By Greg Petty
April 2005
Core Values, Part II
Are we as individuals and families imitating
our national government in our spending habits? Statistics
say we are. Here is a little run down on our collective
financial health:
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American savings rate at the lowest in last 20 years. |
| • |
Only 21 % of Americans are covered by a company
pension plan. Many have lost considerable sums in
their 401 K savings plan due to the last market swoon. |
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A sparse 14% receive income from their assets. |
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The average American household now has 3 times the
credit-card debt than a decade ago. |
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Americans are mortgaging their homes to pay other
debts which has resulted in increased foreclosures
and bankruptcy filings. |
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Social Security provides 42% of the income for people
65 and older |
I could go on but you get the not so pretty
picture. As a whole we (The U. S. Government and its Citizens)
are spending more than we have, increasing our debt load
and failing to save. Are you still thinking of the old American
core value of living below your means and saving for a rainy
day or an opportunity to get ahead? Wrong that’s long
gone, not a reality anymore. What are we going to do if
any semblance of a societal safety net is gone? Refresh
your memory of how well our society did during the depression
years. Through no fault of their own millions were thrwn
out of work, dispossessed of their homes and farms and left
starving for a handout. Our society decided at that time
that we would not again suffer the neglect of our fellow
citizens, that we were wealthy enough to provide for a basic
stipend for all of us.
This
brings me to the latest Bush proposal for a core value -
our health and welfare. I am talking about Social Security
reform. With all due respect Mr. President, you are not
telling the American people the facts about your Social
Security proposal. It’s more of the same familiar
smoke and mirrors approach to see if the American public
is educated enough about the issues to really grasp what
the implications are of your proposal. All at the same time
as really not defining how your proposals work.
Privatizing Social Security is akin to throwing
the baby out with the bath water. Yes, the system needs
adjustment but not a radical overhaul. Many experts agree
that there is not a crisis and that adjustments can cover
the expected shortfall that is to occur anywhere from 2027
or later (There are multiple dates depending on who you
ask given for when this will occur – 2040, 2050, etc)
. By the admission of the Bush Administration official representing
this proposal, privatizing individual accounts does not
address the solvency issues causing the Social SecurityTrust
financial difficulties. This is another proposal that should
be declared the side show that it is. Each of us needs to
study and understand the implications of this proposal and
tell our Representatives and Senators this dog does not
hunt. Every American’s retirement is at stake.
| • |
Mr. Bush is not being forthright about the initial
cost to privatize accounts. The Trust must continue
to pay benefits while a portion of current workers
funds go into individual investment accounts and not
into the Trust Fund as they normally would. His stated
cost of $750 million is far short of that estimated
by the Congressional Budget Office, Center on Budget
and Policy Priorities and others. Estimates range
from $1 – 3 Trillion dollars. OK let’s
split the difference - $2 Trillion dollars. The 75
year gap is $3.7 Trillion dollars. |
| • |
The President has ruled out revenue raising measures.
How can we seriously propose changes to enhance the
financial health of Social Security with only one-half
of the equation in play. That is similar to boxing
with one hand behind your back. |
| • |
Mr. Bush has gallantly framed his rhetoric that
he is doing this to save the system for the younger
members of our society. According to the Center on
Budget and Policy Priorities “For instance,
a worker born in 2000 who has average wages, participates
in the private accounts, and retires in 2065, would
have total benefits (from Social Security and the
private account) that are 50% below the Social Security
benefit scheduled under current law (and 34% below
what Social Security would be able to pay even if
no steps were taken to restore solvency. |
| • |
All of us must refuse this proposed change -Indexing
your Social Security benefits to price inflation rather
than the current method tied to wage increases will
reduce all benefits paid by almost 50% |
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England and Sweden have had disastrous experiences
with privatized accounts and are now seeking to emulate
our current system. This is already a proven failure.
Why are we even considering it? |
This is not a serious proposal. It is only
serious in that the cure is worse than the illness. Simply
put.it will gut our society’s only safety net. It
shifts responsibility from our society as a whole (it was
originally instituted to care for all Americans when the
“free market” failed in spectacular fashion)
directly back to you and to me. Let’s blow away the
smoke of political rhetoric and begin real debate. We require
the media and our leaders to provide all the truthful hard
facts we in order to form an American consensus to restoring
long-term health to Social Security.
In keeping with the principal of Ocham’s
Razor the simplest proposals may be the best:
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Taking back the tax cuts given in 2001 and 2003
will exceed the shortfall beginning in 2027. For example,
the estimated shortfall in 2027 is $202 billion. Cost
of the tax cuts totals $344 billion. In 2033 the shortfall
is $302 billion, tax cut costs are $377. |
| • |
Increase the wage cap on payments into the system
to $140,000. The current cap is $90,000. This will
fully fund the gap. |
| • |
Paul O’Neill (remember the Secretary of Treasury
fired by the President) proposed paying $2,000 per
year into all newly born American’s accounts
for a specified number of years to augment Social
Security. The proposed costs are far lower than any
cost to the Trust Fund to privatize accounts. |
Please study all the issues regarding Social
Security reform. Most importantly, all Americans need to
be presented, and to consider, the best and brightest proposals.
We have not been given the opportunity to hear them yet.
The following articles are excellent resources:
News & Observer –
February 4, 2005
AARP –The Magazine- March/April 2005
AARP Bulletin – February 2005
Newsweek – February 14, 2005
Website – Center on Budget and Policy
Priorities – www.cbpp.org
(extensive info available)
AFL-CIO website – put in your personal
information and see how the proposals affect your benefit.
