Is it Really a Happy Birthday for Social Security?

Published in Woonsocket Call on August 23, 2015

With the stroke of his pen, over 80 years ago, on August 14, 1935, President Franklin D. Roosevelt signed the Social Security Act into law. Over the last eight decades, this domestic program has become one of the most popular federal programs, paying $848 billion to 59 million beneficiaries at the end of calendar year 2014. During that year, an estimated 166 million people had earnings covered by Social Security and paid taxes.

Celebrating the 80^th birthday of Social Security over two weeks ago, AARP released the results of its anniversary survey. The August 2015 survey followed earlier surveys conducted during previous milestone anniversaries in 1995 (60^th), 2005 (70^th) and 2010 (75^th). The latest 29 page report found that Americans of all ages continue to have strong feelings of support for Social Security, and this latest survey found several key themes.

According to the national survey of adults detailed in “Social Security 80^th Anniversary Survey Report: Public Opinion Trends,” Social Security remains a core part of retirement security, it also remains popular across the generations and political ideologies.

“As we celebrate Social Security on its 80^th anniversary, our survey found that it remains as important as ever to American families,” said AARP CEO Jo Ann Jenkins. “We also found that although most want to continue living independently as we age, obstacles to saving often continue to occur in our lives. However, Social Security continues to help generation after generation to diminish these obstacles.”

“When it comes to how important Social Security is to Rhode Islanders, the numbers speak for themselves,” said AARP Rhode Island State Director Kathleen Connell. “210,975 is the number of Social Security beneficiaries in the state; 23.7% say that Social Security provides 90% or more of their total income. And about half say that Social Security represents 50% or more of their income. Without Social Security, many retirees would be living below the poverty line.

“It is plain to see that protecting this key earned benefit is critical. A recent AARP survey found 68% of respondents express at least some concern that they won’t have enough savings to last their lifetime. Imagine if they are given reason to worry more about the viability of Social Security. People who are working toward retirement need to make themselves heard and – as we approach the 2016 elections – hold politicians to their promises to protect Social Security.”

Social Security Key to Surviving Old Age

Older American’s look to rely on their Social Security checks to pay bills, say the researchers. Four in five adults (80%) rely or plan to rely on Social Security benefits in a substantial way. Survey respondents (33%) say that Social Security is the source of income that they rely on or plan to rely on most during their retirement years.

The study finding’s reveal that Social Security has broad support, even across political ideologies and America’s generations, too. Sixty six percent believe that this domestic program is one of the most important government programs when compared to others. This view has remained consistent over time in similar AARP anniversary surveys taken in 1995, 2005, and 2010. According to the study, the vast majority of Americans (82%) also believe it’s important to contribute to Social Security for the “common good.”

Like aging baby boomer and seniors, even younger Americans value this program. Specifically, nine in ten adults under 30 (90%) believe Social Security is an important government program, and nearly nine in ten (85%) want to know it will be there for them when they retire.

The survey respondents also want to live independently in their communities at home. The findings indicate that four out of five adults (83%) consider it extremely important to have the ability to stay at home as long as they want; although 64% believe they won’t be able to do so as they age and become frail. Additionally, while 68% feel it extremely important to have family around, 80% want to be able to financially take care of themselves so their children and other relatives won’t have to support them financially.

While recognizing the importance of financial planning, survey respondents say they face a multitude of challenges that keep them from effectively putting away money for their retirement. Specifically, 69% note that they must focus their income on current financial needs, while 47% believe they do not have enough money left over to put into their retirement savings after paying their monthly bills. Survey respondents (39%) says health issues and family problems keep them from saving for retirement.

SS Trustee Report Gives Nation a Warning

The six member Social Security Board of Trustees issued its 2015 report, on July 22, giving the nation a snapshot of the fiscal health of the nation’s retirement and disability program.

Within the 257 page report, the Trustees gave a dire warning to Congress. “Taken in combination, Social Security’s retirement and disability programs have dedicated resources sufficient to cover benefits for nearly two decades, until 2034. However, the projected depletion date for the separate Social Security’s Disability Insurance (DI) Trust Fund is only a little more than one year away, in late 2016,” says the widely anticipated federal report. “After the DI trust fund exhaustion, annual revenues from the program’s dedicated payroll and taxation of Social Security benefits will be sufficient to fund about three-quarters of scheduled benefits through 2089.”

