Social Security Reform

Should Social Security be reformed? If so, how? Is there a Social Security crisis at all?

Evelyn Morton, director of economic issues for the AARP Federal Affairs Department, was online to discuss Social Security reform.

The transcript follows.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

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Evelyn Morton: Welcome to all of you who are taking part in this chat. We're glad you can be here for such an important discussion. Social Security really is something that effects all of us, and makes a big difference to individuals, their families, and their communities. We know there is a lot of confusion and misinformation about Social Security floating around, and we are glad to have this opportunity to set the record straight.

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Washington, D.C.: Why does Social Security need to be reformed. I thought the whole idea is that the Social Security that is taken out of our checks is going towards are care in the future. If social security is taken away will we reimbursed for the money that has already gone into social security? And how will we be able to live if that is all that people have when they retire. Everyone does not have a 401 and even a 401 k is not enough to live off of if you live 20 years after retirement.

Evelyn Morton: Social Security needs to be strengthened but it is not going broke. As long as workers pay into the system, benefits can be paid. Our mission at AARP is to fight to make sure Social Security provided your children and grandchildren with the secure retirement that many of their parents and grandparents enjoy.

You are right. Almost half of today's workers are not covered by pensions and many more have not saved enough for their retirement. That is the real problem tomorrow's retirees will face and we should be dealing with that separately, not by trying to make money from Social Security.

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Reston, Va.: I'm 35. Why should I have to fund your retirement, and why should your grandchildren have to fund my retirement? Isn't social security basically a big pyramid scheme?

Evelyn Morton: No, Social Security works for all generations and enjoys widespread support among all generations. Social Security is one way that families take care of one another. Without these benefits many families would have to make tough decisions about paying grandma's doctor bills and paying for college. Because grandma and grandpa get Social Security they can live independently and help their families and their communities. Many young families will tell you how Social Security helped out when a working parent died or became disabled.

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Gaithersburg, Md.: Would it help to elminate the FICA income tax cap which was just increased from $87,000 to $90,000? The Medicare taxable income cap was eliminated in the 1990s. What was the rationale for instituting the income cap? Don't people at or above these caps get the greatest payout while some at the bottom never qualify for any benefits, but pay out a greater share of their income? Social Security is much more than just a retirement program, it is a disability program as well that privatization will undercut.

Evelyn Morton: AARP supports raising the cap, not eliminating it. Benefits replace only a portion of your income which is why you don't pay Social Security tax on all of your earnings. Eliminating the cap completely means the highest earners will get really large benefits.

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Newark, N.J.: There seems to be widespread disagreement over whether the real "crisis date" for the existing system is in 2018 or 2042 (or so). Is it truly honest (and/or practical) to extend the date beyond 2018 based on the "trust fund," or is the simple fact that at that point money will have to be diverted from the general revenues to pay for benefefits? Does it really make a difference if the money is technically being used to repay old loans or bonds rather than just paying for benefits directly?

Evelyn Morton: Social Security has a long-term problem but people shouldn't be scared into thinking there is a crisis that requires dramatic changes. Those who suggest that the government won't honor its obligations to Social Security in 2018 are wrong. The bonds that Social Security holds are just like the ones individuals, pension funds and others buy and the government has never defaulted on its obligations. Besides taking money out of Social Security moves 2018 closer.

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Springfield, Va.: How will any proposed changes impact current recipients and those within 5 years of retirement? Many folks plan their retirements by determining how much they need to save and do so when they think they have or will have this much in benefits and savings. Those of us within 5 years and recently retirees are sort of stuck if they change things now. ie. we will have to return to work or work longer.

Evelyn Morton: Seniors care about their children and grandchildren and know how valuable Social Security can be.

Most proponents of radical reform say they will hold current and near retirees harmless, but they can't bind future elected officials. Their plans rely on heavy borrowing, which will lead to pressures to cut benefits or cut other programs that serve seniors and vulnerable populations. Government borrowing could also drive up interest rates which affects all of us.

