Social Security--Fix it or scrap it?
81Signing the Social Security Act of 1935
Ford Hunger March
Dorthea Lange Depression Photo
2-23-09 Obama Finds Resistance in His Own Party on Addressing Social Security Jackie Calmes in the NY Times
- Democrats Resist Social Security Benefit Cuts
Obama is facing resistance from liberals in his own party to Social Security "help" from Lindsay Graham e.g. benefit reductions for future retirees.
Presidential Candidates Need to Take a Position on Social Security and Medicare
- Social Security & Medicare Issues in 2008 Election
This is a link to a video from the National Committee to Preserve Social Security and Medicare with the message that presidential candidates should tell us their plans for preserving Social Security and Medicare.
Walter Reuther on Labor Day in Cadillac Square
Depression Breadline
World's Largest Container Ship
Social Security Needed Now More than Ever
The debate on changing Social Security from its original social insurance concept to one of individual savings and investment has focused on the numbers and how best to assure that funding is sufficient for future benefits.
Equally important is a recognition and understanding of the conditions that led to the adoption of Social Security in 1935 and recognition that workers today still face great insecurities as globalization and trade change the face of American industry. Examining the forces that gave rise to Social Security provides perspective to the debate over our country's needs today.
During the early 20th century, the United States evolved quickly from an agrarian and small-business economy in which people lived independently on farms and in small towns, to an urban society in which workers in industrial centers such as Detroit found themselves dependent for their livelihood on the state of the economy, on the viability of their industry and employer, and on their own good health.
Detroit's population grew from 285,000 in 1900 to 1.6 million in 1935 as workers flocked from farms in the South and Midwest to work for big wages on Ford's assembly lines, but, far from their farms and relatives, they faced new insecurities.
For example, after attracting thousands of workers to Detroit, Henry Ford shut down his Rouge plant for six months in 1927 to change from the Model T to the Model A and had massive layoffs again in 1931, dumping 60,000 workers onto the relief rolls without income to sustain them, far from their farms where they could have grown their own food.
New Deal measures such as the Wagner Act, Social Security, unemployment and workers' compensation provided security in the event of layoff, injury on the job and arbitrary firing and when, as Walter Reuther put it they were "too old to work and too young to die."
Also forgotten in this debate on Social Security is the role played by New Deal programs in the preservation of the free enterprise system.
When Franklin D. Roosevelt was inaugurated, unemployment in the United States was 30 percent, and many people were embracing socialism or communism as a model for our country. On March 7, 1930, John Schmies, Communist Party candidate for mayor of Detroit, led a Ford hunger march from Detroit to Dearborn. After the Wagner Act was passed assuring the right to organize unions and bargain collectively and the steel, auto, electrical and rubber industries were quickly unionized, union leaders such as Walter Reuther cleaned the communists out of the labor movement and proceeded pragmatically to address the needs of union members.
The result was the construction of a remarkable edifice by employers and union leaders through free collective bargaining that included paid holidays and vacations, health care and pensions, highly-paid jobs and a private system of industrial jurisprudence that provided due process in the workplace. These measures provided answers to universal questions such as: What happens to my family if I'm injured or get sick and can't work? When I'm too old to work? And what protection do I have if I'm fired arbitrarily?
Now, thanks to global competition, the foundation of our industrial edifice is cracking. Detroit's population has fallen from 1.6 million in 1935 to 899,000 today, and the city's finances are in dire straits. Less than 10 percent of the private workforce in the United States is unionized. Manufacturing jobs are scarce. More and more Americans get low-wage jobs with few benefits through temp agencies. Car industry pensions are underfunded, as is the federal Pension Benefit Guaranty Corporation, and health care benefits aren't funded at all but paid out-of-pocket only so long as the companies are able.
In the golden '50s and '60s, retirement security was viewed by the companies and the UAW as based on a three-legged stool: Social Security; a non-contributory pension plan (plus lifetime health benefits); and personal savings.
With our industry under global siege, defined benefit pensions underfunded and disappearing, and personal savings declining, now is not the time to weaken the Social Security leg of the retirement stool by subjecting it to the risks of private securitites markets operated by investment bankers and for-profit mutual funds where serious conflicts of interest have been revealed in the past couple of years.
Private savings and investment accounts, IN ADDITION to Social Security and employer pensions and increasing the national savings rate are important. But nothing in Bush's privatization plan would do this. Greater participation in 401(K) plans and IRAs by low income workers should be encouraged bo offering immediate eligibility and automatic enrollment with better tax incentives for participation.
