I rise today to register my disappointment with the recommendations contained in the draft final report of the President's Commission to Strengthen Social Security, which was released yesterday.
The fact that the Commission could not agree on a single plan AND released three separate options is a matter of deep concern as Social Security is an issue of critical importance to my constituents and the people of this country. The three proposals all require profound and fundamental changes to the nation's retirement system.
I am concerned in particular with the impact any changes to the Social Security system will have on women, retirees and disabled workers.
The three approaches taken by the commissioners share several problematic features - the plans call for benefit cuts for retirees and disabled workers and also for individual workers to open voluntary, private investment accounts to provide them with an income in their old age.
Each of the plans divert Society Security resources elsewhere and none of the plans balance Social Security without the use of massive transfusions of general revenues. No independent actuarial analysis was released, making it difficult to assess the Commission's claims.
What is clear is that each plan would "carve out" private accounts from Social Security. Thus, they would divert a portion of trust fund revenues into private accounts.
A diversion of 2 percentage points - the smallest diversion included in the three plans - would take $1 trillion from the trust funds in the next decade.
All three plans would also "clawback" benefits at retirement. That is, retirees would not receive both their full Social Security benefit AND the proceeds of the individual account as many have been led to believe by the supporters of privatization. Instead, their Social Security benefits would be reduced by the clawback mechanism to reflect the accumulations in their accounts.
Mr Speaker, I would like to point out the differences between the three plans. Plan 1 diverts trust fund revenues to individual accounts and does nothing to restore solvency to Social Security (other than the clawback). This means that privatization makes the problem worse, not better.
The second plan includes a 43 percent benefit cut for future retirees which are the clawbacks and cuts in disability benefits. The claims that this plan restores solvency to the system cannot be substantiated and the Commission does not say where this money will come from.
The third plan includes benefit cuts for early retirees and disabled workers, and includes a disguised increase in the retirement age - so that workers will have to work more years to receive the benefit they would get under current law. The Commission claims that this plan will restore solvency by adding large amounts of general revenues to make the system balance.
The first two plans also claim to improve benefits for widows and low-income workers. While this looks like a good idea, the benefits will not make up for the loss of guaranteed benefits required for by privatization. In addition, since the plans are not fully financed, these benefit improvements may be the first to be dropped.
Mr Speaker, these proposals will have a negative impact on women, retirees and disabled workers.
While all workers contribute a share of earnings in order to ensure a minimum standard of living for the elderly, disabled-workers and their families, children of deceased wage earners and surviving spouses, it is women, Mr Speaker, that constitute the majority of elderly Social Security beneficiaries.
Approximately 60 percent of Social Security recipients are women over the age of 65 and about 72 percent of beneficiaries above the age of 85 are women.
Women in our nation rely heavily on Social Security as a source of income in old age: 27 percent of women over age 65 count on Social Security for 90 percent of their income.
As it relates to our disabled, 37 percent of beneficiaries are disabled - they are not retired. The Social Security System was designed to provide a foundation or retirement income for disabled people and to provide protection for their families. This bill is absent on this issue.
Mr Speaker, we recognize that women, on average, earn less than men, meaning that they count on Social Security's weighted benefit structure to ensure that they have an adequate income in retirement.
Women are less likely to be covered by an employer-sponsored pension plan. This means that Social Security comprises a larger portion of their total retirement income.
Women lose an average of 14 years in earnings because they take time out of the workforce to raise their children or to care for their ailing parents or spouses.
When women are in the workforce, they often work in part-time job. This means that they have less opportunity to save for retirement. Since women live six to eight years longer than men do, they must make their retirement savings stretch over longer periods of time. Consequently, women depend considerably upon Social Security's progressive, life-long, inflation-indexed benefits.
Privatizing Social Security would undermine many of the features that benefit American women, retirees and the disabled, the most. Privatization would encourage individuals to invest their proceeds in private accounts, especially through the investment marketplace and the stock market. Private pension plans require sophisticated knowledge of the Stock Market. Many women lack the skills involved in making investment decisions, decisions that would be vital to their long-term financial security.
In addition, because women earn less, live longer and spend less time in the workforce, they will have less to invest in their private pension plan. The result would be that women would have to live on smaller benefits from smaller accounts.
Finally, besides the risks evident in investing in the Stock Market, there is nothing to prevent individual private pension plans from being eroded by inflation. This is particularly devastating for women, who have less money to retire on and the need to make their money last longer. Social security resolves this problem by increasing benefits each year through a Cost-Of-Living-Adjustment (COLA).
This safety net, it appears, will no longer exist under a privatized Social Security System.
Thank you, Mr Speaker.