [or] (2) the congressional
budget….”2
Social Security’s primary revenue has always been pension contributions of employers
and employees. Today, those contributions are sometimes referred to as payroll taxes,
but they are, more accurately, pension insurance contributions. This is precisely why the
statute mandating these payments is entitled the Federal Insurance Contributions Act
(FICA).
That title is no political spin. Congress enacted the Federal Insurance Contributions Act
in 1939, well before the current fashion of Madison Avenue-styled legislative titles like
the “Economic Growth and Tax Relief Act” or “Repealing the Job-Killing Health Care
Law Act.” In stark contrast, Franklin Roosevelt named his bills plainly and
straightforwardly. His tax bills were labeled “Revenue Act”, his legislation to protect the
right of workers to unionize, the “National Labor Relations Act”, and his “Federal
Insurance Contributions Act” specifies the contributions workers must make in exchange
for pension annuities, life insurance, and since 1956, disability insurance. From the
beginning, contributions not needed for current benefits and related administrative costs
have been invested and kept in trust as a reserve for the exclusive purposes of paying
benefits and associated administrative costs.
By Law, Social Security Cannot Add a Penny to the Deficit
The injection of Social Security into the broader deficit debate obscures the fact that by
law Social Security lacks the authority to add to the federal deficit.3 By law, it can only
pay benefits, if it has sufficient revenue to cover the costs. Its budget must be balanced,
but Social Security cannot accrue the revenue needed to balance its budget through
borrowing, because it has no borrowing authority. Social Security lacks the legal
2 Pub. L. 101-508, title XIII, Sec. 13301(a), Nov. 5, 1990, 104 Stat. 1388-623
3 Appended, for the Committee’s information, is a statement signed by 276 academics and other Social
Security and budget experts seeking to dispel confusion about this often misunderstood point
3
authority to deficit-spend, and so, cannot run a deficit. Because it cannot run a deficit, it
cannot add to the federal deficit 4
Cutting Social Security Does Not Reduce the Federal Debt Subject to Limit
As the members of this Committee know, the federal government will reach the limit on
federal debt, or debt limit, in a matter of months. In that regard, it is crucial to understand
that cutting Social Security does not reduce the United States’ debt subject to that limit.
This sharply differs from cuts to agricultural subsidies, defense, or other expenditures
from the government’s general fund.
If a program paid for from general-fund revenue were cut by $100 billion and nothing
else changed, the federal government’s borrowing needs would go down by $100 billion.
As a consequence, the federal debt subject to the debt limit would also go down (or more
realistically, given the current large deficits, would go up less than it would have, without
the cut). If the savings from that hypothetical cut were offset dollar-for-dollar by a cut in
income taxes or an increase in other expenditures funded from general revenues, the
federal debt subject to limit would be unchanged.
In stark contrast, if Social Security benefits were cut by $100 billion, the federal debt
subject to limit or total debt would remain unchanged. If the $100 billion savings from
cutting Social Security benefits were offset dollar-for-dollar by a cut in income taxes or
an increase in general-revenue spending, the total federal debt would increase!
For those who are used to thinking about Social Security as just another spending
program and about Social Security contributions as just another tax, the relationship
between Social Security and the federal debt may be counterintuitive. To grasp that
relationship, it is important to see that Social Security is a defined benefit pension plan
with its own separate income, outgo, and reserve fund.
The following thought experiment may help. Imagine a private pension plan whose
assets are invested solely in Treasury obligations. Imagine further that the plan sponsor,
Company XYZ, cuts the benefits the plan provides, but does not decrease the plan’s
funding in any way. In that case, the plan would have more income in relation to its
expenses than it had before plan benefits were cut. The plan accordingly would use that
additional income to purchase additional Treasury obligations (or to pay plan costs, if that
were necessary). The plan’s increased income would have no effect on the federal deficit
or debt. The federal government would have exactly the same general-fund income and
outgo, and so, the same borrowing needs, irrespective of the cuts to the pension plan
benefits. Consequently, the Department of Treasury would issue debt instruments totaling
the exact same value, irrespective of the actions of the pension plan.
4 The so-called “payroll tax holiday,” enacted last December and set to expire on December 31, 2011, is a
temporary change in the self-funded nature of Social Security. The provision substitutes, in 2011, general
revenue for a portion of Social Security’s dedicated worker contributions. .Many Social Security experts,
including me, opposed the change because we believed it to be poor Social Security policy.
4
In the exact same way, if Social Security’s plan sponsor, the federal government, cuts the
benefits Social Security provides but does not decrease the level of contributions
employers and employees are required to make under FICA, Social Security’s income
would increase in relation to its expenses, and Social Security, accordingly, would
purchase additional Treasury obligations. Social Security’s additional income and its
purchase of additional Treasury bonds would have no effect on the federal deficit or debt.
The federal government would have exactly the same general-fund income and outgo,
and so, the same borrowing needs, irrespective of the cuts to Social Security.
Consequently, the Department of Treasury would issue debt instruments totaling the
exact same value, irrespective of the changes to Social Security.
Cutting Social Security’s benefits, like cutting the benefits of a private pension plan, does
not reduce by even a penny the federal deficit or the total value of debt instruments issued
by Treasury. The only way to reduce the amount of federal debt Treasury issues is to
reduce the expenditures of the government’s general operating fund or increase its
income.
Current Law Already Includes an Automatic Cap on Social Security Spending
Some policymakers are proposing a so-called universal cap as a mechanism to control
federal spending. It is important to understand that unlike the general fund, Social
Security already has an automatic spending cap. If Social Security were ever to lack
sufficient revenue to cover the cost of scheduled benefits, the law provides that those
benefits be reduced automatically.
In order to allow Congress ample time to avoid Social Security’s automatic trigger, the
law requires that Social Security’s Board of Trustees report annually regarding the
program’s financial operations, projected over a 75 year valuation period. According to
the most recent Trustees Report, issued last August, Social Security is projected to have a
surplus in 2011 of $113 billion, and to be able to meet all scheduled obligations, even
with no Congressional action whatsoever, for the next quarter of a century. If no action
were taken by then, Social Security’s cap on spending would automatically cut its
expenditures across-the-board so that beneficiaries would receive, according to the
actuaries’ projections, only 78 percent of their scheduled benefits at that point.
Including Social Security within Deficit Legislation – Irrespective of the Rationale --
Risks the Appearance of Improperly Raiding Social Security
Notwithstanding the fact that Social Security does not and cannot contribute to the
deficit, the proposal put forward by the co-chairs of the president’s National Commission
on Fiscal Responsibility and Reform included changes to Social Security, though the
report explains that Social Security was included “for its own sake, and not for deficit
reduction.” The president and others have similarly discussed a so-called “parallel” track
for Social Security. This approach is ill-advised.
