Why Social Security matters

Unlike tens of millions of Americans, I have all of the “three pillars of retirement” that, in theory, everybody is supposed to have.  I was lucky enough to work for a company, Gannett, that offered a pension to long-term employees.   I was lucky enough to be able to save and invest some money in my working years.  And, finally, like almost all Americans, I have Social Security.

But Gannett could fail, or it could be so financially straitened that it would reduce or abolish its pension payments.  I don’t have a contractual right to a pension.  I get it through the generosity of my former employer.   The pension is a fixed amount, so its buying power diminishes over time because of inflation.  In Rochester, there are more Eastman Kodak retirees than there are Kodak employees.  If Kodak goes bankrupt, which seems possible, they lose their pensions and Kodak’s generous health insurance.  This could happen with any company.

I have my savings invested in conservative Vanguard and T. Rowe Price mutual funds.   Although they fell in value during the 2008 stock market crash, and haven’t gained much since then, I still have a good financial cushion.  Knowing the history of the 1929 stock market crash, I am aware there is no absolute financial security.

But if worst comes to worst, I have Social Security, which is indexed to inflation and which gives me enough to live on, if not necessarily to live as I like, and I have Medicare, which guarantees a basic minimum of medical care.  All the proposals before Congress to “reform” Social Security and Medicare are proposals to take away this minimum economic security, if not for me, then for future generations.

A lot of misleading information is being spread about Social Security by people who should know better.  Here is what is important to remember.

  • Social Security is not broke.  The Social Security trust fund has been building up a surplus, in the form of Treasury bonds, since the 1980s.  There is enough in the fund to pay full benefits for decades, and a small increase in payroll taxes could maintain full benefits for as long as it is possible to foresee.
  • Although the fund is no longer taking in as much in taxes as it pays out in benefits, it is still in the black because of accumulated interest on these bonds.  These “government IOUs” are regarded as the world’s most secure investment by foreign investors.
  • Medicare, with all its problems, provides medical care with greater efficiency and less overhead than any profit-seeking corporate health insurance plan.

There is no reason – none – to offer cuts in Social Security and Medicare as a bargaining chip to make millionaires and billionaires give up their tax breaks.   There is no conflict of interest between generations.   It is as much in the interest of the younger generation to have a secure minimum income when they grow old to work as it is for us 70-somethings.

Click on What the 2011 Trustees Report Shows About Social Security for analysis by the Center for Budget and Public Priorities.

Click on Not Even Corp Mgmt Believe Their Own Equity Return Assumptions for reasons why corporate retirees shouldn’t count on their pensions.

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One Response to “Why Social Security matters”

  1. Anne Tanner Says:

    Ah… a sane approach to a topic that has been an insane political football for some time. Thanks, Phil.

    Like

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