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Straight talk on Social Security: a gerontologist's view

03/11/2005

Perhaps it's time for both sides of the Social Security debate to try something novel-lay out the real issues and see how the populace weighs in on the domestic policy topic most likely to affect them.

First, let's change the way the issue has been framed.

President Bush argues that Social Security is in crisis, and that it won't be there for the next generation without reforms. He proposes allowing all Americans born after 1949 to invest a portion of their Social Security retirement and disability funds into a private account.

The Social Security Trust Fund, which now has about a $1.4 trillion surplus, won't be depleted until 2042, according to the 2004 Annual Reports of the Social Security and Medicare Boards of Trustees. At that point Social Security will be able to pay 73 percent of benefits. A strong economy would well increase the years of solvency.

Overlooked is the fact that the Medicare program will reach insolvency in 2019. We do need to address problems with Social Security, but on what basis has the president decided that Social Security is in crisis but Medicare is not?

Even if we accept the premise that Social Security is in crisis, all of the reform descriptions have essentially acknowledged that if adopted, they would not impact Social Security's bottom line. In fact, the short-term effect is that the trust fund would be depleted faster, unless the government decided to place general tax dollars into the fund.

So, we have a crisis that is not a crisis and a solution that is not a solution.

The president's interest in reforming Social Security lies in his belief that it is better for individuals to invest some of their retirement funds privately, and strategists believe such a reform could remove Franklin Roosevelt's Social Security legacy that the Democrats have exploited for the past 60 years.

On the other side of the coin we have the Democrats whose political reaction seems to be "if the President thinks the program needs to be modified, then it does not."

I don't know if privatization would be better or worse for the program, but I do know that the rationale for change is not based on the facts.

The fact is that America is aging. The Social Security system was developed when the ratio of workers to potential retirees was dramatically different (17:1, compared to today's 3:1), and life expectancy was considerably shorter. Although bi-partisan reforms in 1983 brought major changes to the then-insolvent program, unprecedented demographic shifts require a vision for the future that spreads retirement security responsibilities across all generations without placing undue pressures on our next generation of workers.

A second issue that Democrats have been hesitant to discuss is that Social Security is a better deal for low-income workers. Although higher income workers receive a higher benefit under Social Security, their return on investment is not as high because the system provides a proportionally higher return for low-income workers. This has had a dramatic effect on poverty rates for the older population, which have dropped from almost 40 percent in the 1950s to about 12 percent today.

In many instances higher-income workers probably would do better if they could invest their money separately. Not so much because they can get a higher return on investment, but because none of their private investment could be used to support low-income retirees.

The framers of Social Security crafted a strategy that tried to cut a compromise between two mainstream American values. On one hand, there was a value that individuals who were successful in the work place and earned more should be rewarded in retirement. On the other hand, there was support for a program that helped to bring older people above the poverty level in their final years of life. The current program, limitations aside, reflects this struggle.

It seems that the first debate about the Social Security program should involve where the American people stand on these two principles. After we have figured out that balance with meaningful debate, then we can carefully examine the options and strategies for reform.

The challenges facing Social Security and Medicare as a result of an aging America are real, but certainly solvable, particularly if we start work on real reform sooner then later. Isn't it time for some straight talk on Social Security? I believe we can handle the truth.

Robert Applebaum is professor of sociology and gerontology and Director of the Ohio Long-Term Care Research Project of the Scripps Gerontology Center at Miami University, Oxford, Ohio.

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