5
Including Social Security in a comprehensive deficit package, irrespective of the
rationale, is highly likely to create deep suspicion, and perhaps even anger, among the
American people. The suspicion and anger that would ensue from including Social
Security in deficit reduction legislation – no matter the rationale for its inclusion -- is
foreseeable and understandable.
By law, Social Security’s income can only be used for benefits and associated
administrative costs. That requirement is not just the operation of law; it represents the
solemn, long-standing, fiduciary responsibility of the government, as the plan sponsor.
Historically, Congress has been extremely diligent and careful in executing its fiduciary
responsibility with respect to Social Security’s income and assets. From the program’s
origin, Congress has required Social Security’s trustees to invest all surpluses in the
safest, most conservative investment possible -- interest-bearing debt instruments backed
by the full faith and credit of the United States. Congress has also required those trustees
to report annually, no matter the circumstances, even during World War II and other
times of war, on those contributions and those surpluses which are in reserve, available
whenever the monies are needed to pay scheduled benefits. Currently Social Security
has an accumulated reserve of $2.6 trillion.
Diverting Social Security’s dedicated income and assets from their intended purpose is
legally and morally wrong. Not surprisingly, numerous polls indicate that the American
people do not want their Social Security contributions diverted to debt reduction or
governmental purposes other than Social Security. Yet, polling and focus group data
from a number of sources, including our own, reveal that many Americans believe that
the government has already stolen their contributions or fear that it will. Too many
Americans are convinced that their Social Security contributions have been stolen. Too
many others are uncertain or worried that Congress will steal Social Security’s income
and assets to use for other unauthorized purposes.
The reason for this widely-held anxiety is easy to understand. The American people are
constantly bombarded with irresponsible rhetoric about Social Security. For example,
some policymakers casually refer to the interest-bearing United States Treasury bonds
purchased by Social Security as “just IOUs.” These policymakers fail to acknowledge
that the expression could be used for all Treasury obligations backed “just” by the full
faith and credit of the United States. Similarly, some elected officials have warned
ominously that Social Security’s reserves have already been spent, again not
acknowledging that whenever a corporation or governmental entity issues bonds, it does
so to raise needed funds, which it plans to spend; investors understand and expect that the
funds will be spent and repaid out of future revenue. Even more reprehensibly, some
policymakers have argued for cutting Social Security by quoting Willie Sutton, a
notorious bank robber, who, when asked why he robbed banks, replied, “because that’s
where the money is." The quip presents an unintended but revealing picture – bank
robbers and politicians, all eager to grab the money that hardworking Americans
trustingly hand over every payday to what they believe is a safe institution.
6
All of this casual, irresponsible rhetoric is a serious disservice to the American people
and explains why so many Americans believe that their contributions have been stolen.
Past policymakers have understood their fiduciary responsibility for the funds which are
held in trust for the trusts’ beneficial owners, American workers and their families. With
the notable and disastrous exception of 1981,5 a time that should serve as a cautionary
tale to all politicians, policymakers have understood that, to avoid even the appearance of
impropriety, deliberations over Social Security’s future solvency should be kept
completely separate from broad deficit-reduction efforts.
To include Social Security in deficit legislation, even with the explanation that the
inclusion has nothing to do with deficit reduction, risks reinforcing the widespread belief
that Congress is improperly commingling Social Security’s dedicated monies with the
government’s general operating fund.
The foreseeable suspicion and anger on the part of the American people can easily be
avoided by addressing Social Security in legislation devoted to it alone, at a time after the
current deficit debate is concluded, so that Social Security deliberations are totally
divorced from general budget discussions. This approach will avoid the appearance of
wrong-doing. As discussed below, it is likely to produce better policy outcomes, as well.
Congress Should Address Social Security After The Current Deficit Deliberations
have been Concluded and After the Debt Ceiling has been Raised
In addition to the advantage of avoiding even the appearance of wrong-doing, prudence
suggests waiting until after the deficit deliberations are concluded to take up the issue of
Social Security. As part of the current deficit deliberations, this Committee has
jurisdiction over, and so responsibility for, important programs funded by general
revenue, as well as over income taxation and other forms of general revenue.
Social Security is too complicated and too important to the American people to be
addressed as part of other complicated legislation, when full attention will necessarily be
diverted, and when there is no compelling or urgent reason to do so. There is no need
for haste in addressing Social Security. The latest Trustees’ Report projects that Social
5 Past Congresses have consistently kept Social Security’s income and assets separate from broad deficitreduction
efforts – with the notable and disastrous exception of 1981, during President Reagan’s first year
in office. Just like today, the federal government had an actual deficit, while Social Security was projecting
a deficit. In those two deficits, the Reagan administration saw an opportunity. Reagan’s OMB director,
David Stockman, who later referred to Social Security as “closet socialism,” explained confidentially at the
time to journalist William Greider that the deficits “will permit the politicians to look like they’re doing
something for the beneficiary population when they are doing something to it.” The Reagan administration
badly miscalculated. The conflation of the two deficits in budget reconciliation legislation, followed by a
proposal which would have drastically reduced early retirement benefits, set off a firestorm. Seeking to
quell the storm and get through the 1982 election, President Reagan established the Greenspan commission.
The Commission, on whose staff I served, decided at the outset, to divorce Social Security deliberations
from concerns about the deficit or Medicare. Focused exclusively on Social Security, the Greenspan
commission was ultimately able to reach agreement.
7
Security can pay all benefits on time and in full until 2037, without any Congressional
action whatsoever. While Social Security’s projected deficit should be eliminated in a
timely manner, waiting until after the current debate over deficits and the debt ceiling is
both timely and prudent, given the program’s complexity and importance.
Social Security, which has been carefully crafted over its 75 year history, provides vital
economic security to virtually every American -- not only to the more than 54 million
beneficiaries who receive monthly benefits but also to the more than 165 million workers
who contribute and who, together with their families, are insured against the loss of
wages in the event of disability, death, or old age. Current beneficiaries include millions
of widows, widowers, seniors, .children who have lost parents, and people with
disabilities, as well as their children and spouses.
Our brave soldiers wounded in Iraq and Afghanistan receive Social Security benefits, as
do their spouses and children. So do the families of soldiers who have given their lives in
defense of the nation. Though little noted, Social Security continues to provide benefits
to the families of those who lost their lives in the 9/11 attacks. Social Security’s benefits
are crucial to the vast majority of its beneficiaries and the communities in which they live
and spend.
