LIADA Newsletter       March 2005

FACTS ABOUT SOCIAL SECURITY

Much has been written and discussed about changes to the present Social Security System. In the view of many economists, the program is not in crises nor is a potential shortfall irresolvable. Currently, benefits are based on the level of earnings, but they are tilted toward progressivity so that those at the bottom get more in proportion to their earnings and those at the top get less. Because the federal government has been borrowing against the Treasury securities in the Social Security Trust Fund, to pay for military expenses, education, tax cuts, etc., there is the possibility that by 2042, when the baby boomers will be leaving the work force, a shortfall will occur.

President Bush has proposed diverting a portion of the payroll taxes of younger workers into individual private accounts to be invested by them in stocks or bonds. His projections of 6% earnings have been labeled as unrealistically high by many knowledgeable people. He is also planning to lower the future benefits portion between 20% & 40% by basing these benefits on the Consumer Price Index (CPI) that goes up at a slower rate than wages, as the system is now calculated.

A major problem with the Bush proposal is that the diverted money would not be available to pay benefits to current retirees, causing the government to borrow a significant amount of money to cover these expenses. This creates a potential $2 trillion addition to the deficit.

A more equitable solution would be to gradually raise the cap on income subject to the payroll tax, now at $90,000. This would reverse a recent regressive trend. Income distribution in America has become more skewed with upper-income people earning more money that has escaped the social security tax.

Imposing Social Security taxes on incomes of up to $200,000 would come close to eliminating the entire deficit. Repeal of the cuts unwisely passed by Congress would also save the Trust Fund; however, there is little chance of that occurring.

There exists no dire crisis. Those who would benefit most from privatization would be the stockbrokers, insurance companies, bankers and mutual funds. Under the current system, people who have contributed all their working lives know that regardless of stock market fluctuations and career changes a guaranteed pension awaits them; it is also a disability insurance program. Baby boomers and all who are affected must unite with more experienced seniors in a concerted effort to defeat this privatization fiasco. Call your representatives!

Lita Kelmenson and Edith Pollack

Political Commentary

There is an old adage that the rich get richer and the poor get poorer. In the past, this country was proud to have progressive taxes to help the poor from getting poorer.

It appears that President Bush is set on helping the rich get richer and not on helping the working and middle classes.

The President’s plan for social security is just one more of his plans to help the rich get richer and should be stopped before it becomes law.

During his state of the union address, the President stated that government employees have private security accounts. He neglected to state that those accounts are in addition to the normal social security accounts for government employees.

As we all know, the President’s tax cuts gave much bigger tax cuts to the rich than to middle and working class people.

I urge you to write and telephone your senators and representatives in Washington to stop the Bush social security plan in its tracks.

Judith Maxwell