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Detroit, Mich.: These comments/questions are coming from someone who is not long from retirement. Was not Social Security set up during the time of FDR as a supplemental means to support oneself during retirement and not as a sole means to support oneself? I have also read that, contrary to most people's beliefs, individual people are now taking more out of Social Security than are putting into it. (As a consequence of increased life spans.) If this is true, than why is everyone getting upset if anyone proposes cutting Social Security benefits? I personally do not want to leave a national debt to my children and grandchildren to pay off.

Evelyn Morton: Social Security has always been the base on which to build a secure retirement. Today's workers paid into the system and AARP believes they should get the benefits they deserve. We don't have to slash benefits for future generations to make the program strong.

Without Social Security, families, many of whom are already spread thin financially, would have to shoulder a greater burden caring for older family members. Social Security will be just as important to younger workers because many of them don't have pensions and have not saved enough for their future.

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Fargo, N.D.: Would AARP be in favor of aboloshing social security for anyone under 18? This program is a huge waste of taxpayer dollars. Why not let workers save their own money and keep the government out of it?

Evelyn Morton: Absolutely not. First of all Social Security is not a huge waste of money. Social Security has paid benefits every month, through World Wars, depressions, and stock market downturns as well as in good times. The idea of letting workers voluntarily opt out of Social Security sounds appealing at first glance. But remember, if something sounds too good to be true, it probably is.

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Manassas, Va.: I'm 29 and terrified that this reform will pass. It's bad enough that my benefits will be cut, but private accounts will make my retirement LESS secure! Very few of us young adults have real pensions anymore-- just 401Ks that can be extremely volatile. Social Security seems to me to be the only truly secure income for people my age. And now that's being cut back and reformatted. I hate it!

Evelyn Morton: You are right. Slashing the benefits of future generations to finance risky private accounts is a bad idea. AARP believes people should save for their own retirement to add to their Social Security. Privatizing Social Security hurts everyone.

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Montgomery, Ala.: Ms. Morton:

I realize your organization has come out against any Social Security reform that would empower workers to control some of their own money. As I understand the thrust of the president's proposal and some of the other reform plans discussed, people at or near retirement age would be guaranteed their Social Security benefit. Also, the private accounts would be voluntary, so anyone who wanted to stay in the present system could do so. So what's the problem with giving workers some choice with at least part of their payroll taxes? And please use an argument other than the alleged unfunded transition costs. The costs of doing nothing with this program far exceed any so-called transition costs. Thank you.

Evelyn Morton: Choice is a good idea and workers have lot of choice today through IRA(s) and 401(k)s. Supporters of private accounts say they are voluntary, but everyone—whether they choose the account or not—will have their benefits cut to finance those accounts.

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Bowie, Md.: What is the fundamental disagreement between the two parties? Why can't someone just crunch the numbers and figure out what is the best option?

Evelyn Morton: The fundamental disagreement is more than solvency. The two sides differ about the magnitude of the problem with supporters of privatization claiming falsely that Social Security is in crisis. There is also a fundamental difference over what role Social Security should play. AARP believes that Social Security should continue to provide workers, retirees, and their families with a strong base of financial security.

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Age 70: When Social Security was first created, few lived long enough to reap its benefits.

Why not raise the minimum age?

Evelyn Morton: We already raised the age to 67 and need to look at who that will work. While some people have jobs that they can work at until 70, others don't, some are physically unable to continue working, and some wouldn't be able to find job even if they want them because age discrimination is still a problem.

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Silver Spring, Md.: If the Social Security system is broke by 2042, then today's young workers (18-34 yrs old) get no social security income after many years of paying into the system. What SPECIFIC fixes are you recommending to save social security for young workers?