Because Americans in the last few years have lost trillions of dollars in home equity and
retirement savings, it is more important than ever that proposed changes to Social
Security be addressed deliberately, thoughtfully, and in the sunshine. The importance of
Social Security to virtually the entire population demands that proposals for change
receive thorough consideration, with public participation by representative groups, so that
the implications of all changes are closely examined and clearly understood. Any kind of
expedited procedure or omnibus vehicle would be a disservice to the American people.
Congress Should Use Regular Order in Addressing Social Security, as All Past
Congresses Have Done
Throughout Social Security’s long history, Congress has always relied on regular order
when considering Social Security. Starting with its enactment in 1935, Social Security
legislation has always had the benefit of (1) full hearings before the House Ways and
Means Committee and the Senate Finance Committee; (2) executive sessions which
provided all members the opportunity to offer amendments; (3) unlimited debate and
opportunity for amendments in the Senate; and (4) debate and amendment in the House
of Representatives, consistent with its rules.
This was the procedure that was followed in the enactment of the Social Security
Amendments of 1977, when Social Security faced a larger and more immediate projected
deficit than it does now. Then-President Jimmy Carter proposed legislation that was
considered carefully, with the benefit of full hearings before both the House Ways and
Means Committee and the Senate Finance Committee. Regular order was also followed
in 1983, when Congress largely followed the recommendations of the so-called
Greenspan commission.
8
An issue as far-reaching as Social Security demands that it be addressed only after careful
consideration by this Committee, where the expertise resides. Past Congresses have
always dealt with Social Security responsibly and in the sunshine. There is no reason that
this Congress cannot, as well.
This Committee Should Clearly Define and State the Goal Before It Begins to
Address Social Security’s Projected Shortfall
Historically, policymakers deemed Social Security solvent if its income and outgo were
in actuarial balance or even close actuarial balance for a prescribed valuation period.
Social Security’s actuaries have used valuation periods as short as 35 years, and as long
as 80 years, but since 1965, the valuation period has been 75 years.
Recently, some have advocated even tougher tests of solvency. Some argue that, in
addition to projecting balance for three-quarters of a century, Social Security must be
found to be sustainable in the 75th year or, even more extreme, that Social Security be
solvent over an infinite time horizon.
Others appear to reject the entire concept of actuarial balance and instead want to require
that the annual cash flow from Social Security’s income from outside the federal
government equal or exceed its expenditures. The effect of this goal would be to ignore
Social Security’s investment income and reserves -- in essence, to have the government
effectively default on legal instruments backed by the full faith and credit of the United
States. This approach represents the precise sort of diversion of worker contributions
which Congress should take great pains to avoid and indeed to vociferously discredit.
To provide perspective on what the appropriate goal should be, it is important to
recognize that three quarters of a century is a longer valuation period than that used by
private pensions and, indeed, by most other nations with respect to their Social Security
programs. Moving the goal posts even further away – requiring an infinite time horizon
or even sustainability in the 75th year – simply makes the job of policymakers harder,
without commensurate gain in security, because the farther out one projects, the less
trustworthy those projections become. Even more pernicious is the so-called cash flow
argument. Social Security has always had a reserve to smooth out differences between
contributions and benefits. Between 1958 and 1983, for example, Social Security drew
on its investment income or drew down principal in fourteen different years to cover the
cost of benefit payouts. It is the effort to negate the existence of these reserves and the
accompanying claims that Social Security is in deficit -- when it actually is in surplus
when all of its income is appropriately counted -- that has understandably caused
Americans to be suspicious and angry toward politicians whom they suspect of stealing
their Social Security contributions.
Before policymakers begin to focus on solutions, they should be in clear agreement on
how they wish to define solvency In particular, unless the cash-flow argument is clearly
and vociferously put to rest, Congress will be unable to convince the American people
9
that Social Security is solvent, even if legislation is enacted which the actuaries project
restores Social Security to long-run actuarial balance.
Most fundamentally, it is important to remember that solvency is not the ultimate goal.
The goal is the provision of some measure of economic security to the American people.
Deciding how to finance that goal is crucial, but simply the means to that end.
In Addressing Social Security, Congress Should Follow the Will of the People
Social Security’s scheduled benefits are completely affordable. The gap between Social
Security’s projected benefits over the next 75 years and its projected income is just 0.7
percent of GDP. At its most expensive, once the baby-boom generation is fully retired,
Social Security is projected to cost just 6.1 percent of GDP, considerably less than the
current percent of GDP that a number of industrialized countries are spending today on
their counterpart old-age programs. The issue of how to eliminate Social Security’s
projected deficit is a political question, not one of economics.
There is much polarization in the country today, but Social Security is a program about
which the American people are united. Poll after poll indicates that the American people
by overwhelming percentages support Social Security and do not want it to be part of
deficit discussions. They overwhelmingly believe that Social Security’s benefits, if
anything, are too low, and want its projected deficit closed by increasing its revenue,
ideally progressively. They do not want benefits cut, and they do not want the retirement
age increased – an approach which is mathematically indistinguishable from an acrossthe
board cut in benefits for retirees, even with respect to workers who work until age 70
or beyond.6
According to polling we have conducted, as well as polls of other organizations, these are
the views held by Democrats, Independents, Republicans, union households, tea partiers,
the young, the old, and every other age and demographic.
Some policymakers seem to believe that Social Security spending is out of control, but as
discussed above, it is subject to its own spending cap. It would be paradoxical to cut
Social Security deeply now to avoid less deep cuts in the future, as the co-chairs of the
president’s commission and others have proposed.
What most Americans support -- eliminating Social Security’s manageable shortfall
solely through increased revenue -- is the best policy solution, as well. Social Security’s
benefits are modest by virtually any standard, yet vitally important to the vast majority of
American workers and their families. Moreover, Social Security’s administrative costs
comprise less than one penny out of every dollar spent, a much higher efficiency than that
experienced by private sector retirement plans. In addition, with the termination and
freezing of traditional pension plans and the documented serious shortcomings of 401(k)
6 I have appended a chart which shows the monetary impact on monthly benefits of an increase in the
statutorily-defined “Retirement Age.”
10
plans, Social Security is likely to be an increasingly important source of retirement
income for the vast majority of Americans in the future.
Some on this Committee knew the late Robert M. Ball who, at the time of his death in
2008, was the world’s foremost expert on the U.S. Social Security system. He devoted
seven decades of his life to the protection and improvement of Social Security. His
words and recommendations are still highly relevant today. In an Op Ed in the
Washington Post published shortly before his death, Ball stated unequivocally that in
today’s world, it is “the essence of responsibility to insist on no benefit cuts.” That same
view is shared by numerous other experts. I have appended a letter, for the Committee’s
information, signed by 276 academics and other Social Security experts who
“recommend strongly that Social Security’s manageable shortfall, still decades away,
should be eliminated without cutting benefits, including without raising the retirement
age.”
