Building an Economy that Works for Everyone

Reducing Social Security benefits isn’t ‘responsibility’

From the Everett Herald:

john burbankThe inside-the-beltway crowd is sneaking up on us again. You may have picked up on some news regarding the “National Commission on Fiscal Responsibility and Reform.” President Obama appointed this group of past and present political leaders to “propose recommendations that meaningfully improve the long-run fiscal outlook, including changes to address the growth of entitlement spending and the gap between the projected revenues and expenditures of the Federal Government.” In plain words, that means they are planning to cut Social Security benefits.

This amounts to bad timing and bad behavior. Let’s consider some facts. The standard formula for retirement security has been a combination of Social Security, pensions and savings. But that foundation no longer exists. While Social Security remains solid, the other two are either non-existent or crumbling. Savings have fallen to about 3 percent of personal income. Our 401(k) retirement accounts may be more aptly labeled 201(k) accounts — $100,000 in a 401(k) at retirement will get you about $600 a month. In this great and lasting recession, the collapse of savings and pensions means that more and more Americans, both employed and unemployed, will face poverty and insecurity as they age into retirement. Only one barrier stands between them and being flat broke. That is Social Security.

In our state, More than 1 million people receive Social Security benefits — more than 15 percent of our entire population, including nine out of ten people age 65 and older. In Snohomish County, 88,000 people receive benefits, including more than 61,000 retirees, 7,000 widows and widowers, 13,000 disabled workers and 5,500 children.

Thanks to Social Security, these people have a modicum of economic security. After all, you don’t get rich on Social Security, but you can keep your head above water. The average Social Security payment is a little more than $1,000 a month.

Keep in mind that these payments are earned. That is, workers pay into Social Security with every paycheck. In doing so, they get three insurance packages in one. If they are disabled, they receive disability insurance for the rest of their lives, and their spouses and children are also protected from the poorhouse. If they die, their spouses and children receive life insurance on a monthly basis. When they retire, they know they can count on a steady stream of checks from the Social Security system.

Those checks come from the $2.5 trillion Social Security Trust Fund. This money is wisely invested in Treasury bonds, still considered the safest investment in the world. It grows predictably over time. It’s been built up to make sure there is enough money to cover all retirees when my generation of baby boomers is fully retired.

Now would be an especially good time to increase Social Security benefits. This is not Wall Street’s money, it is the workers’ savings. If Social Security benefits were increased by $100 a month, the average benefit would increase by about 10 percent. That would be a good dividend, especially for the half of all retirees who depend on Social Security for four-fifths of their income.

But instead, the Fiscal Responsibility Commission seems to be intent on cutting Social Security benefits. They are considering ways to nickel-and-dime away the accounts of average citizens, under the guise of “fiscal responsibility.”

Here is a better idea: The commission should propose a financial transaction tax. This would curb the out-of-control speculation and gambling that brought down our economy. Peter DeFazio, an Oregon congressman, has introduced this tax with his bill, “Let Wall Street Pay for Wall Street’s Bailout Act of 2009.” The government would levy a quarter of a percent tax on financial transactions, exempting pension funds, mutual funds, education and health savings accounts and the first $100,000 of transactions annually. This tax would bring in about $150 billion a year from the speculators, forcing Wall Street to eventually pay back the almost trillion-dollar bailout we provided them in the past couple of years.

That would be the fiscally responsible thing to do. We would appreciate the trade-off — protect Social Security while taxing the speculators. But in this topsy-turvy world, who knows? We have yet to see if the president and his commission will listen to Main Street or Wall Street. Stay tuned.

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