Social Security Reform
society’s system of Social Security deals explicitly with a fundamental
human issue: What do we, as a society, do about human suffering? The key word
being “we.” Whose responsibility is it to address the suffering created by
a system that produces more than enough for everyone, but leaves some in
desperate need? Because Social Security touches every working American’s
life in a very tangible way, and because the right wing has created an
atmosphere of crisis around this social program, we have a rare opportunity to
make some quite radical proposals that will appeal to millions of people in
Social Security in the
United States is a program that pays cash benefits to workers, and dependents
of workers, who suffer a loss of wages due to death, disability, or
retirement. Almost all wage-earners are taxed to provide benefits. It is
financed by payroll taxes on wages up to about $70,000, with one-half paid by
workers and one-half paid by employers. Benefits are based on past earnings,
with low-income workers getting back a higher percentage of their wages than
high-income workers receive. Social Security was and is intended to be the
“third leg” of the so-called “three-legged stool” of retirement
income. The other two legs are your own savings and the private pension you
get from your employer. In theory.
However, the majority of
Americans now do not get private pensions, and the problem is worse among
women, people of color, part-time workers, low-income workers, non-unionized
workers, and workers in small companies. In addition, wage inequality has been
increasing, and this partly explains why fewer people than ever are able to
save any significant amount for their retirement, since they have to spend all
their income on living. So the “third leg” of the three-legged stool
increasingly becomes the only leg. Consequently, people are trying to balance
on a one-legged stool, and that’s hard to do. Especially since the average
monthly benefit for a low-wage retiree is now $537 per month. For two-thirds
of elderly people in the United States, Social Security provides over half of
their income; for 3 in 10 it is 90 percent of their income; 16 percent of all
seniors live on their Social Security check and nothing else, and 78 percent
of African Americans over age 70 do so.
The success of the
right-wing assault on Social Security is based on a shrewd recognition of the
fact that, for all of its popularity over the years, there is some measure of
unhappiness with the program as it exists, and the numbers above give an
indication of why.
The right-wing attack on
Social Security plays on people’s legitimate dissatisfaction with an
inadequate program. Clearly there are features of American Social Security
that are sound and should be retained, such as portable benefits that follow
workers from job to job, and cost-of-living adjustments that protect benefits
from the erosion caused by inflation. But, overall, our Social Security system
is a “good news/bad news” affair. To illustrate:
news: Social Security has reduced poverty among the elderly in the U.S.
from 35 percent in 1959 to under 11 percent now, which is a lower rate
than for the population as a whole. Bad news: What kind of anti-poverty
program leaves 1 in 9 people still poor?
news: Social Security includes disability and life insurance protection,
and it is provided to everyone, without regard to the health of the
individual. Bad news: Have you ever tried to apply for Social Security
disability benefits? Or to live on them?
news: Married women who have spent their lives working in the home,
without pay, receive cash Social Security benefits if they live longer
than their husbands. Bad news: Pretty paltry benefits, especially compared
to men. Older women are almost twice as likely to be poor as their male
news: Social Security benefits continue as long as you live. Bad news: You
call this living? All but the highest-income workers try to get by on
under $900 per month. Also, rich people live longer, so they end up
getting more in total lifetime benefits. Add to that the fact that Social
Security taxes are regressive (all wages are taxed at a fixed rate, but
wages in excess of $68,400 are exempt), and it’s even less fair.
news: Social Security benefit amounts are tied to the income you earned
when you were working. Bad news: Social Security benefit amounts are tied
to the income you earned when you were working. So, even though the
benefit formulas are progressive, low-income workers still get less, even
though they need it more, for the reasons stated above.
news: Social Security is a very popular program. Bad news: At the moment,
many people seem to support specific proposals that would effectively
news: Two-thirds of respondents in recent surveys are smart enough to
realize that Social Security benefits are not sufficient. Bad news:
Benefits are not sufficient.
news: Surveys show that most people would be willing to pay higher taxes
to maintain the system. Bad news: They may have to.
The ascent of the “New
Democrats” has given rise to the saying, “Give people a choice between a
Republican and a Republican and they’ll choose a Republican every time.”
Indeed, the pattern in American-style “multiple-choice democracy” is
increasingly one in which corporate interests settle on a series of
business-friendly choices and then let “the people” choose among them. The
discussion of proposals to reform Social Security is a wonderful illustration
of this pattern. All of the myriad plans currently on the table essentially
boil down to one of two choices: Cut back the system or destroy the system.