Fortuitously, the best politics with respect to Social Security is also the best policy.
In Addressing Social Security’s Projected Shortall, Congress Should Retain Social
Security’s Fundamental Features Which Have Stood The Test Of Time
Social Security has often been called the nation’s most successful domestic program. Its
ingenious structure explains the success. Social Security has always embodied basic
American values: reward for work, shared responsibility, prudent conservative
management, compassion, focus on the family, and the recognition that after a lifetime of
hard work, Americans have earned an old age of independence and dignity.
From the moment of its enactment, Social Security has carefully balanced the twin
concerns of equity and adequacy. From the start, Social Security’s benefits sought to
provide a fair benefit for contributions. The higher a worker’s wages and contributions,
the higher the benefit a worker receives in absolute dollars. Simultaneously, from the
beginning, the benefit structure has provided larger proportionate benefits to those whose
lifetime earnings are lower, in recognition that they have less discretionary income and so
need more of their wages replaced. It has provided benefits as a matter of right. In
recognition that we are one people, it treats everyone the same. No matter one’s
economic status, everyone who contributes to Social Security for the requisite number of
quarters receives, as a matter of right, a fair benefit in the event that insured wages are
lost as a result of disability, death with family left behind, or old age.
I urge the members of this Committee, in evaluating proposals for changes to Social
Security, to be especially alert to proposals which would change this fundamental, timetested
structure. An affluence or means test would end the universality of Social
Security. Scaling back on benefits for better-off workers would undercut the fairness of
the system, which so carefully calibrates the relationship between contribution input and
benefits received.
11
The soundest way to strengthen Social Security is to build on the foundation that has
been constructed over the last three-quarters of a century. Social Security is a legacy and
trust which deserves to be addressed with the utmost care and deliberation, so it can be
passed along as a legacy to future generations.
12
April 12, 2011
President Barack Obama
The White House
Washington D.C. 20500
Dear Mr. President:
As experts on Social Security, the federal budget or the economy, we write to correct a
commonly held misconception – that Social Security somehow contributes to the federal
government’s deficit. In fact, Social Security’s Old Age and Survivors Insurance Trust
Fund and its Disability Insurance Trust Fund are prohibited from paying benefits unless
those funds have sufficient income and assets to cover the cost, and they have no
borrowing authority to acquire the requisite income and assets. Consequently, Social
Security is prohibited by law from deficit-spending and thus contributing to the federal
deficit.
We also write to point out that Social Security’s benefits are modest both compared to
those of other industrialized countries and in absolute terms. Its administrative costs are
also modest, amounting to less than a penny of every dollar expended. The modest size
yet increasing importance of Social Security’s life insurance, disability insurance, and old
age annuities, given the trends in private sector retirement arrangements, savings, home
equity and stock values, leads us, as a policy matter, to recommend strongly that Social
Security’s manageable shortfall, still decades away, should be eliminated without cutting
benefits, including without raising the retirement age.
Sincerely,
1. Henry J. Aaron, Ph.D., Senior Fellow, Economic Studies, Brookings Institution
2. W. Andrew Achenbaum, Ph.D., Professor of Social Work and History, University of
Houston
3. Randy Albelda, Ph.D., Professor, University of Massachusetts, Boston
4. Carolyn Aldana, Ph.D., Professor Emeritus of Economics, California State
University, San Bernardino
5. Sylvia A. Allegretto, Ph.D., Economist, Institute for Research on Labor and
Employment, University of California, Berkeley
6. Nancy J. Altman, J.D., Co-director, Social Security Works, top aide to Alan
Greenspan in his position as Chairman of the 1982-83 Social Security Commission
7. Edwin Amenta, Ph.D., Professor of History and Sociology, University of California,
Irvine
13
8. Nancy Amidei, M.S.W., Director, Civic Engagement Project, Emeritus Faculty,
University of Washington School of Social Work
9. Alice H. Amsden, Ph.D., Barton L. Weller Professor of Political Economy,
Department of Urban Studies and Planning, Massachusetts Institute of Technology
10. Greg Anrig, Vice President of Policy and Programs, the Century Foundation
11. Richard Arenberg, M.A., Adjunct Lecturer in Public Policy and American
Institutions, Brown University; Adjunct Lecturer in Political Science, Northeastern
University
12. William Arnone, J.D., Independent Consultant; Partner Emeritus, Ernst & Young,
LLP; Founding Member, National Academy of Social Insurance
13. Michael Ash, Ph.D., Associate Professor, University of Massachusetts, Amherst
14. M. V. Lee Badgett, Ph.D., Director, Center for Public Policy & Administration;
Professor of Economics, University of Massachusetts, Amherst
15. Dean Baker, Ph.D., Co-director, Center for Economic & Policy Research
16. Erdogan Bakir, Ph.D., Assistant Professor of Economics, Bucknell University
17. Radhika Balakrishnan, Ph.D., Professor of Women's and Gender Studies, Rutgers
University
18. Stephen Baldwin, Ph.D., Economist, Retired
19. Robert Jonathan Ball, L.C.S.W, Ed.D., Social Security Works Advisory Committee
20. Nina Banks, Ph.D., Associate Professor, Bucknell University
21. Edward Berkowitz, Ph.D., Professor of History and Public Policy and Public
Administration, George Washington University
22. Alexandra Bernasek, Ph.D., Professor, Colorado State University
23. Merton Bernstein, J.D., Professor Emeritus, Washington University, St. Louis
24. Tom Bethell, Independent Social Insurance Policy Analyst, Editor and Co-author
with Robert M. Ball of Straight Talk About Social Security and other publications
25. Deepak Bhargava, Executive Director, Center for Community Change
26. Cyrus Bina, Ph.D., Distinguished Research Professor of Economics, University of
Minnesota (Morris Campus)
27. Josh Bivens, Ph.D., Economist, Economic Policy Institute
