By Richard A. Gephardt
But the picture is not that grim. I don't believe in UFOs, but I do believe in Social Security. Six decades of experience shows there is a lot more right with Social Security than its detractors will admit.
Before we rush to dismantle the system, we should remember why it was created. It was never meant to be the sole source of retirement income but rather was designed as a foundation for retirement to give all working Americans an income safety cushion. Franklin Roosevelt only wanted to provide "some safeguard against misfortunes which cannot be wholly eliminated in this man-made world."
And it has achieved its original purpose. We now live in a nation where nearly every working adult has the security of knowing that he or she will not live in poverty after retirement. We live in a nation where widows and their children can survive the economic disaster of the death of their loved one. And we live in a nation where the misfortune of disability no longer plunges working Americans into destitution.
The program has nearly eradicated poverty among the elderly. Without Social Security, nearly half of today's elderly Americans would be living in poverty. Nearly 60 percent of retirees count on Social Security for at least half their income. And it provides the only disability protection for 75 percent of all workers.
The bottom line: Social Security has worked. But some of the new reform proposals act as if it were a quaint relic that we have outgrown. Critics want us to move to a market-driven system that abandons the fundamental protections of the present one. This would be a dangerous mistake.
A myth perpetrated by radical reformers is that if Social Security revenues were diverted into private retirement accounts and invested in stocks, the wonders of the equity market would magically enable retirees to achieve much greater levels of benefits at lower costs. This is an admirable desire but an unlikely result.
You wouldn't want your life insurance company investing all your premiums in Third World equity markets. By the same token, we must not develop an overreliance on private equity markets to fund future benefits.
Social Security was born out of our experience in the crash of '29. The Dow Jones Industrial Average stood at 381.17 at its pre-crash peak a level not seen again for 25 years. Could we as a nation really afford the disaster we would experience if the value of our retirement safety net fell 90 percent over a three-year period?
That's the whole point of having an insurance program. You wouldn't want to take the money you spend to protect your house against fire and put it in the stock market, even though there is a high probability your house will never burn down. No one wants to assume that kind of risk.
Privatizers have forgotten what Social Security is and isn't. It isn't designed to be conditional on the outcome of the financial markets. It is designed to be a form of insurance that will always be there for those who need it.
A Social Security Advisory Council report last year pointed out that we don't have to make the choice between our current system and privatization. We can achieve many of the benefits promoted by the advocates of privatization by allowing the trustees to gradually and conservatively invest a portion of the funds in the equity markets, just as insurance companies balance their portfolios.
Instead of destroying a system that took 60 years to build, we should be embarking on sensible reforms that ensure Social Security will be there for American families throughout the 21st century.
We need to begin this process now, but we should also remember we hardly stand on the precipice of disaster. Using conservative economic projections of an average economic growth rate of 1.5 percent, the Social Security Trust fund will not be able to meet all of its obligations after the year 2032. And the latest revisions in the CPI by the Bureau of Labor Statistics may push that date back until 2043.
There aren't any free rides in life, much less in Social Security reform. Any of the changes being discussed would impose real alterations in the levels of benefits, taxation and risk.
We need to get to work, but we also need to move forward with a full understanding and acceptance of changes in this system which has served us so well. We shouldn't let an artificial panic stampede us into a radical reform that trashes the long-standing success of Social Security.
The writer, a representative from Missouri, is the House Democratic leader.
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