Testimony before U.S. House Ways and Means Committee, February 6, 2019
As all of you know, Social Security is overwhelmingly popular. It is so because it addresses economic insecurities that confront rich and poor alike, because it embodies the best of American and religious values, and because it is strikingly efficient, secure, and fair, And it contains a number of important features not found in the private sector, including benefits that are automatically indexed to keep pace with inflation, even if that inflation is in double digits as it was in the 1970s.
Its one shortcoming is that its benefits are extremely modest by virtually any measure. Workers earning around $50,000, who retired at age 62 last year, received only 32 percent of their pay – much too little for them to maintain their standards of living.
Notwithstanding how modest Social Security’s benefits are, they are vitally important. Just ask Neil Friedman and other millionaires who made the mistake of investing their entire fortunes with Bernie Madoff. When Madoff’s Ponzi scheme was revealed, they found themselves forced to survive on their Social Security.
Like those Madoff victims, about one out of three retirees depend on Social Security for virtually all of their income. Around two out of three retirees depend on Social Security for the majority of their income.
As important as Social Security is for virtually all of us, it is especially important to women, people of color, and others who have been disadvantaged in the workplace. Not only are their earnings lower, they are more likely to have periods of unemployment. Moreover, because women and Hispanics have, on average, longer life expectancies, they have even greater need of Social Security’s guaranteed benefits that last until death.
And this reliance will only grow as a result of the retirement income crisis.
But, as reliance on Social Security grows, Social Security’s modest benefits will become less adequate as the result of current law. In 1983, Congress passed legislation that raises Social Security’s full retirement age from age 65 to 67, a change that is still being phased in.
Because of the manner in which Social Security benefits are calculated, raising Social Security’s retirement age by a single year is mathematically indistinguishable from about a 6.5 percent across-the-board cut in retirement benefits, whether one retires at age 62, 67, 70, or any age in between.
Cutting benefits by raising Social Security’s retirement age is especially hard on low-wage workers in physically demanding jobs, as well as on workers – generally women — who must retire early to care for aged parents or other family members.
Those who propose cutting Social Security by increasing its “retirement age” focus on increased average longevity. Although people, on average, are living somewhat longer today, the increase is not the decades that some claim. Moreover, in the last three years, U.S. life expectancy from birth has declined. Furthermore, these are average increases. The gap between the life expectancies of higher-income and lower-income Americans is growing.
Social Security is not welfare and not forced savings. Those who suggest that it should be means-tested fail to recognize that Social Security is part of workers’ compensation. And those who seek to convert Social Security’s guaranteed benefits into a retirement savings account fail to recognize that insurance is what is needed for substantial financial risks which are predictable for groups but unpredictable for individuals – like living to age 100, or becoming disabled, or dying prematurely, leaving dependent children.
These are the guiding principles and values that underlie Social Security’s structure and that have made it so successful, important, and popular.
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- 2018 Trustees’ reports show GOP tax cuts hurt Medicare and Social Security
- Expand Social Security, don’t means test it
- New poll reveals most Democrats are willing to pay Medicare for all tax
- Programs that lower your costs if you have Medicare