28. Robert Binstock, Ph.D., Professor of Aging, Health, and Society, Case Western
Reserve University
29. Barry Bluestone, Ph.D., Dean, School of Public Policy and Urban Affairs,
Northeastern University
30. Mark Blyth, Ph.D., Professor of International Political Economy, Brown University
31. Eileen Boris, Ph.D., Hull Professor and Chair, Department of Feminist Studies,
Director, Center for the Study of Women and Social Justice, University of California,
Santa Barbara
32. Roger Bove, Ph.D., Associate Professor, Retired, West Chester University
33. Gerard Bradley, M.A., Research Director, New Mexico Voices for Children
34. Ruth A. Brandwein, Ph.D., Dean and Professor Emeritus of Social Welfare
and former Director, Social Justice Center, Stony Brook University
35. Bobbie Brinegar, M.S.W., Executive Director, OWL-The Voice of Midlife and Older
Women
36. Byron Brown, Ph.D., Professor of Economics, Michigan State University
37. Clair Brown, Ph.D., Professor of Economics, University of California, Berkeley
14
38. E. Richard Brown, Ph.D., Professor, University of California Los Angeles, School of
Public Health
39. John Burbank, M.P.A., Executive Director, Economic Opportunity Institute
40. Barbara Burt, M.Ed., Executive Director, Frances Perkins Center
41. Donna Butts, Executive Director, Generations United
42. Al Campbell, Ph.D., Professor Emeritus of Economics, University of Utah
43. Martha Campbell, Ph.D., Associate Professor, Economics, State University of New
York, Potsdam
44. Jim Campen, Ph.D., Professor Emeritus of Economics, University of Massachusetts,
Boston
45. Nancy K. Cauthen, Ph.D., Sociologist and Independent Consultant
46. Gamze Cavdar, Ph.D., Assistant Professor, Colorado State University
47. Charles Chittle, Ph.D., Professor, Bowling Green State University
48. David Coates, Ph.D., Worrell Professor of Anglo-American Studies, Wake Forest
University
49. Alan B. Cohen, Sc.D., Professor of Health Policy and Management, Boston
University School of Management, Executive Director, Boston University Health
Policy Institute
50. Laura Coker, Ph.D., Associate Professor, Wake Forest University School of Medicine
51. William E. Connolly, Ph.D., Krieger-Eisenhower Professor, Political Science, Johns
Hopkins University
52. Fay Lomax Cook, Ph.D., Director, Institute for Policy Research and Professor of
Human Development & Social Policy, Northwestern University
53. David Crary, Ph.D., Associate Professor, Eastern Michigan University
54. J. Kevin Crocker, M.A., Undergraduate Program Director and Lecturer, University of
Massachusetts, Amherst
55. James Crotty, Ph.D., Professor Emeritus of Economics, University of Massachusetts,
Amherst
56. Yanira Cruz, D.P.H., M.P.H., President & CEO, National Hispanic Council on Aging
57. Jeff Cruz, Executive Director, Latinos for a Secure Retirement
58. Bill Cunningham, Associate Director of Legislation, American Federation of
Teachers
59. Anita Dancs, Ph.D., Assistant Professor, Western New England College
60. Paul Davidson, Ph.D., Editor, Journal of Post-Keynesian Economics; Chair of
Excellence, Professor Emeritus, University of Tennessee
61. Charles Davis, Ph.D., Professor of Labor Studies, Indiana University
62. Susan Davis, Ph.D., Associate Professor, Economics & Finance, Buffalo State
College
63. Jayne Dean, Ph.D., Associate Professor, Wagner College
64. Patricia Elizabeth Dilley, J.D., L.L.M., Professor of Law, Levin College of Law,
University of Florida
65. G. William Domhoff, Ph.D., Research Professor in Sociology, University of
California, Santa Cruz
66. Peter Dorman, Ph.D., Faculty in Political Economy, Evergreen State College
67. Kirstin Downey, author of The Woman Behind the New Deal (Random House, 2009);
and former economics reporter for the Washington Post
15
68. Richard Du Boff, Ph.D., Professor of Economics Emeritus, Bryn Mawr College
69. Lloyd Dumas, Ph.D., Professor of Economics, University of Texas at Dallas
70. Peter Eaton, Ph.D., Director, University of Missouri-Kansas City Center for
Economic Information
71. Ross Eisenbrey, J.D., Vice President, Economic Policy Institute
72. David Ekerdt, Ph.D., Professor of Sociology, University of Kansas
73. Justin Elardo, Ph.D., Economics Instructor, Portland Community College
74. Gerald Epstein, Ph.D., Professor of Economics, University of Massachusetts,
Amherst
75. Sharon Erenburg, Ph.D., Professor of Economics, Eastern Michigan University
76. Carroll Estes, Ph.D., Professor and Founding Director, Institute for Health and Aging,
University of California, San Francisco; Chair, National Committee to Preserve
Social Security & Medicare
77. Rashi Fein, Ph.D., Professor of the Economics of Medicine, Emeritus, Harvard
University
78. Susan Feiner, Ph.D., Professor of Economics and Women's Studies, University of
Southern Maine
79. Karen Ferguson, J.D., Executive Director, Pension Rights Center
80. Thomas Ferguson, Ph.D., Professor of Political Science, University of Massachusetts,
Boston; Senior Fellow, Roosevelt Institute
81. Sean Flaherty, Ph.D., Professor of Economics, Franklin and Marshall College
82. David Gallo, Ph.D., Professor Emeritus, Department of Economics, California State
University, Chico
83. John Gallup, Ph.D., Assistant Professor, Portland State University
84. Lorenzo Garbo, Ph.D., Professor, University of Redlands
85. Alejandro Garcia, Ph.D., M.S.W., Professor, Syracuse University School of Social
Work
86. Eric Geist, Research Economist, Communications Workers of America
87. Chris Georges, Ph.D., Professor of Economics, Hamilton College
88. Teresa Ghilarducci, Ph.D., Bernard L. and Irene Schwartz Chair of Economic Policy
Analysis, The New School for Social Research
89. David Gold, Ph.D., Associate Professor, The New School
90. Deborah Goldsmith, M.A., Instructor, Economics, City College of San Francisco
91. Nance Goldstein, Ph.D., Associate Professor, University of Southern Maine
92. Linda Gordon, Ph.D., University Professor of the Humanities and Florence Kelley
Professor of History, New York University
93. Steve Gorin, Ph.D., Professor, Social Work Department, Plymouth State University
94. Colleen Grogan, Ph.D., Professor, University of Chicago, School of Social Service
Administration
95. Michael Gusmano, Ph.D., Fellow, Hastings Institute
96. Jacob Hacker, Ph.D., Stanley Resor Professor of Political Science, Yale University
97. Lori L. Hansen, M.S.W., Former Member, Social Security Advisory Board;
Technical Assistant to Robert M. Ball for the 1982-83 Social Security Commission