According to the Social Security Administration, there were about 10.4 million Americans who received benefits from the DI Trust Fund in 2014, including roughly 42,429 in the Ocean State. In order to qualify, these beneficiaries are required to have worked in a job covered by Social Security, and must have been unable to work for a year or more due to a disability. If Congress fails to act to direct more funding into the DI trust fund, disabled workers throughout the nation and in Rhode Island will be hit hard financially right in their wallets.

AARP CEO Jo Ann Jenkins offered her observation about the released Social Security Trustees report. “While the Trustees once again report that the combined Old Age, Survivor and Disability Insurance Trust can pay full retirement, survivor and disability benefits for approximately two more decades, we know that if no action is taken, benefits will be cut by nearly 25% in 2034. As the campaign season gets underway, we will be urging all Presidential candidates to share their plans for the long term solvency and adequacy of Social Security.”

Democrats are calling for an easy fix to shoring up the DI Trust Fund, specifically shifting a small percentage of the Social Security payroll tax from the retirement fund to the disability trust fund. This has occurred 11 times in the past with bipartisan support. But, with the 2016 presidential elections now catching the attention of politicos, GOP Senators have threatened to block any transfer of funds, charging that following this strategy is just a way to push the political “hot potato” issue down the road. Political observers say that this year’s Republican opposition to quickly fixing the DI Trust Fund is a way to force Democrats to the negotiation table to get concessions on higher Social Security payroll taxes or to cut program benefits.

Now, it’s time for Congress to pull together to fix the ailing Social Security program to ensure its future solvency and to adequate fund the DI Trust Fund. Lawmakers from both sides of the aisle must stop their political bickering and craft a compromise to keep Social Security’s retirement and disability trust funds well-funded and up and running for years to come. For the sake of older Americans who now rely on their meager Social Security benefits to survive, our elected federal elected officials must begin to act like Statesmen not simple-minded politicians. Hopefully, the voters will push for this change in thinking when they go into the polls in 2016.

AARP: Social Security is an Economic Generator

Published in Pawtucket Times, October 4, 2013

For those who view Social Security bennies as just a drain on the nation’s economy, just adding the nation’s spiraling deficit, AARP, the nation’s largest aging advocacy group has always seen it differently. Now, according to a new report, released by AARP’s Public Policy Institute on Oct. 1, 2013, researchers found that for each dollar paid to Social Security beneficiaries generates nearly two dollars in spending by individuals and businesses, adding about $1.4 trillion in total economic output to the U.S. economy in 2012. More over, the report’s findings indicate that $762 billion paid in Social Security benefits in 2012 helped Americans keep or find more than nine million jobs.

If Congress is successful in putting Social Security on the budgetary chopping block, the economy will take a hit, warns the AARP report. According to the reports analysis, “reducing benefits by 25 percent across the board in 2012 (by $190 billion), which the Social Security will project will occur around the year 2033, could cost the U.S. economy about 2.3 million jobs, $349 billion in economic output, about $194 billion in GDP, and about $83 billion in employee compensation.”

A Multiplier Effect When Benefits Spent

The 25 page report, Social Security’s Impact on the National Economy, authored by Gary Koening of AARP’s Public Policy Institute, and Al Myles, of Mississippi State University, details the powerful multiplier effect created when Social Security recipients spend their benefits and the companies which receive those dollars spend their profits and pay their employees, who in turn spend their wages. The report provides both national and state-level data.

The researchers use an economic modeling system known as IMPLAN to calculate the multiplier effect and trace the impact of Social Security spending through the national and state economies.

“This report tells us that any adjustments Washington makes to Social Security will have a profound effect on individuals of all ages, businesses and our economy as a whole,” said AARP Executive Vice President Nancy LeaMond. “That’s why AARP is fighting the chained CPI and calling for a national conversation about the future of Social Security – so those who paid into the system can have a voice in the debate and so future generations get the benefits they’ve earned.”

Social Security benefit payments in 2012 supported more than $370 billion in salaries, wages and compensation for workers. Of the more than nine million jobs supported by Social Security spending, about four million were in just ten industries. Nationally, the largest employment impacts were seen in the food services, real estate, health care and retail industries.

In addition to illustrating Social Security’s vital role in supporting national and local economies, jobs and workers’ incomes, this report reiterates the importance of Social Security as a vital source of income for millions of Americans. Social Security benefits keep 22 million people out of poverty, including more than 15 million older Americans, and serve as the foundation of a secure retirement for millions more.

