The advocates of privatization play fast and loose with language and the truth, in the pursuit of their goals. A case in point is Social Security. Privateers sneer at what they deride as a paltry ‘return on investment’. But they disregard and refuse to count the most important returns, while evaluating a critical insurance program as though it were an investment scheme.
The actual name for Social Security is the ‘Old Age, Survivors, and Disability Insurance Program’. It was never meant to be part of a sexy investment portfolio. It was meant to be a national insurance plan that protects all Americans from the threat of economic ruin and abject poverty. You’ve heard about the honored ‘Greatest Generation’ who grew up in the last Depression and fought the Second World War. It was their parents’ generation, born over a century ago, which grew up in the previous Depression and fought the First World War, who made the dream of Social Security come true. All generations since then have been born, raised and perhaps grew old, protected by Social Security. As Franklin Roosevelt succinctly stated, it secures to us … “the right to adequate protection from the economic fears of old age, sickness, accident, and unemployment”. It is insurance for workers and their families against the loss of income that inevitably occurs if a worker dies or becomes disabled at any age, or retires.
There are many Americans in every community who receive Social Security benefits who never personally paid anything into the system. Some live right here in Ozaukee County. They are children whose working parent or parents died at an untimely young age. In the ‘good old days’ before Social Security, many of those orphaned children would be begging in the streets and all would be in serious jeopardy. Fifteen percent of Social Security recipients are survivors. Survivor benefits have prevented millions of children from living in severe poverty and neglect after one or both parents died, and have provided educational opportunity to millions more, and relief from economic distress to those who have cared for them. Bean counters and marketplace supremacists do not count survivor’s benefits as ‘return on investment’. But we must count them because they demonstrate our commitment to ‘caring’, and to doing ‘the right thing’. They count as ‘our moral values’, and to hell with those bean counters.
There are many Americans who, due to a debilitating sickness or injury, are unable to work, or can only do so with greatly diminished capacity. They too are among us in every community. Fifteen percent of Social Security recipients are disabled. Without Social Security, many of them would be desperately destitute. Those who measure everything in dollars don’t count the value of Social Security for the disabled.
Seventy percent of OASDI beneficiaries are elder retirees. Today, ten percent of those over 65 live in poverty. Without Social Security, half of our elders would be living in poverty. Work related pension plans covered forty percent of workers in the 1960’s. But it’s never been better than that, and it’s been getting much worse, with only sixteen percent of workers today covered by private defined benefit pension plans. And workers’ pension plans have been cancelled left and right without recourse in recent years in bankruptcy shenanigans that are part of modern corporate takeover shell games.
Defined benefit pension plans like Social Security are the only type of pension that provides longevity insurance. Longevity insurance is simply insurance that you don’t run out of money to live on before your life is over. Suppose you invest 6% of your pay in retirement savings, and you have an average wage increase of 2% each and every year, and your savings investment grows without fail at 5% a year. After 35 years of work, if you restrict your annual spending to half your final salary, you will spend your entire retirement savings in 8.5 years. What if you live longer than that?
OASDI insures workers and their families against these risks that lie awaiting us all, while spreading the costs of that protection across the entire work force. Privatizing Social Security will mean reducing and eliminating survivor, disability, and longevity insurance. A cruel fate will await families caught by any of those circumstances. And future generations will learn again in anguish the dreadful lessons learned long ago and wisely applied by our ancestors when they established OASDI.
Misinformation about investment returns is brought to your attention by the same privateers who bring you false prophecies that Social Security is doomed by demographics. We’ll get to those prophesies next time, but for now, it’s important that Americans understand the difference between an essential time-tested insurance policy and the smoke-and-mirrors investment scheme planned to replace it. It’s critically important for our future, and the time is now to stop those that are selling that scheme.
December 16, 2004 (See “The Kings Rook Social Security Gambit” for part 2 of 2, and for references to data in this series)