Evelyn Morton: Let me clear up a common misconception. After 2042, Social Security is not broke. Incoming revenues will be able to pay more than 70% of benefits for decades. There are a number of modest, incremental changes that can help fill the gap and we need to put them all on the table. But, private accounts aren't a solvency option.

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Laurel, Md.: Do you agree that reasonable projections indicate that it would take a cash infusion of $10.4 trillion today to make Social Security sustainable in its current state?

Evelyn Morton: No. That number represents what Social Security would have to pay over infinity. Costing anything over "infinity" is ridiculous. Infinity is a term better suited to Science Fiction and the Adventures of Buzz Lightyear, than to real policy debates.

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Morristown, N.J.: Where do you stand on the argument that Social Security is actually solvent, and will remain so, but that Medicare cost will actually spiral?

That the Administration wants to fix the wrong thing, something that isn't broken, for ideological reasons?

Evelyn Morton: Social Security can be made strong with modest adjustments. Medicare faces a serious challenge and one way to deal with this is to contain health care costs.

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Washington, D.C.: Will seniors be forced into these plans? Could seniors just keep their current plans that they have now and then the younger generation could choose to have private accounts?

Evelyn Morton: Hopefully seniors will be held harmless; however, when people take money out of Social Security everyone is hurt. There is less money to pay benefits and the government might have to borrow, raise taxe, or cut spending to replace the money that is needed to honor the obligations to future generations.

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Silver Spring, Md.: Why has Social Security become a retirement program instead of what it was initially intended to do -- support poor older people? This is the problem with the system, and I believe your group is part of the problem.

Evelyn Morton: Social Security was always intended to provide a base of retirement security to all workers who paid in, but not just low-income workers. Many people think eliminating or reducing benefits for middle and high income retirees sounds like a good idea. But there are just too few retirees with high incomes to save any big money. Besides is it fair to contribute to Social Security all of your life and then not collect benefits in your retirement? Or to be penalized for having saved? At AARP, we believe that if everyone pays in, everyone should get the benefit they earned.

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Dayton, Ohio: Why is the AARP still under this impression that there is "no social security crisis? The CBO essentially say's we are, along with OMB, the Social Security Administration, along with many other non-partisan organizations. The CBO says that by the year 2050 the Trust Fund will payout approximately 2 percent of GDP more than there receiving. By 2100 it will be 3 percent. That means every single year from 2017 it will run between a 1 percent to 3 percent GDP deficit. Add it up and by 2075 we will be running a 15 trillion dollar deficit in the Trust Fund. That is more than double our current national debt, which we took 100 years to build. And why is the AARP so against Private accounts. Even the most conservative estimates show that at the least, Private Accounts will yield a return of more than 6 times the current return of T Bills in Social Security. That could only help the huge long term fiscal crunch we have in the Trust Fund. Anyway the returns are hard to argue with. Somebody making $28,000 a year on average for 30 years, with the Social Security tax as is at 12.5 percent and the Dow Jones Index 100 year return rate as the return rate for this person, they would have after 30 years, $732,429.72.

Evelyn Morton: We know there is along-term problem with Social Security, but it is not in crisis. We can strengthen it with reasonable changes and the American people deserve to know more about those options. The debate is about lots more than dueling statistics— we're dealing with people's future security. Our Nation can't afford to lose Social Security.

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Arlington, Va.: It seems to me that people (media/politicians) have forgotten that Social Security benefits are not just for retirees -- but for people who are disabled (and children of disabled people) too. What is going to happen to them if Social Security is revamped? (I received social security as a child, my father still receives disability payments, as did my mother before she passed away...)

Evelyn Morton: Good point, their benefits would be cut too. That's why AARP is fighting hard to make the right changes to strengthen it for all beneficiaries.

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Washington, D.C.: What happens to people who have disabilities, or are widowed, or orphaned if Social Security is greatly changed? Currently many of those individuals receive payments from Social Security. Moreover, Social Security is insurance to help Americans have some sort of safety net. It is not an investment program.

