Bush's Social Security plan will hurt people, the program
May 25, 2005
The president can't take a hint. He continues to tout his Social Security plan even though most Americans are opposed to it. Since they didn't like his plan to privatize the program, he's now talking about benefit cuts too.
You might wonder how the president's revised plan would affect you. If you're like most Americans, the news is not good.
The current Social Security system is relatively generous to people who earn the least -- especially homemakers and spouses who give up their jobs or work part time so that they can take care of family members. Most of them are women.
In contrast, personal, private accounts are based entirely on your income. If you have a high income, you will have a lot of money in your personal, private account. If you earn less, or take a few years out of your career to raise children, follow your spouse when he or she moves for a new job or work part time so you can help care for family members, your personal, private account will suffer.
The current Social Security system is a social insurance system, not just a retirement fund. That means the people who need it most are taken care of -- such as a young child whose working parent died in a car crash. That child is entitled to Social Security benefits every year until adulthood.
Under personal, private accounts, if a young parent dies, his or her child and spouse would inherit his account, but most young parents will not have much money in that account since it is limited to 4 percent of annual income.
Low-income workers who die young might have just a few thousand dollars, and certainly not enough to be called "wealth." Their children would have been better off with the current system, which sends a check every month until age 18 (or 19 if still in high school).
On the other hand, if that same father dies at the age of 67, after retiring, he will probably not have a personal, private account to leave his heirs. That's because his personal, private account would have been turned into an annuity when he retired, and that means he will get checks as long as he lives, but not after he dies.
The solution: Be sure to die just before you retire, to maximize the money in your personal, private account that your family can inherit.
There's more bad news with private accounts. The transition costs to change from our current system to a private system would cost trillions of dollars.
How will we pay for that? Either we need to get rid of the tax cuts that were passed a few years ago, or we would need to cut Social Security benefits. President Bush is suggesting cuts in benefits. His plan would reduce the way that benefits are cut to keep pace with inflation for anyone earning more than $20,000/year. This would mean smaller Social Security checks each month. As a result, most middle-class (and higher) earners would have to depend on their private accounts because they would receive so little from Social Security.
There are ways to strengthen Social Security that would harm fewer women and other lower earners. The most obvious would be to "raise the cap" -- charging Social Security taxes for people earning more than $90,000 per year.
Unfortunately, when the president floated that idea, members of his own party rebelled.
The Social Security system is not bankrupt or in crisis. It's a safety net that many Americans desperately need -- especially those with no other pensions and those who live alone. Many of those most vulnerable Americans are women. Our country should not abandon them, or the program that has helped so many of our friends and relatives.
Diana Zuckerman is president of the National Research Center for Women & Families, a Washington research and advocacy center. She can be reached at firstname.lastname@example.org.