98. Martin Hart-Landsberg, Ph.D., Professor of Economics, Lewis and Clark College
99. Heidi Hartmann, Ph.D., Research Professor, George Washington University, and
President, Institute for Women's Policy Research
16
100. Jeffrey A. Hayes, Ph.D., Senior Research Associate, Institute for Women's Policy
Research
101. Emily Hayworth, Office Coordinator, Women’s Studies Program, University of
Delaware
102. John Henry, Ph.D., Research Professor, University of Missouri-Kansas City
103. Pamela Herd, Ph.D., Associate Professor of Public Affairs and Sociology,
University of Wisconsin, Madison
104. Edward Herman, Ph.D., Professor Emeritus of Finance, Wharton School,
University of Pennsylvania
105. Adam Hersh, Ph.D., Economist, Center for American Progress
106. Stephen Herzenberg, Ph.D., Director, Keystone Research Center
107. Cynthia Hess, Ph.D., Study Director, Institute for Women's Policy Research
108. Carol E. Heim, Ph.D., Professor of Economics, University of Massachusetts,
Amherst
109. Michael Hillard, Ph.D., Professor of Economics, University of Southern Maine
110. Alice M. Hoffman, Ph.D., Board Member, Pennsylvania Alliance for Retired
Americans
111. Emily P. Hoffman, Ph.D., Professor of Economics Emerita, Western Michigan
University
112. Brooke Hollister, Ph.D., Assistant Professor, University of California, San
Francisco; Vice Chair of National Board of Directors, National Gray Panthers
113. Barbara Hopkins, Ph.D., Associate Professor of Economics, Wright State
University
114. Alan Houseman, J.D., Executive Director, Center for Law and Social Policy
115. Dorene Isenberg, Ph.D, Professor and Chair, Department of Economics, University
of Redlands
116. Timothy S. Jost, J.D., Professor of Law, Washington & Lee University School of
Law
117. Jon Jucovy, Ph.D., Chairman, History Department, Ramaz School
118. Karen Kahn, M.S.W., Mental Health Clinician, University of Medicine and
Dentistry of New Jersey
119. Rosalie Kane, D.S.W., Professor, Division of Health Services Research and Policy,
School of Public Health, & Faculty Associate, Center for Bioethics, University of
Minnesota
120. Stephanie A. Kelton, Ph.D., Associate Professor of Economics, University of
Missouri-Kansas City, and Research Scholar, Levy Economics Institute
121. Barbara B. Kennelly, President & CEO, National Committee to Preserve Social
Security & Medicare; Former Member, U.S. House of Representatives; Acting
Chair, Social Security Advisory Board
122. Mary King, Ph.D., Professor of Economics, Portland State University
123. Melvin King, M.A., Retired, Massachusetts Institute of Techonology
124. Eric R. Kingson, Ph.D., Professor of Social Work, Syracuse University; Codirector,
Social Security Works; and advisor to the 1982 National Commission on
Social Security Reform
125. Jennifer Klein, Ph.D., Professor of History, Yale University
17
126. Andrew Kohen, Ph.D., Professor Emeritus of Economics, James Madison
University
127. Ebru Kongar, Ph.D., Associate Professor of Economics, Dickinson College
128. Kazim Konyar, Ph.D., Professor, California State University, San Bernardino
129. Tamara Kraut, Vice President of Policy and Programs, Demos
130. Joan A. Kuriansky, J.D., M.A., Professor Emeritus of Political Science, Wider
Opportunities for Women
131. David Laibman, Ph.D., Professor, Economics (retired), Brooklyn College, City
University of New York
132. Thomas Lambert, Ph.D., Lecturer, Indiana University Southeast
133. Louise Lamphere, Ph.D., Distinguished Professor of Anthropology, Emeritus,
University of New Mexico
134. Gary Latanich, Ph.D., Professor of Economics, Arkansas State University
135. Scott Lazerus, Ph.D., Professor of Economics, Western State College of Colorado
136. William Lazonick, Ph.D., Professor, University of Massachusetts
137. Paul Leigh, Ph.D., Professor, University of California, Davis
138. Keith Leitich, M.A., Part-Time Instructor, Pierce College Puyallup
139. Fernando Leiva, Ph.D., Associate Professor, Economist, State University of New
York at Albany
140. Hank Leland, Senior Research Analyst, Employee Benefits, SEIU
141. Mark Levinson, Ph.D., Chief Economist, SEIU
142. Carlos Liard-Muriente, Ph.D., Associate Professor & Chair, Department of
Economics, Central Connecticut State University
143. Daniel Luria, Ph.D., Vice President of Research, Industrial Technology Institute
144. Robert Lynch, Ph.D., Professor of Economics, Washington College
145. Catherine Lynde, Ph.D., Professor, University of Massachusetts, Boston
146. Arthur MacEwan, Ph.D., Economics, Professor Emeritus, University of
Massachusetts, Boston
147. Nancy MacLean, Ph.D., Arts and Sciences Professor of History, Duke University
148. Allan MacNeill, Ph.D., Professor, Webster University
149. Diane Macunovich, Ph.D., University of Redlands; Former member, Advisory
Panel to the Social Security Trustees
150. Mark Maier, Ph.D., Professor of Economics, Glendale College
151. Ted Marmor, Ph.D., Professor Emeritus of Public Policy and Management, and
Professor Emeritus of Political Science, Yale University
152. Ray Marshall, Ph.D., Audre & Bernard Rapoport Chair in Economics and Public
Affairs, University of Texas-Austin
153. Myra Marx Ferree, Ph.D., Martindale Bascom Professor of Sociology, University of
Wisconsin, Madison
154. Jerry Mashaw, Ph.D., LL.B., Sterling Professor of Law, Yale Law School
155. Julie Matthaei, Ph.D., Professor of Economics, Wellesley College; United States
Solidarity Economy Network
156. Peter Matthews, Ph.D., Jermain Professor of Political Economy, Middlebury
College
157. Elaine McCrate, Ph.D., Associate Professor, Economics and Women's Studies,
University of Vermont
18
158. Heather C. McGhee, J.D., Washington Office Director, Demos
159. Kate McGovern, Ph.D., Adjunct Faculty, Springfield College, School of Human
Services
160. Gerald A. McIntyre, L.L.B., Directing Attorney, National Senior Citizens Law
Center
161. Charles W. McMillion, Ph.D., President/Chief Economist, MBG Information
Services
162. Michael Meeropol, Ph.D., Professor and Chair Emeritus, Department of
Economics, Western New England College; Visiting Professor of Economics, John
Jay College of Criminal Justice of the City University of New York
163. Tatjana Meschede, Ph.D., Research Director, Brandeis University
164. John Messier, Ph.D., Assistant Professor of Economics, University of Maine,
Farmington
165. Peter Meyer, Ph.D., Professor Emeritus of Urban Policy and Economics, University
of Louisville; President and Chief Economist, The E.P. Systems Group, Inc.
