Social Security

Ethical Reflection

C A society is measured by how it treats its most vulnerable citizens

C The most vulnerable should not be sacrificed for economic efficiency

C Problem is not lack of resources but how shared, distributed, and made accessible

Background

Social Security provides more than just retirement benefits. Beneficiaries include

C Seniors, especially women since they are usually surviving spouse.

C Workers who become disabled, their spouses and children

C More children (dependents or survivors) than receive TANF

Present Situation

Today social security takes in more than it spends. For years lawmakers have used these additional funds to cover other expenses with
system holding bonds. Cashing them in would require the government to raise taxes, borrow money or cut budgets. If nothing done:

C SS could face a long term funding shortfall after baby boomers retire, but system not in crisis or facing bankruptcy

C Revenues/expenses close for next 75 years with shortfall of less than 2%

C Full benefits could be paid until 2041 or 2052 (depending on numbers used) and about 70% or 80% of benefits after that

C Long term shortfall 1/3 to 1/5 less than the Administration=s tax cuts

Proposed Solutions

Private accounts as proposed by president will

C Worsen SS finances by diverting payroll tax revenues away from the program which would then need replaced to continue paying
benefits to those already retired or nearing retirement age

C Add to federal budget problems by requiring trillions in new borrowing

C Cut benefits significantly for workers with private accounts B could offset entire value of their account

C Be riskier - stock market can=t offer guaranteed benefits

C Compound problems for disabled workers who will have benefit reduction and fewer earnings for private account

Some Other Proposals Discussed

revenue raisers

C Raise/eliminate $90,000 payroll tax cap

C Increase payroll tax rate from 12.4% to 15% over 70 years B is regressive

C Raise taxes on benefits B affluent would contribute more

C Extend coverage to newly hired state/local government employees

C Invest a portion in indexed funds

cost trimmers

C Change from wage index to price index B succeeding generations would see successively deeper benefit cuts
and could fall into poverty

C Adjust the cola

C Increase normal retirement age to 70

Actions Requested

C Close projected gap through modest mix of benefit and payroll tax changes over a number of years

C Say Ano@ to private accounts

4/2005