For a better understanding of the issues being debated around Social Security and how changes could impact federal employees, Senior Correspondent Mike Causey invited Nancy Altman, chairman of the Board of the Pension Rights Center, to be a guest on Your Turn with Mike Causey.
“There’s a good reason,” said Altman, that Social Security “is called ‘the third rail’ and that is because it is so successful, so important, and so much a fabric of this country.”
As author of The Battle for Social Security, Altman explained the program, started in the 1930’s is as relevant as ever, saying it’s still “thoroughly modern in its concept.”
The idea is that as long as workers are dependent on wages, they need wage insurance in case they lose those wages and that’s what Social Security is. You can suffer a disabling illness or accident and your wages are gone and need to be replaced and Social Security, since 1956, has provided wage insurance.
It also acts as a survivor’s insurance if you die and have young children, “and if you grow old and can’t keep working you need a joint and survivor annuity, (it acts as) an old age annuity,” said Altman.
Life expectancy when Social Security was started was “57 or 58,” said Altman. The reason it was so low, she explained, was that in that childhood illnesses such as smallpox, mumps, and the like were part of life. “If people lived until 21, they usually lived until 65.” Today life expectancy is longer, “but only about five years longer, and we have increased the retirement age two years.”
Money Locked in a Box
Despite popular misconceptions, Social Security is not only operating in the black, it even has a surplus. A big one, said Altman.
“Currently today, and most of your listeners may not realize this, Social Security has an accumulated reserve, a surplus, of $2.5 trillion.” With a T and that’s a surplus. “People aren’t used to the federal government, any part of the federal government, having a surplus.” The surplus is expected to continue until 2024 “when it will have a $4.2 trillion surplus.”
Federal employees may feel even more heartened to learn that the surplus is invested in the same treasury bills as the TSP’s “never has a bad day G fund,” as Causey calls it.
Altman concedes “there is a manageable shortfall that is projected,” but said there are many ways to close it.
Altman talked about two options being considered and her thoughts about them:
Raising the retirement age – “quite ill advised.” For every increase in the retirement age, said Altman, is like a six to seven percent across the board benefit cut.
Changing the cost of living adjustment – Seniors already have extremely high costs over and above the normal cost of living adjustment because of health care. What they pay is disproportional, said Altman.
Neither, said Altman, is really an option.
My strong view and the view of our coalition is that…there should be no increase in the retirement age, including other benefit cuts because what raising the retirement is is simply an across the board benefit cut, no other benefit cuts, that it’s manageable shortfall should be closed by making those who can afford to pay somewhat more do so.
Causey mused that Simpson’s comments certainly got people’s attention, and that might have been the purpose.
Altman said she finds Simpson’s negative view of Social Security a bit perplexing.
“I don’t know why he seems to have a vendetta against ordinary Americans who have also contributed, and quite frankly, the average benefit in Social Security for all beneficiaries is less than $13,000 a year. So this is not people getting a lot of money. It’s a very small amount, and yet two-thirds of seniors rely on Social Security for half or more of their income.”
Altman argues instead of cutting benefits or raising the retirement age “we should be talking about expanding Social Security” since retirement isn’t enough to cover Americans who have lost 401(k)’s, jobs and even their homes.
“Workers and their families have earned those benefits and they are entitled to them and they should get them.”