President George W. Bush's proposed "reform" of social Security springs from longstanding haters of FDR and the New Deal and from hopes of enhancing the appeal of the GOP to young voters. The libertarian CATO Institute has been waging a public relations campaign effort to gut Social Security for several years. The Bush administration proposals failed to recognize that Social Security, as originally conceived, has served us well and is as needed now as it was in 1935.
[This article was adapted from one that appeared as an op-ed by Ralph Deeds in the Detroit Free Press February 23, 2005]
401k Plan Regulations Need Reform
The current recession 2008-09 has decimated the 401K savings of many if not most Americans. This may present an opportunity to make needed changes in 401k regulations. Changes are needed because the plans are not performing their intended function--participation is not as high as it should be; the costs of many plans is too high; and participants too often must choose among a bewildering array of investment options including the stock of their own employer. Savings have been invested inappropriately for retirement accounts, and the results have been abysmal for many if not most participants.
Last month John Bogle, inventor of the no-load, low cost, tax efficient index mutual fund and founder of the VanguardGroup, which is the not-for-profit, investor-owned, second largest mutual fund group in the world, recommended to Congress a number of improvements in the regulations governing 401k plans. Unsurprisingly, Bogle recommended automatic enrollment and limiting investments to broad stock and bond index funds. A link to Bogle's testimony is provided below. [John Bogle has been called "The Warren Buffett of mutual funds." He has devoted his life to reforming the mutual fund industry.]
Statement of John T. Bogle Before the Education and Labor Committee, U.S. House of Representatives Feb. 24, 2009
- STRENGTHENING WORKER RETIREMENT SECURITY
Bogle recommends automatic enrollment in 401k plans and limiting investments to approved broad bond and equity index mutual funds.
Don't BeTricked!
McCain Supports Privatization of Social Security
How the Great Depression Changed Detroit
Is Social Security Broke?
A Stalwart of Retirement Planning: the IRA by J. Alex Tarquinion in the NYTimes 4-27-07
Alex Tarquinio points out that the Individual Retirement Accountor IRA is often overlooked in retirement planning. More than 90 percent of IRA money comes in the form of roll-overs from 401k plans. Only 14 percent of American households that were eligible to make direct IRA contributions did so in 2006....Fifty-seven percent of "prime working-age Americans," had no retirement plan at work. Contributing to an IRA makes senses for such people.
Read Tarquinio's excellent article here;
That Looks Too Risky!
9-3-09 NYTimes Reluctance to Retire Due to Declining 401k Balances
- Increasing Reliance on 401k Plans May be Accentuating Economic Cycles
“One unappreciated side effect of the 401(k) system is that it’s a sort of reverse automatic stabilizer,” says Teresa Ghilarducci, an economics professor at the New School.
Veteran of 1930s Detroit Labor Wars
- Detroit Labor Wars
96 year old Dave Moore tells of his experiences in the Ford "hunger march" and the turbulent Detroit auto industry in the 1930s.
Who Needs Retirement, Anyway Phyllis Korkki in the NYTimes 4-19-09
- Who Needs Retirement, Anyway?
"I will not retire while I've still got my legs and my makeup box,"said Bette Davis. "Retirement is the ugliest word in the English language,"said Ernest Hemingway. "Sooner or later I'm going to die," said Margaret Mead,"But I'm not going to retire."
PrintShare it! — Rate it: up down flag this hub
Comments
Thanks for your comment, Chuck. Some day we'll have to get together for a beer in Tucson. I have a brother and a sister who live there.
I see two things playing out with younger people. First, few of us count on social security and second, I believe we are more frugal as a generation than baby boomers. Our generation will have to save more and spend less to live in retirement.
I have little faith in the government to return the funds we invested in our retirment years. I also see the huge draw down that's coming as our parents retire and the workforce shrinking as something that was not considered when social security was designed to have the current workforce pay for the previous.
I'm not up to speed on the borrowing against social security. Are we setting our selves up to have outstanding loans with depleted equity until there is nothing less to secure the loans? Or is it more of a concern that the money goes to something else and then it won't be available to people when it comes time to collect?
You're on. Give me a call whenever you plan to come. It would be great to meet you and have a beer. The next few months are the best time of the year for visiting Tucson as the weather is great - sunny and a balmy 70+ temperature.
Social Security needs only minor tweaks to assure that you will receive benefits, Paul. The public has been misled by concerted PR campaigns by CATO, the Heritage Foundation and similar groups who would like to do away with Social Security and Medicare. Fortunately, they are out of step with the majority of Americans.