AARP’s Public Policy Institute calls the Social Security Program critical in promoting the income stability among the nation’s seniors, by providing a steady stream of income to replace wages lost due to retirement. “About 1 out of 6 Americans – 57 million people – receive Social Security benefits, including 9 out of the 10 individuals aged 65 and older,” says the Washington, DC-based policy institute.

According to the Social Security Administration, the program is a key source of retirement income for the nation’s retirees, noting that “it is the only inflation-protected, guaranteed income they have. Among the age 65 and over recipients, 23 percent of the married couples and 46 percent of the unmarried couples rely on the program for 90 percent or more of their income. Also, 53 percent of the married couples and 74 percent of those unmarried in this age group receive 50 percent or more of their income from Social Security.

Experts Weighing in on AARP Report

According to Lisa Mensah, Executive Director, of the Aspen Institute’s Initiative on Financial Security, “The AARP study fills a key void in the debate around Social Security. Social Security is not only important for individual financial security but also it has a major impact supporting jobs and economic activity in every state. When weighing Social Security as a budget matter, the fiscal coin has two sides—what it costs and what it delivers—and too often what Social Security delivers for the broader economy is poorly understood.”

Adds, Dean Baker, Co-Director of the Center for Economic and Policy Research,
“In a context where the economy is below full employment, as is clearly the case today, Social Security provides an important boost to demand. The report it released showed the importance of Social Security in each of the 50 states. When the economy is near full employment, the demand generating by Social Security may not be needed, but for now and the foreseeable future this demand will be providing an important boost to growth.”

Impact on State Economies

The AARP report details the spending of Social Security checks on the economy on all fifty states. Of course, California, the state with the largest economy in the nation, has the largest impact. In this state along, Social Security benefits supported 888,000 jobs, $147.4 billion in output, and $8.7 billion in state and local revenues.

Meanwhile, for the littlest state in the nation, “People need to consider a Rhode Island economy without Social Security benefits,” said AARP State Director Kathleen Connell. “Could the state live without $2.9 billion a year in federal money being spent on medications, rent, food, utilities, clothing and services?

“When a person spends Social Security benefits, the lawn gets mowed, the driveway gets plowed, CVS sells toilet paper, and the corner market sells milk. Someone gets paid and then spends that money – which means retailers and service providers are getting paid. And then they spend. It’s a cycle, and each step along the way, sales tax is collected by the state – more than $280.7 million,” says Connell. The AARP study shows that this spending supports 33,000 jobs in the Ocean State. So, Social Security makes life better for retirees and people with disabilities, it supports Rhode Island jobs and Rhode Island taxpayers benefit significantly, she says.

“Social Security was engineered with this in mind. The money paid into the system is not doing much if it stays in the Treasury,” observes Connell. “Social Security allows people to live more comfortably, improves their health and quality of life, and benefits the economy,” she adds.

“Seen this way, what would we be saving if we cut Social Security benefits?” quips Connell.

Congressman David Cicilline notes, this report confirms that almost 80 years after it was established, Social Security strengthens Rhode Island’s economy and provides significant benefits for families across this state.” Cicilline, representing the Ocean State’s 1st Congressional District, states that while other lawmakers propose Social Security benefit cuts of one kind or another; he has introduced legislation to protect the program by strongly opposing the use of chained CPI to calculate cost of living increases.

In Conclusion

Inside the Washington, DC beltway, Congressional lawmakers continue to seek out ways to rein in rising Social Security program costs. Some call for a combination of reducing program benefits while raising revenues. Others support only benefit cuts warning that raising the payroll tax or bringing other forms of additional revenue would hurt the nation’s fragile economy.

After the Federal Shutdown, when Congress comes back to continue the people’s business and begins to seriously debate policies for reforming Social Security, it becomes crucial for these lawmakers to bring the AARP Policy Institute’s economic impact study findings into their discussions. Slashing benefit checks will hurt financially vulnerable seniors, but as shown by the findings of this recently released report it can also have a drastic impact on fragile state economies by slowing job growth, and reducing retail and other spending, even lowering tax revenues at the local, state and the federal levels.

For a copy of the report, go to http://www.aarp.org/work/social-security/info-09-2013/social-security-impact-on-the-national-economy-AARP-ppi-econ-sec.html.

Herb Weiss, LRI ’12, is a Pawtucket-based writer covering aging, health care and medical issues. His weekly commentaries can be found on his blog, herbweiss.wordpress.com. He can be reached at hweissri@aol.com.