Social Security I
Bill Long 8/31/05
Michael Hiltzik on the Plot Against Social Security
In the early 1980s I used to devour books on public policy and biographies of significant political leaders. I had just finished my Ph. D. in the history of religions and felt that my life was too focused on old and relatively obscure religious texts; immersion in the maelstrom of current politics and public policy issues provided an "escape" into the present and an outlet for what I thought at the time were inclinations for public service in my own life. But as I engaged myself more fully in the affairs of the 1980s in Portland, Oregon, I found myself less drawn into the "Washington world."
Reading Michael Hiltzik's recently-released book on the debate over social security brought back both the memories of my time 25 years ago as well as my reasons for not making public policy books a regular part of my intellectual diet. On the one hand, Hiltzik, who co-shared the Pulitzer Prize in 1999 for the Los Angeles Times for stories on corruption in the entertainment industry and illegal detoxification programs for wealthy celebrities, gives us a lucid, timely and statistically-rich account of the origin, development and current state of social security. On the other hand, his book is hastily-written, replete with little factual errors and not sufficiently explanatory on crucial issues.
One example of the little factual errors that bugged me when I read the book appears in the preface. He dedicates the work to his family and decides to mention his two boys using "social security language"--i.e., talking of people according to when they will retire (reach age 65). He speaks of Andrew as due to retire in 2083 and David as a member of the "cohort" of 2086. What??? If they reached 65 at those dates, they are not yet born and won't be born for more than a decade. It was a small signal to me that I needed to weigh Hiltzik's numbers carefully. Thus, though this book won't win any prizes either for writing or editing, it has the virtue of clarifying a massively confusing subject that the President has tried to bring to public consciousness through his desire to 'privatize' part of social security.
Getting Our Bearings on the Plot Against Social Security
In good journalistic fashion, Hiltzik lays out the current situation and his "take" on it in the first chapter. He briefly describes the Bush plan to allow workers to withhold and invest a few percentage points from the 6.2% they pay from their paychecks to social security (what the President calls "promoting ownership in America"), the way that this part of Bush's agenda has been very carefully scripted by having fawning supporters solemnly declare in public meetings that there is a major problem with social security, and various facts and figures about who pays how much to keep social security going.
He gives us the following numbers. There are currently 48 million recipients of social security. The vast majority (33 million) receive old-age benefits (what most people think of when they think social security). These benefits are calculated based on an average of lifetime earnings or, more precisely, earnings over a worker's most productive 35 years, and are relatively progressive benefits. That means that those who earned most would get about 38% of their average income from social security when they retire; those in the middle about 54% of their median wage, and those at the bottom of the pay scale, 73% of their average lifetime wages. Currently old-age social security benefits average about $18,900/year for couples and $11,460/year for single people. These numbers represent more than 1/2 of the retirement income for 2/3 of the recipients and for 1/5 of the recipients social security seems to be their only source of income. Of the remaining 15 million who receive social security benefits, 8 million receive disability payments (I represented, unsuccessfully, one who had lost his benefits before an administrative law judge of the Social Security Administration when I was in law practice. After getting another lawyer and, perhaps as important, another judge, he got his benefits restored). The remaining beneficiaries of social security are deceased workers' survivors, mostly children, whose benefits average $10,700 per year. Thus, social security is a rather complex quilt of programs providing old-age, survivors and disability payments.
Three important issues to understand the system are its funding sources over the years, the problems caused by its funding, and the philosophical issues behind the desire of some to "privatize" some of social security. Let's begin with some history.
Some History and a Big Problem
Social Security (SS) emerged out of the Great Depression of the 1930s. Passed precisely 70 years ago (President Roosevelt signed the bill in August 1935), the original legislation was driven by a desire to prevent retired workers from falling more deeply into poverty and desperation. Though the idea of some kind of social insurance was not new at the time (almost all states had some system of unemployment insurance in place, for example), it was unprecedented for the federal government to intervene in the benefit game. Unemployment insurance, a product of the progressive movement of a few decades earlier, was a state-by-state system, with significant voluntary features. Thus, for the federal government to contemplate much less enact social security legislation was a tribute to the desperation of the times as well as the political skill of FDR.
As it was originally conceived, SS would be funded by payroll deductions of 2% (1% contributed by employer and 1% by employee), but many American workers (farmers, domestic employees, transient workers, state and local employees, for example) were exempted. These amounts were deducted beginning January 1, 1937, with benefits to be paid out beginning in 1942. As it actually turned out, the 1939 Congress extended benefits to other groups than old-age recipients and decided to make payments available in 1940. Everyone knew that a massive infusion of cash to the keep the system viable would be necessary in the 1950s, but no one blinked. SS was a system whose time had seemingly come.
The next essay describes problems that emerged.
Copyright © 2004-2009 William R. Long