Medicare is the program that will soon run out of money, not Social Security.
haha I like that last editorial
The GOP has been fighting to end Social Security since the day Roosevelt put pen to paper. The Reagan plan, picked up by King George, has been to put the country in such a huge deficit that they could then claim the U.S. will go broke if it doesn't kill all of what's left of Roosevelt's programs, especially Social Security. Their plan to privatize Social Security (and just about everything else) is just another facet of that plan. To privatize Social Security is to end it! There's plenty of money to fund Social Security well into the next century, provided we don't start World War III before Bush leaves office. With the help of the right wingers, big business has all but killed unions in this country (first by moving plants down South and now by sending jobs to Asia, Africa and the MidEast. Keep up the good work Ralph.
Paul Krugman aggrees in his op-ed 11-16, "Played for a Sucker."
Iin Wisconsin there is a public employee retirement plan that is similar to what President Bush proposed. Employees own the fund and it is controlled by an elected board. the State oversees the fund, but unlike SS the state can not take or borrow money from the fund. Over the years I have contributed to both the State Retirement Plan and SS. I am now drawing more money and was able to retire early (age 57) than I will draw from SS at age 65. This system is a good comprimise because you have to contribute, there are death benifits for your named survivor, and you have the option of taking a lump sum if you leave the system.
That sounds like a good system, in addition to, but not as a replacement for Social Security. I too am retired and drawing from a private pension fund which pays me double my Social Security benefits. I would not be able to live comfortably without BOTH Social Security and my defined benefit pension. Moreover, I saved in addition in my employer's 401k plan. In my experience all three plans are needed to provide for an un-reduced standard of living in retirement.
The best solution is to preserve Social Security and provide additional incentives for participation in 401k savings and investment plans to replace defined benefit pension plans which most employers are dropping.
I wonder what the the Wisconsin state fund invests in? I hope they haven't invested in subprime mortgage-backed securities. Many state investment funds have been hurt by these unfortunate investments peddled by big Wall Street banks.
Enjoyed this hub....worthwhile reading. The real budget monster is the cost of medicine in this country....it is the issue that is most important to address rationally. Unfortunately most of the politicians running for President and pussy-footing around at best. The only truth speaker with an honest plan is Dennis Kucinich. SINGLE-PAYER: get rid of private insurance, and employer based plans. This is the answer most civilized nations of the world have come to.
great hub, great comments. :)
Enjoyed the Hub
Tom
3bg3cvemr6574
Enjoyed the Hub
Tom
Tnx for the comment.
That's a nice idea...........
Couldn't agree with you more. BTW, the American Association of Future Retirees is dedicated to exactly what you are trying to do: save Social Security, and don't "reform" it out of existence. (FYI, I'm the Executive Director.) I'd like to invite you to become a member; it doesn't cost anything & we need people like you who not only think as we do but are articulate about getting the word out. Please check us out at http://www.aafr.org . I'd appreciate your feedback about our site, it's fairly new.
Good site. I signed up although I'm not sure I'm eligible. I'm already retired!
Yes, you're eligible & are already enrolled as a member! There are no age requirements... all that matters is that you support our goals of preserving Social Security and other important programs for future generations. Even if you're a "current retiree," you can be a "future retiree" at heart (which most are if they have kids & grandkids).
Excellent article Ralph. For the past ten years I've been watching my wages and benefits decline. I was hired in to a multinational insurance corporation in 2001 which was the last year they offered pension benefits. Everyone hired after 2001 had to rely on a 401K.
I stayed long enough to be vested so supposedly I will get a small benefit whenever I decide to start drawing on it, but it wouldn't shock me if they find a way to get rid of that too the way things are going.
My 401K lost 33% of its value last year and when the bank went down I took a distribution becaus I needed it. The job I found in November offers no pensions, no health insurance, no benefits except a 401k packed with mutual funds that are all currently losing large amounts of money--plus, they constantly require work off the clock, which is technically illegal at an hourly wage job. I've started joking that maybe they could find some volunteers to do the work, and they answer me as if it's a serious suggestion because they really are that shameless.
I'm 55. I'll be happy if I'm not a greeter at WalMart when I'm 80--if I make it to 80. Privatizing social security is a shameful greedy grab by the uber-rich for the few cents 99% of us have left. I don't know why more people aren't more whipped up right now about it. I spend half of every day arguing with people who think the UAW single-handedly destroyed the American economy. It's very depressing.