166. Thomas Michl, Ph.D., Professor of Economics, Colgate University
167. Marcelo Milan, Ph.D., Assistant Professor of Economics, University of Wisconsin-
Parkside
168. William Milberg, Ph.D., Professor, The New School
169. John Miller, Ph.D., Professor of Economics, Wheaton College
170. Gwendolyn Mink, Ph.D., Social Policy Scholar
171. Lawrence Mishel, Ph.D., President, Economic Policy Institute
172. Vernon Mogensen, Ph.D., Professor of Political Science, Kingsborough
Community College, City University of New York
173. Monique Morrissey, Ph.D., Economist, Economic Policy Institute
174. Fred Moseley, Ph.D., Professor of Economics, Mount Holyoke College
175. Tracy Mott, Ph.D., Associate Professor and Department Chair, Economics,
University of Denver
176. Nancy R. Mudrick, Ph.D., Professor of Social Work, Syracuse University
177. Stephen Mumme, Ph.D., Professor, Colorado State University
178. Peggy B. Musgrave, Ph.D., Emerita Professor of Economics, University of
California, Santa Cruz
179. Alan Nasser, Ph.D., Professor Emeritus, Economics, The Evergreen State College
180. Paul Nathanson, J.D., M.C.L., Executive Director, National Senior Citizens Law
Center
181. Michael Nuwer, Ph.D., Professor of Economics, State University of New York,
Potsdam
182. Alice O'Connor, Ph.D., Professor, Department of History, University of California,
Santa Barbara
183. Annelise Orleck, Ph.D., Professor of History, Dartmouth College
184. Nancy M. Ortiz, District Manager, Retired, Social Security Administration
185. Rudy Oswald, Ph.D., Retired, AFL-CIO
186. Christine Owens, J.D., Executive Director, National Employment Law Project
187. Aaron Pacitti, Ph.D., Assistant Professor, Siena College
188. Michael Perelman, Ph. D., Professor of Economics, California State University,
Chico
19
189. Kenneth Peres, Ph.D., Economist, Communications Workers of America
190. Mark Peterson, Ph.D., Professor of Public Policy and Political Science, Luskin
School of Public Affairs, University of California, Los Angeles
191. Paul Pierson, Ph.D., John Gross Professor of Political Science, University of
California, Berkeley
192. Larry Polivka, Ph.D., Director, Claude Pepper Center, Florida State University
193. Harold Pollack, Ph.D., Faculty Chair Center for Health Administration Studies,
Helen Ross Professor, School of Social Service Administration, University of
Chicago
194. Robert Pollin, Ph.D, Professor, University of Massachusetts, Amherst; and Co-
Director, Political Economy Research Institute
195. Shirley Porterfield, Ph.D., Associate Professor, University of Missouri-St. Louis
196. Marilyn Power, Ph.D., Professor of Economics, Sarah Lawrence College
197. Mark Price, Ph.D., Labor Economist, Keystone Research Center
198. Paddy Quick, Ph.D., Professor of Economics, St. Francis College, Brooklyn
199. Miles Rapoport, President, Demos
200. Edith Rasell, Ph.D., Minister for Economic Justice, United Church of Christ
201. Elton Rayack, Ph.D., Professor Emeritus, University of Rhode Island
202. Steve Regenstreif, Director, AFSCME Retirees
203. Michael Reich, Ph.D., Professor of Economics, University of California, Berkeley
204. Nola Reinhardt, Ph.D., Professor of Economics, Smith College
205. Bruce Roberts, Ph.D., Professor, University of Southern Maine
206. Malcolm Robinson, Ph.D., Professor, Thomas More College
207. Charles Rock, Ph.D., Professor of Economics, Rollins College
208. Maya Rockeymoore, Ph.D., President & CEO, Global Policy Solutions
209. William M. Rodgers II, Ph.D., Professor of Public Policy and Chief
Economist, Rutgers University
210. Leah Rogne, Ph.D., Associate Professor, Minnesota State University, Mankato
211. Sergio Romero, Ph.D., Assistant Professor of Sociology, Boise State University
212. Frank Roosevelt, Ph.D., Teaching Faculty, Sarah Lawrence College
213. Nancy Rose, Ph.D., Professor Emeritus of Economics, California State University,
San Bernardino
214. Basel Saleh, Ph.D., Assistant Professor, Radford University
215. Michéle Saunders, D.M.D, M.S., M.P.H., Professor & Director, South, West &
Central Consortium Geriatric Education Center of Texas, University of Texas
Health Science Center
216. Steven Savner, J.D., Director of Public Policy, Center for Community Change
217. Susan Scanlan, Chair, National Council of Women's Organizations
218. Arthur Scarritt, Ph.D., Assistant Professor, Boise State University
219. Robert E. Scott, Ph.D., Economist, Economic Policy Institute
220. Peter Schaeffer, Ph.D., Economics Professor, West Virginia University
221. James Schulz, Ph.D., Emeritus Professor of Economics, Brandeis University
222. Eric Schutz, Ph.D., Professor, Rollins College
223. Stephanie Seguino, Ph.D., Professor of Economics, University of Vermont
224. Jean Shackelford, Ph.D., Professor, Bucknell University
225. Nina Shapiro, Ph.D., Professor of Economics, Saint Peter's College
20
226. Heidi Shierholz, Ph.D., Economist, Economic Policy Institute
227. Richard Shirey, Ph.D. in Economics, Professor Emeritus, Siena College
228. Laurence Shute, Ph.D., Professor Emeritus of Economics, California State
Polytechnic University, Pomona
229. Max J. Skidmore, Ph.D., University of Missouri Curators' Professor of Political
Science, Thomas Jefferson Fellow, University of Missouri-Kansas
230. Curtis Skinner, Ph.D., Director of Family Economic Security, National Center for
Children in Poverty
231. Theda Skocpol, Ph.D., Victor S. Thomas Professor of Government and Sociology,
Harvard University
232. Margaret Somers, Ph.D., Professor of Sociology and History, University of
Michigan
233. Peter Spiegler, Ph.D., Assistant Professor, University of Massachusetts, Boston
234. Janet Spitz, Ph.D., Associate Professor, College of St. Rose
235. Case Sprenkle, Ph.D., Retired Professor, University of Illinois, Urbana-Champaign
236. James Ron Stanfield, Ph.D., Emeritus Professor of Economics, Colorado State
University
237. Howard Stein, Ph.D., Professor, University of Michigan
238. Mary Stevenson, Ph.D., Professor Emeritus of Economics, University of
Massachusetts, Boston
239. Jeffrey Stewart, Ph.D., Independent Social Insurance Policy Analyst
