Janice Gregory, National Academy of Social Insurance
With the release of the 2012 Social Security Trustees Report, we can expect to hear another round of sharp debates on Social Security’s financial picture. We must see to it that these discussions do not lose sight of some important facts.
Despite concerns in some quarters about Social Security’s long-term stability, the truth is that the program remains sound and, with some timely improvements, will continue to provide security to millions of Americans for generations to come.
In today’s still-fragile economic recovery, as in previous downturns, Social Security income and outgo are performing as they were designed – as a counter-cyclical insurance program. With more people out of work, contributions from wages increase less than expected, or even decrease, and more workers retire sooner than they had planned. These facts are not a cause for alarm. Rather, they demonstrate the insurance function of Social Security and how critical it is to the economic stability and security of American workers and their families.
Unlike the early 1980s, and despite the recent deep recession, the Social Security program is actually continuing to build reserves for the future. The trustees’ new projections show that the reserves held by the Old Age, Survivors & Disability Insurance (OASDI) program will increase from $2.7 trillion at the end of 2011 to $3.1 trillion by the end of 2020.
Since the first benefit was paid 72 years ago, and through many economic ups and downs, the Social Security program has never missed a payment. Under current law, the program has the resources to pay all projected benefits for the next two decades. This is in sharp contrast to 1983, when the program’s reserves were fast approaching zero, and Congressional action in the spring was necessary to enable the program to pay full benefits due in the summer.
Policymakers today could schedule sensible changes in the program – such as raising the contribution rate, broadening the sources of income to pay for Social Security, raising the tax cap, or modest benefit adjustments – to put the system in balance for 75 years and beyond. At the same time, benefit improvements are needed to better assist vulnerable populations as well as to maintain a sound foundation for future retirees, many of whom have suffered sharp losses in family wealth due to the simultaneous setbacks in housing values and investment assets. These points are further developed in the NASI report Fixing Social Security: Adequate Benefits, Adequate Financing.
Three in four Americans – across age groups and party lines – say it is critical to preserve Social Security even if it means asking working Americans to pay higher taxes to do so. According to a poll co-sponsored by the National Academy of Social Insurance and the Rockefeller Foundation, majorities of Americans are willing to pay for Social Security because they value it for themselves (72%), for their families (75%), and for the security and stability it provides retired workers, disabled individuals, and the children and widowed spouses of deceased workers (87%).
This year we mark the 77th anniversary of the act establishing Social Security. That law underscored that the program is part of a critical foundation that allows capitalism to thrive in the United States by protecting American workers against the risks of becoming impoverished by disability or in old age, and guards their families against the risk of being financially devastated by the loss of a worker’s earnings.
Janice Gregory is President of the National Academy of Social Insurance (NASI). Previously, she was Senior Vice President for the ERISA Industry Committee (ERIC) where she directed legislative affairs from 1984 through 2006. From 1979 through 1983, she coordinated activities of the Subcommittee on Social Security for its Chairman, the Honorable J.J. Pickle of Texas. She was awarded the Social Security Administration Commissioner’s Citation in 1984. She is a contributing author to Prospects for Social Security Reform and Checks and Balances in Social Security, and is principal author of The Vital Connection: An Analysis of the Impact of Social Security Reform on Employer-Sponsored Retirement Plans and Getting the Job Done: A White Paper on Emerging Pension Issues. In 2003, she was named one of the one hundred most influential people in finance by Treasury and Risk Management magazine.