Out of curiousity, what percentage of tax do you pay in the States? I ask because I gather that many Americans equate Social security and Universal Healthcare with high taxation, and I don't believe that to necessarily be the case.
Employees and employers each pay 7.65% Social Security tax on the earnings up to $109,000 for a total of just over 15%. In addition single income tax payers pay 10%--35% depending on income, deductions etc. Also, they pay state sales and property taxes which vary from state to state.
Here employees pay 22% on any amount earned between £2231 - £34600 pa, and 40% on anything higher than that. In addition they pay 11% National Insurance contributions on any amount over £5,460 pa. For this we Brits have Universal Healthcare, a basic (but quite low) pension from age 65, and Social Security benefits (known as a job-seekers allowance) for if we are made unemployed. We also have non-contributory public education until age 18, but this is partly funded by local authorities , to whom we pay local taxes (usually between £100 and £200 per property on average)
There's a lot to be taken into consideration, but do you think we pay a huge amount more?
Amanda- Ok all that is little confusing. Can you tell me if some one earns like $6000 per month which is roughly 4000 pounds (without any contribution to personal investments like 401k) after taxes how much would be a person's take home salary.
CW - £4000 per month would be quite a generous salary here, as an average salary is somewhere between £1800 and £2500 depending on your location and profession. On £4000 per month you might expect to take home very roughly £2600. That may not sound like much if you're used to lower taxation, but I imagine you or your employer would be paying a generous whack to health insurance?
Hey Deeds a topic you can relate too. You must be an expert on it having one foot in the grave yourself. But too bad you had to probably copy and paste the whole thing.
I wrote the article. It was originally published as an Op-ed in the Detroit Free Press. If you disagree with it why don't you explain why?
Ralph,
Well written HUB. My problem with social security is this, you can never draw out what you pay in. Its simply not possible. It's caused more problems than its solved. For example you mentioned the forming of Unions. No one could argue that the unions haven't played a role in the demise of Detroit. Just another example of good intentions and the road to hell...
C.J., Thanks for your comment.
We are all lucky that Bush was not able to turn Social Security money over to Wall Street! Incentives for investing more in 401k plans should be increased, on top of Social Security, not in place of Social Security. This will be especially important for people who are not covered by traditional defined benefit pension plans which are rapidly disappearing from the scene.
Some people draw out more from Social Security than they pay in, some less. Some none. Some die or become disabled before retirement age and Social Security payments help support their families. That's the way insurance works. The UAW was not known for self restraint in pressing it's demands. But two parties signed every contract--the union and the management. In the past several years the UAW has agreed to some huge cutbacks in wages and benefits, too late to save very many jobs. The big increases in wages and benefits came for the most part when the companies didn't have a lot of competition and were quite profitable.
Ralph,
Can't argue with you on the Bush thing. No doubt what would have happened to all that money if it would have been moved over to 401K's. It would have been flushed with the rest of the market. Don't get me wrong, I'm not saying that 401K is the answer to Social Security. I'm just not going to be for any social program thats compulsary. You point out something that I don't think a lot of people understand. Social Security is INSURANCE, not a retirement investment. You pay into it, its compulsary and you only get it(some of it) if you meet the criteria and prove need. Do you believe that the average Joe would agree to that, if explained that way?
The Unions have created a lot more problems than the obvious(auto industry) They have created third party hires, temp and contract agencies(indirectly) so employers can avoid a Union from forming. Its a disaster. UAW really hurt the image of all Unions. I personally don't believe they have any real purpose anymore, other than to line the pockets of the Union management. How do you get Michigan back to work now? Will they work for less money? There are a lot of tough questions and no easy answers.
Tnx for your comment.
One little correction: After age 62 you don't have to "prove need" in order to collect Social Security benefits. Benefits are reduced if you start collecting before the normal (65+) retirement age. The only time you have to prove need is if you are filing for a Social Security Disability benefit. For that benefit you have to provide medical evidence that you are unable to work.
I spent 34 years negotiating with the UAW and could say a lot on the subject, but I don't feel like going into a long discussions of the pros and cons here at this time.
34 years!?? You must be exausted! Sounds like a lot of work and worry.
Well, I went through a few all nighters and a lot of weekends every three years. Actually it was quite interesting.
Chuck says:
2 years ago
Good article, Ralph. And, here is the link to my contrary view http://hubpages.com/hub/The-Social-Security-System I always enjoy a good exchange with you. Chuck