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Social Security for All: Excerpt from 'Social Security Works!' by Nancy Altman

By    |   Wednesday, 28 Jan 2015 04:53 PM

An excerpt from the book Social Security Works! Why Social Security Isn’t Going Broke and How Expanding It Will Help Us All by Nancy J. Altman and Eric R. Kingson

EXPAND SOCIAL SECURITY FOR ALL GENERATIONS

AN EXPANDED SOCIAL SECURITY SYSTEM IS A SOLUTION TO a variety of challenges facing the nation, including the income insufficiency of today’s seniors; the retirement income crisis confronting today’s middle-aged and young workers; insufficient recognition of and public support for the caregiving functions of the family; and increased inequality, now hollowing out the middle class. While not a total solution, Social Security has a key role to play.

Our plan is but one among a number of excellent plans. A growing number of United States senators, members of the House of Representatives, academics, and leading organizations representing, among others, women, seniors, people with disabilities, low-income Americans, and people of color, have put forward Social Security expansion plans.

All of the plans present solutions to pressing challenges. All pay for the improvements. All truly strengthen, rather than cut, our Social Security system. Combined, these proposals and plans illustrate that there are many paths to building on our existing Social Security system to provide stronger, affordable protection for America’s families, while reducing income inequality.

Here, we discuss the various elements of our plan, as well as other proposals, some of which appear in other plans. This chapter describes benefit improvements and how they strengthen retirement security for today’s retirees and workers, and how they strengthen protections across all generations in the family, including those giving care to others.

INCREASING THE ECONOMIC SECURITY OF CURRENT AND FUTURE SENIORS

Social Security currently provides a strong foundation, but its benefits are far from adequate by themselves. Indeed, they are mod- est by virtually any measure. Social Security’s retirement benefits average just $15,571 a year. They do not come close to replacing a large enough percentage of wages to allow workers to maintain their standards of living once wages are gone. Moreover, these already minimal replacement rates will be lower in the future, as the result of the already enacted cuts, now being phased in. As another measure, Social Security’s benefits are extremely low by international standards, ranking near the bottom when measured against the old-age benefits provided by other developed countries.

In light of Social Security’s near universality, efficiency, fairness in its benefit distribution, portability from job to job, and security, the obvious solution to the nation’s looming retirement income crisis is to increase Social Security’s modest benefits. Recognizing the retirement income crisis, a number of policymakers have pro- posed additional savings vehicles and incentives to save. Some have proposed building on tax-favored IRAs and 401(k)s. But savings will not be effective for the vast majority of workers; what will unquestionably be effective is insurance, in the form of time-tested Social Security.

Increasing Social Security’s benefits can be done simply and quickly, with no start-up costs, no additional regulation, and virtually no additional administrative costs. It is very important to recognize that benefit improvements will, over time, be conveyed to all generations in the family and those to come. In fact, younger generations will reap greater benefits from an across-the-board increase than today’s old. That’s because, in raising the benefits of current beneficiaries, we also raise the benefits of those who will receive them in the future, and because today’s old will receive this benefit improvement for fewer years than tomorrow’s old. It will also lessen the squeeze on those who feel responsible to supplement the incomes of their aging parents while also assisting their own children and grandchildren.

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Moreover, increasing Social Security benefits will increase the benefits, not just of retired workers but also of disabled workers, their families, and the families of deceased workers. This increase would occur automatically, without reference to specific groups, because Social Security’s benefits are primarily generated from the same formula.

INCREASE BENEFITS FOR ALL CURRENT AND FUTURE BENEFICIARIES

In light of the looming retirement income crisis, which will affect most workers, Social Security’s modest benefits should be increased for everyone. There are many ways to design this increase. The increase can be structured so that lower-wage workers and their families receive benefits that are a larger percentage of their pre-retirement wages as some proposals do, or proportionately, as the All Generations Plan does. Increasing everyone’s benefits fits with the spirit of Social Security and ensures that all workers and their families have a somewhat stronger and larger foundation when wages are gone.

And so the All Generations Plan proposes an across-the-board 10 percent increase in benefits for everyone who receives Social Security benefits now, or will in the future. Just as Social Security has a minimum benefit and a maximum family benefit, we limit our plan’s maximum benefit increase to $150 a month.

ADOPT A MORE ACCURATE COST OF LIVING ADJUSTMENT

Virtually every expansion plan proposes the adoption of a more accurate measure of the cost of living experienced by Social Security beneficiaries, and the All Generations Plan does so as well. This change is not really an increase in benefits; it is designed to ensure that benefits do not erode.

