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Commission's Interim Report Says Social Security Facing Crisis
July 23, 2001
The President's Commission to Strengthen Social Security released a draft of
its interim report on Thursday, warning that Social Security "is broken" and faces a
serious crisis unless reform is undertaken quickly. However, the report also points
out that reform can be "an opportunity" to build a better retirement system for
younger workers. It discusses the program's looming financial crisis, noting that
the system's problems begin in 2016, when the program begins to run a cash
deficit, but it goes beyond questions of solvency to focus on such issues as the
ways in which the program is unfair to women, minorities and the poor. The report
also stresses the importance of wealth creation and of finding ways to allow low-wage
workers to save and invest.
Among key points made by the commission:
- The current system is facing a serious and urgent
financial crisis. By 2016, the program's benefit
obligations will exceed its annual tax revenue. Faster
economic growth will not save the existing system. In
addition, building up the Social Security Trust Fund does
nothing to change Social Security's financial problems.
The report will cite several sources, including the Social
Security Trustees, the Congressional Budget Office, the
General Accounting Office, the Congressional Research
Service, and the Clinton Administration's budget
proposals, to the effect that the Trust Fund is not an asset
of the federal government.
- Arguments against reform are equivalent to
advocating tax increases, benefit cuts, massive reductions
in other government expenditures, or government borrowing on an unprecedented scale. The tax increases
and benefit cuts would be large, representing a
tremendous hardship to average Americans.
- Under the existing system, young workers
receive an extremely poor rate-of-return on their taxes.
Indeed, individuals entering the workforce today are
unlikely to live long enough to even get back what they
will pay into the system.
- The current system gives workers no legal rights
to benefits, leaving their retirement benefits at the mercy
of the political process.
- Social Security reform offers an opportunity to
improve retirement security for women, minorities, and
other vulnerable Americans. The current Social Security
system contains many inequities that penalize women
and minorities. The current system is nowhere near as
progressive as commonly believed.
- Social Security reform offers an opportunity to
create a nation of savers and investors, giving Americans
greater ownership and control over their retirement
income. Low-wage workers and African-Americans, in
particular, would benefit from the opportunity to
accumulate real wealth.
The commission will finalize the report at its next meeting, 10 AM in the
Presidential Ballroom of the Capitol Hilton, 1001 16th Street, NW, Washington,
DC. The meeting is open to the public.
Critics of Social Security privatization were quick to attack report as "scare
tactics" and denied that Social Security was facing any sort of crisis. Henry
Aaron of the Brookings Institution and Rep. Robert Matsui (D-CA) held a joint
press conference to denounce the report as a "Chicken Little" document. Aaron
and Matsui continue to insist that the Social Security Trust Fund is a real asset,
meaning that there is no Social Security crisis until at least 2038. That, of course
ignores, not only the numerous nonpartisan sources pointing out the Trust Fund's
irrelevance, but the crisis suffered today by young workers forced to pay into a system that provides them no legal rights to their benefits and a declining rate of
return.
The debate is not likely to subside any time soon. Opponents of
privatization, led by the National Committee to Preserve Social Security and
Medicare, will be holding a press conference during the commission's lunch break.
Among those invited to participate are NCPSSM Chairwoman Martha McSteen,
Sens. Maria Cantwell (D-WA) and Jon Corzine (D-N.J), and Rep. Ellen Tauscher (D-CA).
On the day following the commission's meeting, the Cato Institute will host
a forum to offer comments on the group's initial efforts. Professor Thomas Saving,
a member of the commission will offer his impressions on where the group is
heading, followed by a discussion by experts with a variety of viewpoints on
Social Security reform, including Robert Bixby of the Concord Coalition, Roger
Hickey of the Campaign for America's Future, and Michael Tanner of the Cato
Institute. To register for this forum, click here.
"It's your money, your choice, your future."
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