Saul Friedman
November 27, 2004
The e-mail from Rich S. gives us an opportunity to assert some truths about the nation's 70-year-old Social Security System, which may help prevent the Bush administration from souring the coming Social Security debate with the kind of lies that got us into a war.
Rich of Mount Sinai, who drives a school bus, will be going on Social Security next year at age 62, and he'll get a smaller benefit than he'd receive if he waited until he's 66. "To me, this is a penalty for taking it early," he writes, "so why is the government taking one dollar for every two I make over $11,600? Is there a person I can write to voice my displeasure?"
Maybe an explanation will help. In 1983, in an effort to strengthen Social Security, President Ronald Reagan appointed a commission, headed by present Federal Reserve Chairman Alan Greenspan, to make fixes to the system and build its trust funds so it could pay benefits for the 74 million boomers who start retiring at the end of this decade.
The commission raised payroll taxes to the current 12.4 percent, split between employer and employee. It raised the retirement age to 67, while retaining the early retirement option of 62. But "if you start receiving retirement at 62," said the Social Security Web site, "you will get 80 percent of the monthly benefit because you will be getting benefits for an additional 36 months."
When Social Security became law (over Republican opposition) it was feared that retirees would continue to work and take jobs away from younger workers. Thus for years Congress reduced benefits by a dollar for every two dollars earned over a certain limit, which saved money for the system. But a few years ago, as more retirees went to work, Congress phased out the penalty for beneficiaries over 65. But not for Rich, although he and others like him may earn as much as $12,000 next year without a reduction.
The 1983 changes in the law also rebut a pervasive myth designed to discredit Social Security: that members of Congress think so little of the system that they and other federal employees don't contribute to it. Wrong, says Social Security.
Since January 1984, "All members of Congress, the president, vice president, federal judges and most political appointees" have been covered by Social Security, says Social Security Online. Previously, they were covered by the Civil Service Retirement System. They could retain these benefits or switch to Social Security. Now, all federal employees must enroll in the program.
Social Security taxes were never deductible, but for years the Treasury Department held that Social Security income was not taxable. That changed under Reagan in 1983, when Congress approved a Greenspan Commission proposal to tax up to half of Social Security benefits for persons with relatively high incomes. In 1993, the Clinton administration raised to 85 percent the portion of Social Security benefits taxed, for higher-income persons. The taxes were earmarked for Medicare.
The Greenspan Commission produced many more lesser changes (see www.ssa.gov), but they added up to new security for Social Security and a huge buildup of the trust fund to pay for the boomers. And no matter what you may hear from the administration:
1. Social Security is not in crisis and nowhere near bankruptcy. If nothing is done and the economy grows at a snail's pace, the Social Security retirement system would begin dipping into the trust fund in 2018 to pay benefits. But the system's Republican trustees say the trust fund, with assets of $1.8 trillion (which continues to grow from interest paid on its Treasury holdings), can pay full benefits until 2042, when the youngest boomers will be 78. And if need be, it can continue to pay 70 percent of benefits until 2078.
2. But if the economy does better and Congress makes slight adjustments, more modest than in 1983, like raising payroll taxes 1 percent and ending the wage ceiling on which taxes are collected, Social Security would remain in the black, guaranteeing inflation-adjusted pensions for millions of Americans into the next century. The generation following the boomers is considerably smaller.
3. Don't let anyone tell you the trust fund is not real, that it consists of a bunch of worthless IOUs. The so-called IOUs are U.S. Treasury notes, backed by the full faith and credit of the United States. And the Bush administration, which is borrowing heavily from the trust for Iraq (evidence that it's real money), won't dare renege on the debt.
4. Social Security is a uniquely progressive pension, in that the lower your income during your working years, the higher percentage of your salary is replaced by the benefit. Thus, as a retirement insurance system, Social Security deliberately favors America's workers, over higher salaried professionals and executives who can afford to save more and invest.
5. Social Security, which has paid out about $7 trillion through wars and recessions, is not just a pension system. A separate trust fund helps finance Social Security Disability Insurance for 7 million disabled Americans of all ages. And Social Security pays survivor benefits to 4 million children and 5.5 million widows/widowers of beneficiaries who died young.
6. Even if the president says he wants workers to be permitted to invest only part of their Social Security taxes in per- sonal retirement accounts, that would be a first step for his most prominent allies for privatization - Washington's Cato Institute and Grover Norquist's Americans for Tax Reform, who would eventually replace all of Social Security because they believe the government should not be in the pension business.
Now let an honest debate begin.
Write to Saul Friedman, Newsday, 235 Pinelawn Rd., Melville, NY, 11747-4250, or e-mail saulfriedman@comcast.net.
