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Not so fast on privatizing Social Security

Commentary
December 9, 1998

Millions of U.S. elderly could be impoverished by proposals to cut taxes, dismantle the system

On Tuesday, December 8th, President Clinton will convene a White House Conference on Social Security Reform. Social Security has been enormously successful at lifting half of the elderly out of poverty and providing benefits to 44 million Americans who are aged, disabled or survivors of deceased workers.

With the baby-boom generation in their peak earning years, Social Security is collecting more than it is spending and placing the money in reserves for the time when the baby-boomers retire and collections are less than expenditures. These extra collections make up 98 percent of today's so-called "budget surplus."

Oregonians should be aware of two major threats to our current social security system - tax cuts and privatization. Both would trade in, not tune-up, Social Security.

While Social Security is fully funded now and for the next three decades, by 2021 the Social Security system will start drawing down its reserves. By 2032 the reserves will be spent and the Social Security system will have sufficient annual income to pay only about 75 percent of benefits. That is why Social Security is said to be "insolvent" after 2032.

Proposals to cut short the reserves - and exacerbate the insolvency - with tax cuts make little sense. The budget surplus should be used to save Social Security. We should increase the reserves by devising a public system that partly invests the Social Security trust funds' reserves in a diversified portfolio through an independent board insulated from political control.

In addition to the tax cuts that spend the reserves necessary to meet future obligations, the Cascade Policy Institute and others want to shift a portion of Social Security taxes to private investment. These privatization proposals would inevitably require large cuts in Social Security's core benefits and make retirement income overly dependent on the risks of the stock and bond markets.

Most Oregonians know that privatization has significant administrative costs and that we don't live in Lake Wobegon where all or even most individual investors have above average returns.

A group of concerned citizens have drafted a "Statement of Principles for a New Century Alliance to Protect and Strengthen Social Security." This Statement of Principals serves as a starting point for every Oregonian to engage in a dialog about Social Security.

It is incumbent on each of us to work to ensure that Americans of all ages will continue to be protected by Social Security from serious loss of income. It is time for Oregonians to join together to insist that Social Security's central role in family income protection not be compromised, and to endorse the following principles for Social Security reform:

Discuss these principles with your family, friends and neighbors, co-workers, and members of your congregation.

It is time to demonstrate that there is a large and growing group of Oregonians who want to fix Social Security without "privatizing" or otherwise dismantling it or threatening its future.

Oregonians who respect the importance of honoring promises and commitments to future beneficiaries need to speak out that big tax cuts and privatization schemes, however politically packaged, are incompatible with "saving Social Security first."

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