By – Kathleen Spillane
On Tuesday, July 29th, 2014 the House Committee on Ways and Means held a hearing titled “What Workers Need to Know about Social Security as They Plan for their Retirement”. Chairman Sam Johnson (TX) began the hearing by noting that the Social Security Board of Trustees “provide an annual financial check up.” That check-up report was released on Monday, July 28th and Rep. Johnson concurred that it “sounded the alarm over Social Security’s financial health”. According to the Board of Trustees report, by 2033 retirement and survivor benefits will be cut by 23%. The Chairman’s Opening Statement pushed not only the Committee, but Congress as an entire body, to address Social Security’s financial crisis. “Unless Congress does its job…full benefits can’t be paid…beginning in just two yeas for those receiving disability benefits.” Chairman Johnson stressed that the reforms will be far larger than previous changes enacted by Congress, such as a series of reforms passed in 1983, as Americans need sound retirement planning and a Social Security System that they can understand and that serves, rather than burdens them. AMAC is working tirelessly on Capitol Hill to achieve the substantive reforms Social Security needs so that benefits will be preserved for years to come, and Americans will have retirement funds they may rely on. These reforms are needed sooner rather than later.
The hearing featured six witnesses. The first, Dr. Blahous, is a Public Trustee on the Social Security and Medicare Boards of Trustees. In his testimony, Dr. Blahous highlighted these specific points:
- First was the major financing shortfall facing Social Security, with part of this shortfall, namely short term disability benefits, being an immediate problem.
- Secondly, there is vast uncertainty as to how these financial issues will be resolved. “The longer we delay, the larger the relative sacrifice”, Dr. Blahous said, as less people will prepare for the sharp decline in benefits that would inevitably occur if Social Security’s finances continue to suffer.
- Dr. Blahous’ third point was that, additionally, the longer we wait to reform Social Security the more difficult it becomes to execute these reforms within the traditional framework of the system. In waiting too long to act, the opportunity to properly reform Social Security while preserving its historic structure may disappear. One rather bleak perspective was that, if in 2033 significant reform hasn’t been enacted “even cutting all benefits wouldn’t solve the problem”.
Another witnesses, Dr. Steurle, the Institute Fellow and Richard B. Fischer Chair at the Urban Institute, testified that the is an increasing number of middle-aged Americans who are retiring earlier than in past decades. The current system, created in the early 20th century, did not anticipate both a decade longer retirement period and a longer life expectancy. Now, “a third of the adult population for a third or more of their adult lives” will be receiving Social Security benefits. Social Security thus does not currently have in place “a financial system that can provide so many retirement benefits for so long and to so many without a depletion of resources”. A delay in reform, Dr. Steurle stressed, will be detrimental to the increasing number of future retirees.
In the final three witnesses’ testimonies, Dr. Entmacher, Vice President for Family Economic Security of the National Women’s Law Center, addressed the disproportionate number of elderly women who may face poverty in retirement and also underscored that for two thirds of seniors, Social Security represents 50% of their retirement income, and for others, a third of their retirement income. Dr. Andrew Biggs of the American Enterprise Institute emphasized that the state of retirement security is “substantially better than you may think” and that Congress “should not panic…and pass far reaching policy changes in haste” but did note that Social Security will reach insolvency in 2030, and that the long term deficit has quadrupled in the past 4 to 5 years.
In the question and answer session of the hearing, Rep. Tiberi (OH) inquired as to whether certain Senate proposals to raise the cap on payroll taxes would have any effect on the failing financial state of Social Security. Dr. Biggs stated that “we would be worse off if we raised the tax max(imum) on payroll taxes”, and that in addition we cannot promise additional benefits without paying for those benefits which were already promised to retirees. Chairman Johnson asked Dr. Blahous what the true nature of the financial shortfall is, and he responded that “a quarter of the benefits are not financed or people’s tax revenues are short by a third of what they need to be to fund promised benefits”.
AMAC is working to preserve Social Security benefits for hard working citizens across America, and you can learn more about AMAC’s “Social Security Guarantee”, which details our proposal to reform Social Security and protect benefits, by visiting the “About” Section of our website or by visiting http://amac.us/social-security/.