The automatic annual cost of living adjustment (COLA) is one of the most important features of our Social Security system. It is intended to assure that benefits, once received, maintain their purchasing power no matter how long someone lives. That’s why Social Security benefits are adjusted automatically every January to prevent their erosion if and when there has been inflation. Without accurate and timely inflation adjustments, retirees, people with serious and permanent disabilities and other beneficiaries would see their Social Security lose value as they age. The current inflation index under-measures how inflation eats away at the purchasing power of benefits.

The intent of the cost of living adjustment is to allow beneficiaries to tread water; instead, they are slowly sinking. That is why it is so important to adopt the Consumer Price Index for the Elderly as the basis of the annual cost of living adjustment.

INCREASE BENEFITS TARGETED TO ALLEVIATING POVERTY

In addition to a better Consumer Price Index and an across-the- board benefit increase, the All Generations Plan calls for targeted benefit increases to alleviate poverty. Poverty among seniors has declined sharply over the last half century. Nevertheless, some serious pockets of poverty remain. Frequently, people who were poor at younger ages remain poor in retirement. Low-wage workers, as well as workers who were disadvantaged during their working years—disproportionately, people of color, women, and members of the LGBT community—are likely to have disproportionately high rates of poverty in old age. Indeed, many women who were secure at younger ages find themselves financially strapped as they grow older. Women live longer on average than men, are less likely to have supplemental pensions, and, often are the ones to take time out from the workforce for the essential but uncompensated job of caring for family members.

Social Security is by no means a total solution. People should have a living wage when they work full-time. No one in this country should be penalized in the workplace for his or her race, gender, sexual orientation, religion, or ethnicity. Caregivers should receive the economic and emotional support they deserve. But Social Security, because of its ingenious structure, helps those workers and their families when they reach old age. It could easily do even more.

One of the values underlying Social Security is that workers who retire after a lifetime of work should not retire into poverty. Moreover, the architects of Social Security believed that workers who contributed to Social Security should receive benefits larger than they could receive simply by applying for means-tested welfare. Social Security provides benefits that are disproportionately larger for those who have experienced lower wages over their careers. As a consequence, even an across-the- board percentage increase, as the All Generations Plan provides, helps these workers disproportionately.

In addition, Social Security has included a minimum benefit since 1939. Because the special minimum is only indexed to the rise in prices, not wages, it has not kept pace with the nation’s rising standard of living. Consequently, it covers fewer and fewer workers each year.

It is time to update the minimum benefit so that when fully implemented, those working for at least thirty years and retiring at their full retirement age will receive a benefit equal to 125 percent of the federal poverty line. The All Generations Plan proposes to do just that.

Another area of disproportionate poverty occurs among the very old, who likely have exhausted other resources. Those disproportionately poor at very old ages are more likely to be women, who may be widowed, divorced, or never married, and who may never have earned much during their younger years. To address this issue, some have proposed increasing benefits at an advanced age, such as 85. In fairness to those who have experienced serious and permanent disabilities at young ages and who have been receiving benefits for many years and, like the very old, may have exhausted other resources, these proposals sometimes simply raise benefits after a certain amount of time—for example, for those who have been receiving benefits for twenty years. Another proposal is to increase benefits for widows, who have disproportionately high rates of poverty. Others have proposed so-called earnings sharing between spouses, whether still married or divorced. Although the All Generations Plan does not include these specific, targeted reforms, we applaud them. We think they would help many who are disadvantaged, while remaining consistent with Social Security’s overall structure and conceptual underpinning.

A SERIOUS CAUTION ABOUT THE GOAL OF ANTI-POVERTY AND SOCIAL SECURITY

While targeted increases (like the ones just highlighted) are valuable and relatively inexpensive, they should not be done while scaling back, or worse, eliminating benefits for others. Some who don’t like Social Security, or simply don’t understand it, have proposed enacting these targeted expansions while scaling back on benefits for what they call higher-income workers.

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Although it is a clever sound bite to ask why billionaires should get Social Security, there are practical as well as conceptual reasons why everyone should receive the benefits they have earned.

Scaling back or eliminating the benefits of millionaires and billionaires would produce relatively minute savings, since there are so few of them and their benefit levels are low already in relation to their contributions, as a result of Social Security’s progressive benefit formula. That is why, when one examines the details of the proposals that have been put forward to scale back benefits for “higher income” individuals, those proposals invariably cut the benefits of middle-class workers and their families. Those putting forth these proposals rarely, if ever, define what they mean by higher income, but “higher income” is simply used as a relative term, since most seniors have modest incomes. Every proposal that has any noticeable cost savings involves reducing the benefits of solidly middle-class Americans, sometimes those with annual incomes as low as $25,000. If the proposals did not do that, they would show virtually no savings on official projections.