240. Jay Stone, Ph.D., Teacher, Ramaz School
241. Frank Stricker, Ph.D., Professor Emeritus, California State University, Dominguez
Hills
242. Myra Strober, Ph.D., Professor Emerita of Education, Stanford University
243. Simona Sung, Ph.D., Professor of Economics, College of Saint Rose
244. Paul Swanson, Ph.D., Professor of Economics, William Paterson University
245. Peter A. Swenson, Ph.D., C.M. Saden Professor, aND Director of Undergraduate
Studies, Department of Political Science, Yale University
246. Jose Tapia, Ph.D., Assistant Research Scientist, University of Michigan
247. Peter Temin, Ph.D., Professor Emeritus, Massachusetts Institute of Technology
248. David Terkla, Ph.D., Associate Dean, College of Liberal Arts, University of
Massachusetts, Boston
249. Frank Thompson, Ph.D., Lecturer in Economics, Research Investigator, University
of Michigan
250. Emanuel Thorne, Ph.D., Chair, Department of Economics, Brooklyn College of
City University of New York
251. Mariano Torras, Ph.D., Professor of Economics, Adelphi University
252. Mayo Toruno, Ph.D, Professor and Chair, California State University, San
Bernardino
253. John Tower, Ph.D., Professor Emeritus of Economics and Management, Oakland
University
254. Lynn Unruh, Ph.D., Professor of Health Management and Informatics, University
of Central Florida
255. William Van Lear, Ph.D., Professor of Economics, Belmont Abbey College
21
256. Katherine van Wormer, Ph.D., Professor of Social Work, University of Northern
Iowa
257. Ben Veghte, Ph.D., M.P.A, Social Policy Scholar
258. Marcela Velasco, Ph.D., Assistant Professor, Colorado State University
259. Paula Voos, Ph.D., Professor, Rutgers University
260. Jeff Waddoups, Ph.D., Professor, Department of Economics, University of Las
Vegas
261. Robert P. Watson, Ph.D., Professor of American Studies and Coordinator of the
American Studies Program, Lynn University
262. John Weeks, Ph.D., Professor of Economics, University of London
263. David Weiman, Ph.D., Elena Wels Hirschorn Professor of Economics, Barnard
College
264. Scott A. Weir, Ph.D., Economics Instructor, Wake Technical Community College
265. Thomas Weisskopf, Ph.D., Professor Emeritus of Economics, University of
Michigan
266. Cathleen Whiting, Ph.D., Associate Professor of Economics, Willamette University
267. Howard Wial, J.D., Ph.D., Fellow, Brookings Institution
268. Gary Williams, Ph.D, Associate Professor of Sociology (retired), Belmont Abbey
College
269. Robert G. Williams, Ph.D., Voehringer Professor of Economics and Chair,
Economics Department, Guilford College
270. John Williamson, Ph.D., Professor of Sociology, Boston College
271. David Wilsford, Ph.D., Professor of Political Sciences and Director of Graduate
Studies, George Mason University; and Visiting Senior Fellow, London School of
Economics
272. Martin Wolfson, Ph.D., Associate Professor of Economics, University of Notre
Dame
273. Yavuz Yasar, Ph.D., Associate Professor, University of Denver, Department of
Economics
274. Laurie Young, Ph.D., Director of Public Policy and Government Affairs, National
Gay and Lesbian Task Force
275. David Zalewski, Ph.D., Professor of Finance, Providence College
276. Henry Zaretsky, Ph.D., President, Henry W. Zaretsky & Associates, Inc.; Adjunct
Professor, University of Southern California
Cuts in Retirement Benefits Resulting from Raising the Retirement Age to 69
22
Age at which worker starts receiving benefits
Statutory “Retirement Age” of 65
Statutory “Retirement Age” of 67
Statutory “Retirement Age” of 69
Percent decrease by changing from age 65 to 67
Percent decrease by changing from age 67 to 69
Percent decrease by changing from age 65 to 69
62 $800 $700 $610 12.5% 12.9% 23.8%
63 $867 $750 $655 13.5% 12.7% 24.5%
64 $933 $800 $700 14.3% 12.5% 25.0%
65 $1,000 $867 $750 13.3% 13.5% 25.0%
66 $1,080 $933 $800 13.6% 14.3% 25.9%
67 $1,160 $1,000 $867 13.8% 13.3% 25.3%
68 $1,240 $1,080 $933 12.9% 13.6% 24.8%
69 $1,320 $1,160 $1,000 12.1% 13.8% 24.2%
70 $1,400 $1,240 $1,080 11.4% 12.9% 22.9%
Explanatory Note: This chart illustrates the impact on monthly benefits that results from changing Social Security’s statutory “Retirement Age.” It is based on a hypothetical worker whose wage record entitles him or her to $1,000/month at the statutory “Retirement Age.” The dollar amounts will vary with a worker’s particular wage record, but the percentage reductions shown are the actual reductions for all workers. They do not vary with earnings. The dollar amount shown is the benefit paid monthly for the rest of the worker's life, adjusted only for inflation once it has begun to be received.
Age 65 is the statutory “Retirement Age” for beneficiaries born prior to 1938; age 67 is the statutory “Retirement Age” for beneficiaries born 1960 or later. 42 U.S.C. §416(l) The
Earliest age a worker can claim Social Security old age benefits is age 62. 42 U.S.C. §402 Fiscal Commission Co-Chairs Erskine Bowles and Alan Simpson have proposed Increasing the statutory “Retirement Age” to age 69. Although their proposals stipulate that the earliest eligibility age will be increased to 64, for illustrative purposes this chart assumesthat it will remain age 62 even if the statutory “Retirement Age” is raised to age 69. 42 U.S.C. §402(q) and §402(w) specify the actuarial adjustments when benefits are claimed before or after the statutory “Retirement Age.” §402(w)(6)(D) provides that for workers reaching age 62 after 2004, benefits are increased by two-thirds of 1% for every month of work, up to age 70, after the statutory “Retirement Age,” and that is the adjustment factor used in the chart. As a matter of historical fact, the transition to a larger adjustment factor and to a higher statutory “Retirement Age," meant that when the statutory “Retirement Age” was 65, the adjustment factors varied with year of birth, in accordance with §§402(w)(6)(A), (B), and (C).
Source: The benefit amounts in the chart were calculated by Nancy J. Altman, Co-Director, Social Security Works. They have been reviewed for accuracy by the Chief Actuary, Social Security Administration.