One of President Obama’s top economic advisers, Lawrence Summers, told leading economists Aug. 11 that the president intends to overhaul Social Security before he leaves the White House.
Summers, director of the White House National Economic Council, said Obama’s aim would be to strengthen Social Security “in a way that will assure people that there’s something they can rely on, a base from which they can build their retirement security.”
His remarks came at the annual meeting of the National Bureau of Economic Research, a group that includes Nobel Prize winners, presidential economic advisers and economists from academia, business and labor.
Summers said he was “confident” that the Obama administration, would “address Social Security from the perspective that the protection of what’s the bedrock of the system has to be an absolutely central value.”
That bedrock is a top concern of retirees and workers about to retire. Social Security is the single largest source of income for the elderly. Two-thirds depend on it for most or all of their income.
The AFL-CIO Executive Council, at its March meeting, issued a statement saying, “We cannot allow fiscal responsibility to be used as a pretext for cutting the social safety net. In this time of growing economic insecurity, we should be strengthening rather than dismantling the social safety net.”
The financing of Social Security, the union leaders said, is “fundamentally sound.”
Social Security revenues and reserves are fully adequate to pay all benefits until 2041 or 2049, and 74 percent of benefits after that, they said.
They pointed out that the cost of making Bush’s tax cuts for the rich permanent is three-and-a-half times the size of the entire Social Security shortfall over 75 years. The cost of extending the Bush tax cuts for only the wealthiest 1 percent still exceeds the entire Social Security shortfall, they noted.
Ed Coyle, executive director of the 3-million-member Alliance for Retired Americans, warned recently that the public should be suspicious of “sky is falling” predictions of doom for Social Security. Such doomsday warnings, he said, “mask an ongoing ideological agenda to cut benefits to current and future retirees.”
Instead, he said, the focus should be on strengthening Social Security by raising the cap on earnings subject to Social Security tax (currently set at $106,800), and “ending the nearly 20 percent overpayment that taxpayers give to the big insurance companies to offer privatized Medicare Advantage programs.”
The AFL-CIO leaders also suggested dedicating estate tax revenues above a certain limit to reinforce the Social Security Trust Fund.
Noting that throughout Social Security’s 75-year history, it has been modified many times to keep pace with economic changes, the AFL-CIO leaders emphasized that any fixes must maintain and extend its benefits, not cut them.
The union leaders warned against measures proposed by some, such as increasing the early retirement age or the standard retirement age; changing the Social Security benefit formula to increase the number of years of earnings counted or to index benefits to prices instead of wages; or restricting eligibility.
“‘Fixing’ Social Security by lowering living standards is no solution at all,” they said.
The AFL-CIO pointed out that wage stagnation is one reason why there’s a projected future shortfall. “The most appropriate response to this problem is to encourage wage growth by allowing workers to form unions free of employer interference and to reform health care so that health care expenditures are no longer a drain on wage growth.”
In his remarks yesterday, Summers noted that resolving the economic crisis and reducing health care costs will help replenish the Social Security fund.
Coyle emphasized job-creation as well as health care reform, saying, “Putting more Americans back to work will send more money into these trust funds.”
suewebb @ pww.org