The proposal to destroy the
system is known, somewhat misleadingly, as “privatization.” Privatization
would dismantle the current system of taxing all workers to pay benefits to
those who need them, and replace it with a system of Personal Security
Accounts (PSAs) wherein each worker would set aside money for their own
retirement, along the lines of the current IRAs or 401(k) plans in the private
In a privatized system,
workers would still have the same amount of tax (or more) taken out of their
paychecks, but they would now be required to invest part of it into the stock
market. When they retire, they would get their money—however much it might
be—to do with as they please. These plans thus call for only partial
“privatization.” The government would still require that you pay taxes,
but instead of that money becoming public property used to protect everyone,
it would be placed in the private stock and bond markets. It is more accurate
to call these plans “market-based” plans than “privatization” plans.
After a slow start,
numerous liberal and progressive think tanks and publications have pointed out
why this would be a disaster for most workers. Such an individual,
market-based system would remove the “social” from Social Security, and
the fact that all the risks in the system would fall on individual workers
would remove the “security.” As in any market-based, individualized
system, the most suffering would be borne by those with the fewest resources
at their disposal; that is, poor and working-class people. As one might expect
this alternative is promoted by rich and owning-class people.
Given the extreme nature of
the various market-based plans, a plan to merely cut back the current system
is being presented as the “liberal” alternative. Ideas such as raising the
retirement age, reducing the cost-of-living adjustments, and increasing the
averaging period for calculating benefits also would hit hardest on poor and
the past 100 or so years, most industrial societies have come to recognize
that, in addition to these individual reasons for dependency, there are also
social reasons why people cannot support themselves. They acknowledge that,
under capitalism, there will always be people who are willing and able to work
but, for reasons that have to do with how the society is structured, cannot
support themselves. That’s exactly why we have Social Security.
It’s called Social
Security because it recognizes that there are social factors that threaten the
security of individuals and that therefore demand a social response. Article
25 of the Universal Declaration of Human Rights states that every person has
“the right to security in the event of unemployment, sickness, disability,
widowhood, old age or other lack of livelihood in circumstances beyond his
It should be no surprise
that most people born and raised in the United States think about Social
Security in very narrow and limited terms. This is because the American system
of Social Security is narrow and limited. A look at a few other wealthy
countries confirms this. Australia, Canada, Denmark, France, Germany, Italy,
New Zealand, Norway, Sweden, and the United Kingdom all have national systems
of universal health care and maternity leave; the U.S. does not. Each of these
countries has a national program of income assistance for families with
children; the U.S. does not. The U.S. alone lacks a national system of
insurance against unemployment and workplace injury (our state-run systems
provide widely varying degrees of protection from state to state).
The Social Security program
that we currently have in the United States came about as an alternative to
several more progressive proposals being debated in the 1930s. Unlike the
current corporate-led debate about Social Security, the original campaign for
social insurance was led by poor people and workers. As early as 1931, the
National Hunger March on Washington climaxed with the presentation to Congress
of a Workers’ Unemployment and Social Insurance Bill. Kenneth Casebeer
summarizes that “bill” as a series of five demands:
adoption of a federal system of unemployment insurance, guaranteeing full
wages for full or part involuntary unemployment;
to be available to all categories of wage labor without discrimination by
race, sex, age, origin, or political opinion; no person to be deprived of
benefits for refusing to take the place of a striker or to work for less
than union rates;
funding from war preparation appropriations combined with sharply
progressive taxation on all incomes above $5,000 [$60,000 in 1998 dollars]
with no levies on workers;
by elected worker committees; and
insurance for loss of wages through sickness, accident, old age, or
February 2, 1934, legislation including their five demands was introduced into
the House of Representatives by Minnesota Farmer-Labor Party Congressman
Ernest Lundeen. The official “Workers’ Unemployment and Social Insurance
Bill”(HR 7598 and subsequent versions) was the most popular, and came
the closest to becoming law, among several progressive predecessors to
Roosevelt’s Social Security. Over its Congressional lifetime from 1934
through 1937, more than 70 municipal governments around the country endorsed
the Workers’ Bill, as did innumerable ethnic and mutual aid societies and
organizations of the unemployed. Many African-Americans and women supported
it, as it was the only bill that treated all citizens equally.
was intense opposition from the private insurance industry (in which Roosevelt
had worked before becoming president) and the American Medical Association. In
addition, a powerful group of Southern Democrats in Congress in the 1930s was
opposed to any federal mandate that would require that benefits be paid to
African-American tenant farmers and domestic workers; these workers were thus
excluded from the system until the 1950s. Similar racist desires to keep
state-based “separate and unequal” systems in place resulted in the
failure to establish national systems of unemployment insurance benefits and
workers compensation as part of the New Deal; that legacy survives to this day
in our inequitable state-based programs.
its ultimate defeat, the existence of a radical alternative like the
Workers’ Bill shaped the discussion of Social Security and forced President
Roosevelt to put forth his limited but still essential Social Security Act of
1935. Despite its limitations, the current system does in fact provide some
very real protection from market forces, and thus has remained Roosevelt’s,
and the nation’s, most popular social program.
is a set of four values, and accompanying organizing principles that we can
use to come up with a genuine alternative in the debate about Social Security.