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November 27, 2004
The e-mail from Rich S. gives us an opportunity to assert some truths about the nation's 70-year-old Social Security System, which may help prevent the Bush administration from souring the coming Social Security debate with the kind of lies that got us into a war.
Rich of Mount Sinai, who drives a school bus, will be going on Social Security next year at age 62, and he'll get a smaller benefit than he'd receive if he waited until he's 66. "To me, this is a penalty for taking it early," he writes, "so why is the government taking one dollar for every two I make over $11,600? Is there a person I can write to voice my displeasure?"
Maybe an explanation will help. In 1983, in an effort to strengthen Social Security, President Ronald Reagan appointed a commission, headed by present Federal Reserve Chairman Alan Greenspan, to make fixes to the system and build its trust funds so it could pay benefits for the 74 million boomers who start retiring at the end of this decade.
The commission raised payroll taxes to the current 12.4 percent, split between employer and employee. It raised the retirement age to 67, while retaining the early retirement option of 62. But "if you start receiving retirement at 62," said the Social Security Web site, "you will get 80 percent of the monthly benefit because you will be getting benefits for an additional 36 months."
When Social Security became law (over Republican opposition) it was feared that retirees would continue to work and take jobs away from younger workers. Thus for years Congress reduced benefits by a dollar for every two dollars earned over a certain limit, which saved money for the system. But a few years ago, as more retirees went to work, Congress phased out the penalty for beneficiaries over 65. But not for Rich, although he and others like him may earn as much as $12,000 next year without a reduction.
The 1983 changes in the law also rebut a pervasive myth designed to discredit Social Security: that members of Congress think so little of the system that they and other federal employees don't contribute to it. Wrong, says Social Security.
Since January 1984, "All members of Congress, the president, vice president, federal judges and most political appointees" have been covered by Social Security, says Social Security Online. Previously, they were covered by the Civil Service Retirement System. They could retain these benefits or switch to Social Security. Now, all federal employees must enroll in the program.
Social Security taxes were never deductible, but for years the Treasury Department held that Social Security income was not taxable. That changed under Reagan in 1983, when Congress approved a Greenspan Commission proposal to tax up to half of Social Security benefits for persons with relatively high incomes. In 1993, the Clinton administration raised to 85 percent the portion of Social Security benefits taxed, for higher-income persons. The taxes were earmarked for Medicare.
The Greenspan Commission produced many more lesser changes (see www.ssa.gov), but they added up to new security for Social Security and a huge buildup of the trust fund to pay for the boomers. And no matter what you may hear from the administration:
1. Social Security is not in crisis and nowhere near bankruptcy. If nothing is done and the economy grows at a snail's pace, the Social Security retirement system would begin dipping into the trust fund in 2018 to pay benefits. But the system's Republican trustees say the trust fund, with assets of $1.8 trillion (which continues to grow from interest paid on its Treasury holdings), can pay full benefits until 2042, when the youngest boomers will be 78. And if need be, it can continue to pay 70 percent of benefits until 2078.
2. But if the economy does better and Congress makes slight adjustments, more modest than in 1983, like raising payroll taxes 1 percent and ending the wage ceiling on which taxes are collected, Social Security would remain in the black, guaranteeing inflation-adjusted pensions for millions of Americans into the next century. The generation following the boomers is considerably smaller.
3. Don't let anyone tell you the trust fund is not real, that it consists of a bunch of worthless IOUs. The so-called IOUs are U.S. Treasury notes, backed by the full faith and credit of the United States. And the Bush administration, which is borrowing heavily from the trust for Iraq (evidence that it's real money), won't dare renege on the debt.
4. Social Security is a uniquely progressive pension, in that the lower your income during your working years, the higher percentage of your salary is replaced by the benefit. Thus, as a retirement insurance system, Social Security deliberately favors America's workers, over higher salaried professionals and executives who can afford to save more and invest.
5. Social Security, which has paid out about $7 trillion through wars and recessions, is not just a pension system. A separate trust fund helps finance Social Security Disability Insurance for 7 million disabled Americans of all ages. And Social Security pays survivor benefits to 4 million children and 5.5 million widows/widowers of beneficiaries who died young.
6. Even if the president says he wants workers to be permitted to invest only part of their Social Security taxes in per- sonal retirement accounts, that would be a first step for his most prominent allies for privatization - Washington's Cato Institute and Grover Norquist's Americans for Tax Reform, who would eventually replace all of Social Security because they believe the government should not be in the pension business.
Now let an honest debate begin.
Write to Saul Friedman, Newsday, 235 Pinelawn Rd., Melville, NY, 11747-4250, or e-mail saulfriedman@comcast.net.
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