While eliminating the benefits of millionaires and billionaires does not produce much in the way of savings, that action would have detrimental shortcomings, which, it is not too hyperbolic to say, are potential poison pills to our Social Security system. First, affluence-testing Social Security would create enormous administrative problems and costs. No matter where the limit was put, it would mean that every one of us would then have to prove to the Social Security Administration, through income tax returns, house valuations, and other evidence, that we are not too rich to receive Social Security.

Perhaps most importantly, taking away benefits from the wealthiest, who have nonetheless earned those benefits, would subtly but fundamentally undermine a widely popular program that has done more to eradicate poverty in this country than any other program. Our Social Security system is the nation’s most effective anti-poverty program. It lifts 22 million people—including more than 1 million children—out of poverty each year. But that is a byproduct of its central mission, which is to provide universal insurance against the loss of wages.

No proposal should be enacted if it transforms Social Security from an insurance program into a welfare program.

TO FURTHER ALLEVIATE POVERTY, IMPROVE THE SUPPLEMENTAL SECURITY INCOME PROGRAM

SSI, which currently serves more than 8.3 million low-income aged and disabled Americans, is an important complement to Social Security but its extremely modest benefits and very restrictive eligibility criteria are in desperate need of updating.

That’s why in addition to expanding Social Security, it is time to increase SSI’s meager benefits as well as its income and assets limitations. At a minimum, the SSI benefit should be set at the official poverty level.

What should not be done, though, is to transform Social Security into SSI in the name of targeting its benefits toward the poor. Certain targeted increases, like increasing benefits for the very old or increasing the minimum benefit, can be enacted within the insurance framework of Social Security, but a means test or affluence test transforms Social Security into welfare and should not be enacted. We also should not scale back middle-class benefits, so that workers no longer get a fair deal on the premiums that are paid. Bill Gates and other billionaires should still receive Social Security, but we should require them to pay more.

STRENGTHENING FAMILY PROTECTIONS AND REINFORCING CAREGIVING

Although Social Security is often thought of as a program for the old, it is more accurately a family protection program. Nearly three out of ten beneficiaries receive disability or survivor benefits.

Moreover, increasing the benefits of Social Security beneficiaries reduces the burden on adult children to care for aged parents and expands the income of extended families. Throughout history, adult children have cared for aging parents. One way to think about Social Security is as an institution that routinizes and streamlines that age-old transfer, in recognition that some people have many children who can share the costs, while others have few or none at all. Social Security allows this transfer to be made while allowing seniors to have the dignity that comes with having earned the support, and the autonomy provided by an independent source of income—all while alleviating the pressure on younger family members.

But expanding Social Security beyond a simple increase in benefits can help families even more directly.

SUPPORT CARE GIVEN TO OTHERS

In addition to death, disability, and old age, other times that wages may disappear are when a child is born, when a worker becomes sick, or when a worker leaves paid employment to care for a sick or functionally disabled relative. Federal law already mandates that workers may take up to twelve weeks of leave without losing employment. It is a simple step to say that the wages lost during those weeks should be insured and replaced through Social Security. The All Generations Plan takes that simple step and adds these circumstances as insurable events that Social Security covers.

We base our proposal on the Family and Medical Insurance Leave (FAMILY) Act, which representative Rosa DeLauro (D- CT) has introduced, with eighty-two co-sponsors at the time of this writing, in the House of Representatives, and which senator Kirsten Gillibrand (D-NY) has introduced, with four co-sponsors, in the Senate. Our proposal is nearly identical to theirs, but simply adds these circumstances as insurable events under Social Security, while the FAMILY Act designates its own earmarked contribution, separate and apart from what is now paid for Social Security’s old age, survivors, and disability insurance.

In addition to the income lost when a child is born or adopted, which the paid family leave proposal addresses, expenses increase. Many other industrialized countries provide not only paid family leave, but also children’s allowances. The All Generations Plan proposes a $1,000 allowance at the birth or adoption of a child.

When workers take time out from the workforce to care for family members, they not only lose wages, but also fail to earn credit toward their own Social Security benefits in the event of old age, disability, or premature death. Yet, many people, disproportionately women, withdraw from paid work to undertake this enormously important unpaid work.