Organizing principles: Universal and Mandatory.
In a Social Security system, this means that everyone pays in when able,
and everyone draws out when needed; it’s universal. For the good of all,
everyone must be required to participate. If people are allowed to
voluntarily “opt out” in search of a better deal for themselves, the
system loses its character of solidarity, and it goes broke in the
bargain. If a Social Security system is not universal and mandatory, it is
not “social,” and therefore fails the solidarity test.
Organizing principles: Redistribution and Progressivity.
In a truly just system, all recipients would receive benefits sufficient
to live in dignity. To move in this direction within our indisputably
unjust economic system, it will be necessary to redistribute a large
amount of income. Although our current system does have a progressive
benefits schedule, the payroll tax upon which it is based puts the
heaviest burden on working class and poor people. We need to move toward
funding Social Security through progressive taxes on income and wealth,
while moving toward a universal flat benefit equal to a living wage. There
should be no means test or requirement of previous earnings to receive
benefits; all residents should be entitled to live in dignity.
Organizing principle: Insurance.
The only way to have the “security” that is promised by a system of
Social Security is to set it up as a system of insurance. Insurance is a
system that guarantees protection for its members; that’s the
“security” in Social Security, and it should be secure for every
person in the society.
Organizing principle: Public.
Since it is the “free market” that has produced the gross income
inequality that we see in the United States, we can hardly expect a
market-based system of “Social Security” to solve that problem. Only a
program conceived and run by a democratic, publicly-accountable body (that
is, the government) has any chance to reflect the values of the majority
of the population, values that include the three mentioned above.
we begin the project of building a better system of Social Security, we need
to organize to defeat the attack on the existing system. Flawed though the
system is, any move toward a system of pre-funded, individual, private
retirement accounts would make it dramatically worse for the majority of
Americans. Defeating the move to a market-based system is thus necessary, but
not sufficient, to carry out a campaign around reforming Social Security.
the short term, then, we need to:
Beware of any proposal that
includes the terms “voluntary,” “opt-out,” or “generational war.”
These are coded attacks on the principle of solidarity.
Keep in mind that individual
accounts emphasize the accumulation of private wealth, making the system less
redistributive, and thus less of an anti-poverty program.
Demand that the current program
remain public and its management continue to be in the hands of the Social
Security Administration, keeping it more efficient, more reliable, and more
secure than the market could ever be.
Insist that benefits continue to be
guaranteed by the federal government and that any shortfall be financed from
general Treasury revenues.
Resist, in principle, the idea of
an individual, market-based system of personal accounts, popularly known as
“privatization.” Under such a system, values of solidarity, justice, and
security would give way to market values of individualism, self-interest,
property rights, and luck.
the longer term, we need to formulate a positive proposal that states what we
want in a system of Social Security, based on clearly articulated values.
Without such a proposal, it is unreasonable to expect anything other than
cutbacks in the program; the only question will be how many and how large.
a proposal to bring the Social Security system into closer accord with our
values will have to grow out of discussions within our organizations. Here is
a list of four suggestions which might serve as a starting point for those
discussions. We want:
A national system of benefits for
unemployment, and for income loss due to sickness, old age, maternity,
workplace injury, or any other disability. Also included should be a basic
A system that is financed entirely
through progressive income and wealth taxes, with benefits guaranteed by the
Benefits to be set at a level equal
to a living wage, as determined by regional councils of recipients. These
councils would take into account local conditions and costs of living when
setting benefit levels for the local population, and these levels would serve
as a wage floor for local economies.
Universal health care. The real
fiscal crisis we face is the system-wide explosion of health-care costs. We
are currently rationing health care based on wealth, and this is unjust. We
spend more on health care as a percentage of our national product than any
other industrial country.
Security is, and always has been, one of the most popular social programs in
the world. Those who talk of bankruptcy and insolvency for Social Security,
and who warn that Social Security “will not be there for us” when we need
it, are either expressing a profound lack of faith in American democracy, or
an intent to undermine it. Possibly both.
this historical moment, the federal government is the only institution in this
country with the power to set significant limits on the corporate agenda.
Right now we are in the middle of a debate about the future of a program that
touches the lives of every American, and no progressive alternatives are on
the table. This could be the organizing opportunity of a lifetime. Let’s not
miss out on it.
Jeff Nygaard is a free-lance writer and activist in Minneapolis, and the
founder of the Social Security Project of Minnesota.