National Association of Counties * Washington, D.C.            Vol. 31, No. 9 * May 10, 1999

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Saving Social Security: Now is the time to act

By Javier Gonzales
NACo Second Vice-President

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Social Security has been the nation’s largest, costliest and most successful domestic program. Nearly every American worker now pays taxes into the system, and more than nine out of 10 Americans over the age of 65 receive benefits.

Created in 1935, during the depths of the Great Depression, Social Security has done more to ensure that all working Americans have access to financial resources during their retirement or non-working years than any other single program. With fewer than half of all workers enrolled in a private pension plan, Social Security has become the principal source of income and support for nearly two-thirds of all elderly Americans.

Social Security has been the single most effective way of reducing the overall poverty rate among Americans 65 years of age and over. In 1959, the U.S. Census Bureau estimated that more than 35 percent of elderly Americans were poor. Today, fewer than 10 percent of elderly Americans are poor. Without Social Security, nearly half of all elderly Americans would be.

Nearly 44 million Americans receive an average monthly benefit of $745. Thirty-million are retirees and their dependents, more than six million are disabled workers and their dependents, and more than seven million are survivors of deceased workers.

Women more dependent on Social Security
Women are the most likely to benefit from Social Security. Of elderly women living alone, more than a third rely on their Social Security benefits for 90 percent or more of their income. Yet women often receive substantially less than men. The average monthly benefit for a retired woman is nearly $625; the average for a man is nearly $830.

And today, Social Security remains one of the most prominent, important and popular government programs. According to the National Academy of Social Insurance, most Americans agree that Social Security provides useful benefits and two-thirds say that the benefits are not sufficient. Most Americans say they would be willing to pay higher taxes to maintain the Social Security system and only one out of 10 says the government spends too much on Social Security. The vast majority continues to support universal participation in Social Security.

Yet we also know that without some substantial changes in the way Social Security is funded, the program may become bankrupt in the first half of the 21st century.

Payments from the Social Security Trust Fund are expected to exceed income in 2013. From 2013 to 2020, interest generated from the trust fund will be needed to pay benefits. From 2020 to 2032, payments will be made from the trust fund’s principal. By the year 2032, the trust fund may be depleted.

The question before this nation is: Do we abandon our publicly funded and operated Social Security system or do we ensure its solvency well into the second half of the next century? The answer for most Americans to question one is no; the answer to question two is a resounding yes.

Social Security must be reformed if it is to survive
If nothing is done, by the year 2032 the system will become insolvent and millions of Americans who are currently contributing to Social Security and expecting to receive its benefits will be left in the cold. We must examine the benefits structure, the payment level, and most importantly the way we fund Social Security as part of our reform efforts.

Social Security funding from the budget surplus can have major economic benefits
Three things may be achieved if the surplus is used to fund the Social Security Trust Fund. The first is that Social Security will be fully funded until 2055, well beyond the expected life span of most baby boomers.

The second is that the federal government will be able to buy down a substantial portion of the national debt, helping to maintain low interest and inflation rates. The third is that the overall savings rate in this nation – a rate that has been steadily decreasing over the past 35 years – will increase by as much as 2 percent each year, and will enable us to become a creditor nation, again.

Social Security reform will ensure that the covenant between our government and the people will be retained
Millions of Americans who otherwise would have no resources to fund their "golden years," will, in fact, have the resources they need to maintain a minimal lifestyle during retirement.

Several different proposals have been floated on how to best save Social Security. These have run the gamut from leaving the program intact to complete privatization; from reducing benefits to increasing taxes.

There is little doubt that this debate over methods of reforming Social Security will continue for some time and that these reforms will be directed at keeping Social Security financed through the year 2055.

Survey on Social Security To Examine Impact of Reform on Counties Over the next several weeks, counties that are exempt from contributing to Social Security will be asked to provide NACo with an assessment of the impact that removing that exemption will have on their county’s budget and retirement systems. The one-page survey, which will be forwarded to a random sample of counties currently exempt from participating in the Social Security system, is designed to help inform Congress and the Administration of the fiscal impact that such a change might have on counties throughout America. Anecdotal information from various states, counties and cities has suggested that if governments currently exempt from contributing to Social Security are required to contribute, the impacts will be significant. For example, in California – where every government worker is exempt from Social Security – it is estimated that contributing to Social Security will cost the state and its counties and cities several billion dollars over a 10-year period. It is also believed that removal of this exemption will seriously undermine the fiscal stability of the California Public Employees Retirement System. No proposal to reform Social Security from the Administration or Congress has sought to eliminate the exemption for state and local governments from contributing to Social Security. However, the National Advisory Commission on Social Security did recommend that all exemptions be removed, and that every employer and worker be required to contribute to the Social Security system. Yet, even if all government workers were included in Social Security, the National Advisory Commission admits that such a change will extend the financial solvency of the Trust Fund two years, and will substantially increase its liability. For additional information about this survey, contact Neil Bomberg 202/942-4205; nbomberg@naco.org or Eric Ciliberti 202/942-4207; eciliber@naco.org.