U.S. Senator Charles E. Schumer and Rep. Sander Levin (D-MI) held a joint conference call to respond to President Bush’s announcement last night that he wanted to not only privatize Social Security, but also include a plan that would deeply cut benefits to lower and middle class families. Schumer, a member of the Senate Finance Committee and Chairman of the Democratic Senate Campaign Committee, and Levin, the senior Democrat on the House Ways and Means Subcommittee on Social Security have both been at the forefront on the policy debate on Social Security reform and stalwarts against reckless, deficit-exploding privatization plans.
“The President has basically said that his Social Security reform runaway train has a big sign on the back saying ‘Privatization or Bust’ and the American people aren’t getting on that train,” Schumer said.
“The President's offer of 'sliding scale' benefit cuts would result in the biggest benefit cut in the history of Social Security," said Rep. Levin. "Social Security is not a poverty program, it is a retirement system people have worked hard for, paid into and have earned. The President and Congressional Republicans are determined to replace the guarantee of Social Security with risky private accounts and massive benefit cuts"
Sen. Schumer outlined a number of other points below in the conference call:
- “These benefit cuts for the middle class are not chump change when you consider that one-fifth of all individuals over 65 rely on Social Security for all of their income, and two-thirds of individuals over 65 rely on it for more than half of their income.
- “The President and his allies continue to talk about how people will be able to earn a higher rate in the market than they currently do through Social Security. This is like comparing apples to oranges. Social Security is an insurance program, not an investment plan. Comparing the market’s rate of return to the rate of return in an insurance program is a completely invalid concept.
- “It’s hard to ignore that the stock market has essentially been flat for SIX YEARS – it is back where it was in April 1999. So the President is telling people that they will be better off in the market, but the market has risks – and what if the market is flat or down for several years in a row, like it has been now, right before people retire?
- “It’s important for people to recognize that the same money cannot be used for two different purposes. That is one of the huge problems with the President’s plan. Current payroll taxes pay current benefits. If people are allowed to set a portion of their payroll taxes aside, and keep them for their own accounts, then trillions of dollars have to be borrowed to pay benefits to current retirees or near-retirees. Given that we have record deficits already, that’s bad economics.
Schumer concluded, “The President has now made his privatization plan even less attractive. Mr. Pozen’s price indexing will cut benefits for people who earn as little as $20,000 a year. Privatization plus deep benefit cuts to middle class citizens is even worse than privatization alone. We urge the President to take privatization off the table and to create a bipartisan commission that can make the adjustments necessary to preserve Social Security for current retirees and future generations.”
The President’s so-called progressive price indexing proposal will require deep benefit cuts for middle class seniors:
- There would be at least a 28% benefit cut for a worker who is born five years from now, who retires at age 65, and who has average career earnings. {Social Security Administration Memo, Estimated Financial Effects of a Comprehensive Social Security Reform Proposal Including Progressive Price Indexing, 2/10/05}
- There would be at least a 42% benefit cut for a worker who is born five years from now, who retires at age 65, and who has career earnings that are “the equivalent” of $59,000 in 2005. {Social Security Administration Memo, Estimated Financial Effects of a Comprehensive Social Security Reform Proposal Including Progressive Price Indexing, 2/10/05}
OTHER KEY FACTS ON PROGRESSIVE PRICE INDEXING
Deep Benefit Cuts for Average Earners Today. There would be a 24% benefit cut for a worker who is 25 years old today, who retires at age 65, and who has career earnings that are “the equivalent” of $59,000 in 2005. {Social Security Administration Memo, Estimated Financial Effects of a Comprehensive Social Security Reform Proposal Including Progressive Price Indexing, 2/10/05}
Deep Benefit Cuts for Lower Waged Earners Tomorrow. There would be a 28% benefit cut for a worker who is born five years from now, who retires at age 65, and who has average career earnings (under the definition of average earnings of the Social Security Administration Actuaries’ office). In 2005, such average earnings is $36,000. {Social Security Administration Memo, Estimated Financial Effects of a Comprehensive Social Security Reform Proposal Including Progressive Price Indexing, 2/10/05}
Deep Benefit Cuts for Average Earners Tomorrow. There would be a 42% benefit cut for a worker who is born five years from now, who retires at age 65, and who has career earnings that are “the equivalent” of $59,000 in 2005. {Social Security Administration Memo, Estimated Financial Effects of a Comprehensive Social Security Reform Proposal Including Progressive Price Indexing, 2/10/05}
Benefit Cuts From Progressive Price Indexing Will Come On Top of the Privatization Tax in the Bush Plan. As a result of the President’s decision to couple so-called progressive price indexing with privatization, workers who choose private accounts will see their benefit cuts cut twice. “Under private accounts like those the President has proposed, the cost of the private accounts is offset by reducing substantially the Social Security benefits of those who elect the accounts. If progressive price indexing is combined with private accounts of this nature, Social Security benefits will be lowered twice — once due to the indexing changes and a second time to pay for the private accounts. As this analysis explains, the result would be that millions of middle-income workers would receive little or no Social Security benefits in retirement. They would be left largely with only their private account.” {Center on Budget and Policy Priorities, 4/26/05 (emphasis added)}
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