Indeed, anyone who has cared for children or sick or functionally disabled relatives, or witnessed another who has done so, understands how important and how hard that work is, yet it is unremunerated. In order to increase the economic security of those who engage in this invaluable labor, the All Generations Plan provides credit toward Social Security benefits when parents leave work to care for young children—a first step on which to expand further in years to come.

RESTORE STUDENT BENEFITS FOR CHILDREN OF DECEASED OR DISABLED WORKERS

Many younger Americans are finding advanced education either out of their financial reach or are taking on huge amounts of debt to continue to attend school. While the major solution to this challenge lies outside of Social Security, the program can do its part.

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Social Security provides benefits to minor children whose parents have died or become disabled. The concept is that if those tragedies had not occurred, those workers’ wages would have provided their support. At one time, those children’s benefits continued until age 22 for those who attended post-secondary colleges, universities, or vocational schools. But at the beginning of the Reagan administration—when the current campaign against Social Security was just getting underway—those benefits were repealed. At that time, the cost of that education was more affordable, and government-provided student loans and grants were more readily available. The All Generations Plan re- stores student benefits for children of disabled or deceased workers.

Most parents, if they are financially able to do so, contribute to the costs of their children’s post-secondary education. All of us, through Social Security, should provide that support when workers have lost wages as the result of death or disability. Children’s benefits, received when a worker has died or become disabled, should continue beyond high school—as they did for many years—if those children attend college or vocational school. Though these benefits should be provided to any working family that has earned them, these beneficiaries tend to be lower income. Consequently, children receiving Social Security disproportionately live in families with lower incomes and disproportionately are racial and ethnic minorities.

ENHANCE PROTECTIONS FOR DISABLED ADULT CHILDREN AND DISABLED WIDOW(ER)S

Parents generally worry especially about children with disabilities and want to make sure that they are cared for after the parents have died. Parents also want those children to have as independent and productive lives as possible. Social Security addresses the first concern: it provides benefits for the life of the child. With respect to the second, though, Social Security could be improved.

Social Security has a family maximum, which limits the amount that can be paid based on a worker’s earnings record. This may apply even if the disabled adult child is able to live independently. This can have the unfortunate side effect of reducing monthly benefits for the family unit. While this limitation may make sense when a disabled-adult-child beneficiary lives in the family home and shares household expenses, it makes no sense for those beneficiaries who do not live with their parents. Although the number is small, the limitation poses a significant barrier for disabled-adult- child beneficiaries who wish to live more independently. The All Generations Plan addresses this shortcoming.

Social Security also recognizes the special hardship faced by people with disabilities who are widowed. While widow(er)s cannot receive survivor benefits until age 60 at the earliest (unless they are caring for dependent children), widow(er)s who are disabled can
receive benefits at younger ages, in recognition of their inability to work. But there is an arbitrary age, 50, for the start of these benefits and a requirement not applied to other persons with disabilities about how recent the onset of the disability must be. Moreover, unlike disabled workers, their benefits are reduced substantially, to 71.5 percent of a full benefit, when they are received at age 50. The All Generations Plan proposes to drop these arbitrary restrictions and harsh reductions. Like the disabled-adult-child proposal, relatively few people are affected and so the cost is relatively low, but the importance to those who would benefit is substantial.

NOW IS THE TIME TO EXPAND SOCIAL SECURITY

All of the expansions highlighted fit within the solid structure of Social Security, the cornerstone of which was laid more than three-quarters of a century ago. We are the wealthiest nation in the world, much wealthier than we were when Social Security was created, and much wealthier than when it was expanded in the past.

The last major legislative expansion occurred almost a half century ago. It is time to expand it again. Expanding Social Security, where the benefits go largely to low- and middle-class families, and paying for those expansions by requiring the wealthiest among us to pay their fair share, will reduce the growing income inequality. The question we should ask is, how can we afford not to expand Social Security in these ways. The results will be greater economic security for America’s working families and a fairer distribution of the nation’s bounty.

The intent of the cost of living adjustment is to allow beneficiaries to tread water; instead, they are slowly sinking.

Copyright © 2015 by Nancy J. Altman and Eric R. Kingson. This excerpt originally appeared in Social Security Works! Why Social Security Isn’t Going Broke and How Expanding It Will Help Us All, published by The New Press Reprinted here with permission.

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An expanded social security system is a solution to a variety of challenges facing the nation.
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Wednesday, 28 Jan 2015 04:53 PM
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