Rep. Nadler (NY), is my former representative, and quite possibly one of my favorite politicians, so it was no suprise to come into work this morning and find his e-newsletter in my inbox proclaiming, "There are a lot of rumors out there about the so-called Social Security crisis. The fact is that there is no crisis." Copy of the email below:
There is No Crisis
There are a lot of rumors out there about the so-called Social Security crisis. The fact is that there is no crisis. The nonpartisan Congressional Budget Office estimates that, if left untouched, Social Security will be able to provide 100 percent of benefits until 2052. The trust fund currently has $1.7 trillion in reserves. As with any other major government program, Social Security should be adjusted when and if necessary - but there is absolutely no justification for the President's proposal to replace the system with a private accounts plan. Social Security has never failed to pay out Americans' guaranteed benefits.
Privatization Creates a Problem
The President's plan would substantially weaken the Social Security system. Private accounts would drive Social Security deep into the red by taking funds currently used to pay beneficiaries and putting that money into private accounts. In fact, the privatization of Social Security would add $5 trillion in new national debt, handing over an even larger stake in our government to China, Japan and other countries we borrow from heavily.
Privatization Means Benefit Cuts
Plans to privatize the Social Security system would undermine retirement security by cutting guaranteed benefits for more than 40 percent for future retirees. These cuts will affect all recipients currently under 55, even those who don't sign up for an account. Younger workers lose the most; they would see $152,000 cut from their benefits over their lifetime, according to the Center for Economic and Policy Research. On top of that, those who do opt into the private account system would have to repay of all the money originally diverted into the account, indexed for inflation, plus an administrative fee of 3 percent. This claw-back would wipe out 70-100 percent of the account's final value. In other words, your guaranteed benefits will be reduced by 70 cents or more for every dollar you put into an account.
Privatization is a Pet Cause of Conservatives
Since the program's inception, conservative opponents of large government entitlement programs have attempted to scale back or replace Social Security, and this is just the latest instance. Peter Wehner, the President's director of strategic initiatives, wrote in a memo leaked to the press that privatization is "the crucial new conservative idea in the in the history of the Social Security debate."
The continued health of the Social Security program should never be threatened by partisan ideology. Several of my Republican colleagues have had the good judgment to reject this nonsense and join the Democrats in protecting your benefits.
A Word on Progressive Price Indexing
At a recent press conference, the President announced that in addition to private accounts, he favors so-called progressive price indexing of Social Security. The basic concept here involves calculating benefits according to prices, instead of wages - as they're calculated now. The problem is that prices rise more slowly than wages, so benefits would fall farther and farther behind a recipient's pre-retirement standard of living. The President's plan involves a sliding scale of price indexing, under which the wealthiest recipients' benefits would be fully price-indexed, only the least wealthy recipients' benefits would be fully wage-indexed, and the middle class would be subjected to a mix of wage and price indexing. To exacerbate the problem, New Yorkers, whose wages are usually higher than others' in order to offset the high cost of living in the City, would see even greater cuts under this plan.
The bottom line is that progressive price indexing will mean substantially reduced benefits for most recipients. And that's on top of the reductions under the private accounts plan. All told, this is a wholesale reduction of benefits for no good reason.