Evelyn Morton: You raise an excellent point. Social Security is about a lot more than just retirement. Most privatization proposals would lead to cuts in disability and survivor benefits. Their private accounts would not be able to replace the benefits they would lose. This is not ok.

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Stafford, Va.: How are present social security contributions invested and at what interest rate? Would individual's investing those same monies in government securities not yield higher returns and yet still be secure in the investment?

Evelyn Morton: Social Security dollars not needed to pay benefits are invested in government securities. The average interest rate is around 6 percent. If today's 155 million workers invested their dollars, they would face much higher administrative costs individually than Social Security does. Besides, the money in their accounts might not last a lifetime, whereas Social Security pays lifetime, inflation adjusted, guaranteed benefits to workers and their families.

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Washington, D.C.: Why do privatization's opponents completely ignore the serious problems with state-funded/controlled retirement and pension programs exhibited in countries like Germany, France, and Italy? These nations are facing near-insurmountable crises in their programs precisely because they chose to maintain the status quo (i.e. tax hikes and benefit increases) rather than adress and fix the basic flaws of any pay-as-you-go government-run system. And this type of "solution" seems to me to be exactly what the defenders of SS want for the US - more of the same ststus quo nonsense that merely delays the inevitable collapse of the system, while producing greater burdens on society in the meantime.

Are we blind to what's happening over there, or do US Social Security supporters really think they are smarter than the Europeans and can somehow fix the unfixable?

Evelyn Morton: Fortunately, the U.S. Social Security system is in much better shape than systems in many other countries. Some nations like Chile and Great Britain, which have privatized their systems, have faced significant problems. Workers, retirees, and their families are not better off.

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Fayetteville, N.C.: What specific steps do you suggest we take to convince Congress that Social Security is an important program to maintain and to send the message that the proposed "reforms" would cripple it and negativiely impact millions of seniors?

Evelyn Morton: Everyone needs to be a part of the discussion about Social Security's future. Whether you are receiving benefits or not, Congress needs to know, as often as you can, that there is a right and a wrong way to fix Social Security. Remind them that you are watching. To send a message to Congress, go to www.aarp.org/socialsecurity.

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Arlington, Va.: Vice President Cheney stated today at Catholic University that personal accounts will be voluntary. How popular do you expect such private accounts would be? Will the creation of such accounts alone be sufficient to cover the upcoming shortfall? In other words, won't it be necessary to either reduce benefits, increase payroll taxes, or raise the retirement age to cover the shortfall?

Evelyn Morton: Creating private accounts makes the shortfall worse and costs a lot more than fixing Social Security. AARP believes people should invest and take the opportunities that are already out there.

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Portland, Ore.: I wish there was more emphasis on the fact that Social Security is currently an insurance program. It is not a savings program. I'm not sure that all workers understand this.
I personally plan to save as much as I can on my own, but I also want that insurance that Social Security provides.

Evelyn Morton: AARP agrees that Social Security isn't a savings program. It's a way of protecting workers and their families against income lost when a worker leaves the workforce. We wish there were more people like you who are saving to add to the Social Security benefit they are planning to receive.

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Evelyn Morton: Thank you for joining me today. The questions were great! Sorry we couldn't answer all of them. I hope that I have helped put to rest some of the myths and misconceptions you may be hearing about Social Security. I also hope you will go to www.aarp.org/socialsecurity to join our fight to strenghten Social Security the right way.

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Pittsburgh, Pa.: I am curious as to why Senators and Congressman do not pay into the Social Security system?

Evelyn Morton: This is a such an important question that I just received and wanted to set the record straight. Although people think Members of Congress don't pay into Social Security. That's not true. All Members of Congress pay into Social Security at the same tax rate as all other workers and their benefits are calculated in exactly the same way. Before 1984, federal employees, including Members of Congress, we part of a separate plan. Since January 1, 1984, everyone in Congress must participate in Social Security.

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