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It is time to stop thinking of Social Security as a problem and start thinking of it as a key solution to our retirement security crisis.
The dimensions of the crisis are well known. For millions of Americans, retirement seems an unreachable goal. Rather than looking forward to well-deserved economic security in old age, many working people now fear retirement. Half of working Americans have no retirement plan at all at work. Most of those who have a retirement plan are in 401-k savings accounts where the median balances are less than $30,000. Taking into account all sources of income, it is estimated that the gap between what working Americans need to maintain their standard of living in retirement and what they actually have is $6.6 trillion. Most of the 76 million baby boomers will face retirement with fewer assets than previous generations had, and many will be forced to keep working in their retirement years to stay out of poverty.
The causes of the crisis are also well understood. Fewer and fewer workers are now covered by defined-benefit pension plans. Retirement savings have been decimated by losses in the stock market. Working families have lost trillions of dollars of home equity with the collapse of the real estate bubble. The stagnation of wages has made it harder for workers to save for retirement. And the inexorable rise of health care costs is taking a bigger and bigger bite out of retirement income.
This is clearly a crisis that demands a solution, and any solution obviously will require additional resources. Some might say that we cannot afford to do anything about this problem because America is too poor or because we are bankrupt, but this is not true. America is one of the richest countries on earth and we still have vast economic resources at our disposal.
So the question really is, “What is the best way to fix this problem?” If we were to start from scratch and build a new retirement security supplement, ideally we would want one that has shared responsibility of employers, employees and the government; portable lifetime benefits that are paid out only at retirement; pooled assets; professional management; efficient and transparent administration; and effective oversight. But we already have such a program. It is called Social Security.
While Social Security is an obvious solution to the crisis, its current benefit levels are too modest. Social Security’s income replacement rate is one of the lowest of all the industrialized countries. To compensate for the decline of traditional pensions and the loss of retirement savings, Social Security retirement benefits must be increased across the board, which would be especially meaningful for low-income seniors. In addition, Social Security COLAs need to take into account the higher health care costs faced by seniors. Finally, too many employers look for ways around making their contributions to Social Security through labeling their workers as independent contractors.
Needless to say, the Social Security debate in Washington, D.C., has not been centered on across-the-board benefit increases. On the contrary, it has focused almost exclusively on benefit cuts of various descriptions, which would only make the problem worse. The AFL-CIO has repeatedly stated our opposition to any reduction of benefits, such as an increase in the retirement age or a reduction in cost-of-living adjustments, regardless of who proposes them.
In fact, there is no justification whatsoever for benefit cuts. A number of plans put forward in recent years have demonstrated that cutting benefits is not necessary to close Social Security’s modest long-term funding shortfall. One thing all these plans have in common is they would all tax income above the existing taxable earnings cap, and this must be part of any solution. However, the AFL-CIO reaffirms its longstanding position that mandatory coverage of all public employees must not be part of any funding plan.
The reason why the debate in Washington, D.C., has gone so far in the wrong direction is that the enemies of Social Security have spent enormous amounts of money spreading misinformation about the program. The truth is that Social Security is not in crisis. It can pay all scheduled benefits through the year 2036 and three-quarters of all scheduled benefits thereafter. If Social Security were a pension plan, it would be in the “green zone”—the healthy zone—under the Pension Protection Act. Social Security does not contribute one dime to the deficit, it is legally prohibited from borrowing or going into debt and it is not a significant driver of long-term fiscal imbalances.
The retirement security of working people is similarly under attack at the state and local levels. General Treasurer Gina Raimondo (Rhode Island), Gov. Rick Scott (Florida), Gov. Rick Snyder (Michigan), Gov. Andrew Cuomo (New York) and Gov. Chris Christie (New Jersey) have advocated cuts in the modest pensions of public employees while simultaneously supporting tax cuts for the wealthiest Americans. This is class warfare by the 1% against the 99%.
We can expect to hear more misinformation and attacks from people who oppose retirement security for working people in this election campaign. We have a responsibility to speak out and defend Social Security from attack, yet it matters immensely how we defend it.
Republican candidates will argue that Social Security benefits are overly generous and unaffordable. Those of us who care about retirement security for working people cannot win this debate by pointing out that our proposed benefit cuts are smaller than the Republican cuts, as some Democrats would have us do. By offering up any cuts at all, we legitimize the false claim that Social Security benefits are unaffordable and overly generous and there is nothing more we can do about the retirement security crisis.
We must change the terms of debate by focusing on the crisis of retirement security, because this is a debate in which benefit cuts have no place. The people who want to cut benefits should have to explain how they propose to solve this problem. We have to stop playing defense, because we have nothing to be defensive about.
Support for Social Security transcends demographics and party identification. The vast majority of Americans believe Social Security is more important than ever and that its benefits should be increased. The American people understand that Social Security is the solution, not the problem, and politicians in Washington need to follow their lead.
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