Opinion pieces and speeches by EPI staff and associates.
THIS PIECE ORIGINALLY APPEARED IN THE MIAMI HERALD ON JULY 9, 2000.
Gore’s and Bush’s plans for Social Security: People vs. Power
by Edie Rasell
“The question is whether you’re for the people or for the power.”
This is how Al Gore characterizes the choice in the presidential sweepstakes — and it’s a good measure for evaluating the candidate’s plans for Social Security.
Gore plans to keep the program intact while enhancing its finances and benefits. George Bush would carve out a huge piece of the program to finance individual accounts and provide a nice windfall for Wall Street.
Remember, Social Security works like an insurance policy: workers pay into the system and, in return, Social Security provides guaranteed benefits in retirement, if they become disabled or to their surviving family members upon their death. Nobody gets rich from Social Security, but everybody gets by.
Gore proposes using the Social Security surplus to pay down the federal debt. After 10 years, he would begin contributing to Social Security the interest savings from the debt reduction.
He would also make some improvements in benefits for women — a moderate boost in survivors’ benefits to help widows and a reduction in the so-called “motherhood penalty” for women (and men) who are out of the labor force caring for children.
In addition, Gore is calling for an add-on to Social Security to help moderate- and low-income workers save for retirement. Low-income workers would receive $3 for every $1 saved up to a total amount of $2,000 annually. The match would shrink to $1 for every $3 saved for middle-income households.
While Gore would strengthen the current Social Security program and encourage additional personal saving, Bush wants to transform Social Security into a risky investment system of private accounts.
Bush is extremely short on details but has let it be known he would divert Social Security payroll taxes into individual accounts, a seismic maneuver that would threaten the program’s long-term financial picture. Some lucky or savvy investors could do well, but the rest will come up short. Most retirees would actually be worse off under this program.
A recent study by leading experts estimated the benefit that retirees would receive from their private accounts plus the skeleton Social Security benefits that would remain. They find the average earner would receive 20 percent to 33 percent less under the Bush plan than with Social Security. And this assumed a generous return on the assets in the private accounts, higher than other experts are predicting.
Private accounts offer the lure of the get-rich-quick, dot-com life in the stock market. Social Security lacks this glamour and potential for great wealth. But it does provide two-thirds of the income received by the middle-income elderly.
You can’t outlive the benefits, they are not eroded over time by inflation, and they are increased if the beneficiary has a spouse or other family members at home. Try telling your broker that you need more income from you private account because your kids are still at home, inflation is higher than you expected, or you are living longer than you planned.
Bush’s plan undermines the current program and puts the retirement security of future retirees at substantial risk while benefiting the power brokers on Wall Street. Gore not only maintains the guarantee of Social Security benefits for all workers but also helps them to save for retirement. His is the best plan for the people.
[ POSTED TO VIEWPOINTS ON AUGUST 23, 2002 ]
Edie Rasell is an economist with EPI. She specializes in health care issues.