A contentious debate in the 106th Congress will center on the future of Social Security and the related issue of what to do with the projected $4 trillion budget surplus. These questions are critically important to women, and NOW has joined with scores of other national organizations advocating preservation and strengthening of Social Security.
Republican leadership in Congress, with powerful backing from investment and banking interests, has proposed scrapping the 64-year old social insurance program and replacing it with individual investment accounts. These privatizers claim that the Social Security system is headed for financial disaster and that no money will be left in the program for future generations.
Much of the alleged crisis is manufactured by those who would reap the financial windfall of billions of dollars flowing into private investments.
But this projected shortfall may never even come to pass, particularly if there is continued high employment, strong economic growth and a resulting increase in revenues to the Social Security Trust Fund. Even if that growth does not occur, other options include increasing payroll taxes, cutting benefits or raising the cap on taxable income. With 32 years to go, there is no crisis that requires us to take actions that could be to the long-term detriment of women.
NOW took part in two coalition news conferences in December, one with the National Council of Women's Organizations and the other to kick off the New Century Alliance for Social Security, a broad coalition of more than 160 diverse national organizations.
NOW President Patricia Ireland met later with Hillary Clinton, her staff and Presidential advisors after an earlier meeting between NOW officers and Presidential advisors during which NOW warned that "proposals to divert workers' current payments from the Social Security system into individually-held, private accounts whose returns would be dependent upon the risks of volatile investment markets . . . would significantly damage women's retirement income. Without the guarantees of a shared insurance pool, cost of living increases and lifetime benefits, many women could easily outlive their assets."
In addition, the President suggested establishing a separate voluntary investment program, targeting lower-income workers to help them save for retirement. These Universal Savings Accounts or USAs would be funded with 11 percent of the budget surplus and would provide a government match for individual deposits.
The President also proposed using 15 percent of the surplus to strengthen Medicare, which is projected to run out of money in 2008. His message also indicated that the administration would be looking at ways to reduce poverty among elderly women, who are twice as likely as elderly men to be poor.
Social Security supporters were relieved that Clinton, who was rumored to be leaning toward some form of privatization, had instead backed preserving the system.
Advocates must keep asking the questions that will face many older women. What happens when your savings runs out? What happens if your husband chooses not to share his personal savings account with you? What if inflation spirals out of control and much of the value of personal savings is eroded? What if your spouse was a foolish investor? What if the stock market crashes and loses value at about the time you want to retire? Those groups advocating privatization of the system are hard put to provide satisfactory answers to these questions.
Privatizers say that retirement security will be enhanced if workers purchase annuities that will assure them an income as long as they live. Unfortunately, annuities are expensive and unfairly discriminate against women by charging more and paying out less.
Social Security has done more than any other government-sponsored effort to help secure women's economic security in old age. In effect, the system attempts to compensate for the economic penalties that women as family caregivers and lower-income earners experience - not perfectly yet, but certainly better than decades ago when most women were dependent upon their husbands' pensions and savings.
NOW and the many organizations that make up the National Council of Women's Organizations have spelled out our "bottom line" for any revamping of Social Security, urging the President and Congress to "protect the heart of Social Security" with a plan which:
The Securities Industry Association and the Investment Company Institute, representing investment banks, brokers and the mutual fund industry, are playing a low-key, but extensive role, according to The Nation magazine (Feb. 8, 1999). Large firms like State Street Boston, PaineWebber, Merrill Lynch, Fidelity and American Express are supplying studies and providing technical expertise. These same firms have also contributed large sums to the campaign coffers of Congressional leadership.
Wall Street brokerage houses stand to gain billions in brokerage fees. One projection, as reported by the Washington Post (Jan.7, 1997), indicated that $240 billion in fees would be diverted to investment firms during the first 12 years of privatization. At the same time, retirees would see their income cut by up to 20 percent to cover those fees and administrative costs. Current benefit levels would inevitably be cut; every privatization bill introduced in the last Congress raises the retirement age to 70 or higher, cuts guaranteed benefits and cuts cost-of-living increases. Supplanting Social Security with private investment accounts also risks losses in the event of substantial declines in financial markets or a serious economic recession.
Hearings are underway in the House of
Representatives, and additional legislation will soon be introduced.
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