Ohio Secretary of State Ken Blackwell has been confirmed as luncheon speaker
at a conference on "African-Americans and Social Security," co-sponsored by
the Cato Institute and the National Black
Chamber of Commerce. The conference, scheduled for February 12, 2002, in
Washington, DC will examine how Social Security reform will impact the African-American
community. It will look at such issues as whether Social Security is fair to
African-Americans, the need for greater savings and investment in the African-American
community, and, of course, the great debate over whether Social Security should
be privatized.
Blackwell, one of the nation’s highest ranking elected African-Americans, has
been a long-time advocate of Social Security privatization. Early this year,
he had this to say, in a column in Investors
Business Daily:
Social Security is facing a financial crisis that, if
not averted, will be devastating for African-Americans.
Within 15 years the program will begin running a
deficit, spending more on benefits than it takes in
through taxes.
No group has as much at stake in Social
Security reform as African-Americans. This group is
disproportionately dependent on Social Security for
their retirement income. Three in four older black
households rely on Social Security for half or more of
their retirement income. A third of older African-Americans
rely on Social Security for all of their
income.
As a long-time advocate of Social Security
reform, I believe it is promising to see these red flags
finally being heeded. Social Security reform is
beginning to get the attention it deserves as a civil
rights issue. National Urban League President Hugh
Price and NAACP Chairman Julian Bond recently
addressed the need to improve and strengthen our
current system. Unfortunately, they dismiss private
individual investment accounts as recommended by
the Social Security Commission.
Price and Bond are correct that higher mortality
rates for young blacks affect African-Americans'
aggregate rate of return on Social Security
contributions. But it is wrongheaded to leave the
impression that this alone causes the low rates of return. High mortality rates for the young do not have
a big impact on Social Security returns. Many young
blacks that die have not had time to develop
substantial earning histories and have not paid a
significant amount of money into the system.
Moreover, there are many other factors that make
Social Security in its current form a bad deal for
African-Americans.
Family structure is one factor. One needs only
to look at the demographic group that benefits most
from Social Security – married couples with children
and a stay-at-home spouse - to understand. This is a
living situation far less prevalent amongst African-Americans
than other races. The list of Social
Security's disadvantages for blacks goes on. African-Americans
are less likely than whites to have other
forms of savings or wealth, a condition exacerbated
by the 12.4% Social Security tax. After paying their
living expenses, few low-income workers have the
discretionary income needed to invest. Social Security
taxes squeeze out other forms of saving and
investment. As a result, many African-Americans are
unable to accumulate real wealth. Moreover, since
Social Security benefits are not inheritable, this
downward spiral of wealth inequity is compounded
from generation to generation.
Any Social Security reform should take into
consideration the needs and circumstances of
African-Americans. The only proposal to thoroughly
do so is the partial privatization strategy advocated by
President Bush and former Sen. Daniel Patrick
Moynihan of New York.
While this issue will be largely debated along
partisan lines, similar reform strategies have found
non-ideological appeal across the globe. The Labor
Party privatized in Australia. Social Democrats in
Sweden are implementing private accounts. Even
former communists in Poland and Hungary have
privatized. Policy-makers in those countries chose
private accounts not based on political ideology but
because they understood it was the best way of
building wealth and security for workers.
Transforming the system to one based on
individually owned, privately invested accounts would
treat African-Americans far more fairly. There is
nothing partisan about that. By changing the system
from an unfunded, defined benefit to a defined
contribution plan based on real wealth, privatization
would disconnect total benefits from life expectancy.
The benefits any individual receives would depend on
what was paid into the system plus the investment
return on those payments. Benefits under the current
program are dependent solely on how many years
those benefits are received. This would not be the
case under a partially privatized system. Individuals
would have a property right to their Social Security
benefits. This account would become part of the
contributor's estate, able to be passed down as an
inheritance. Survivor and disability benefits, which are
received by many African-Americans, would not be
affected by any of the privatization plans that have
been proposed. And as for providing a fairer rate-of-return
to African-Americans, nothing could be more
capable of doing so than a privatized Social Security
system. Compound interest, as Albert Einstein once
said, is the most powerful force on earth. It could work
magic on both economic and social levels. A higher
rate-of-return would create wealth and lift many
African-American seniors out of poverty.
It is time for our national leaders to consider
the current and long-term consequences of our unfair
Social Security system for African-Americans. The
stakes are high. But so are the opportunities.
