by Melanie Brunson
On May 2, 2001, President George W. Bush issued an executive order establishing the Commission to Strengthen Social Security. According to the White House, the mission of this 16-member, bipartisan commission is to submit to the President recommendations for modernizing and restoring fiscal soundness to the Social Security system according to the following principles.
a) Modernization must not change Social Security benefits for retirees or near-retirees;
b) The entire Social Security surplus must be dedicated to Social Security only;
c) Social Security payroll taxes must not be increased;
d) Government must not invest Social Security funds in the stock market;
e) Modernization must preserve Social Security’s disability and survivors components; and
f) Modernization must include individually controlled, voluntary personal retirement accounts, which will augment the Social Security safety net.
The commission’s goal is to have a report to the White House sometime this fall. We anticipate that the White House will submit its proposals for Social Security reform to Congress early in 2002. Thus, the debate is rapidly escalating in Washington as to the meaning of the principles set forth in the president’s executive order, and the feasibility of implementing them. Questions abound. How much of the system will be “privatized,” if any? How will the scheme be implemented? What will be the impact?
However, regardless of which side one takes in the debate over Social Security reform, it is noteworthy that there is little evidence that participants in this debate are paying adequate attention to the impact of their proposals on Social Security beneficiaries who receive disability benefits. More than one-third of Social Security benefit payments are made to non-retirees, including nearly seven million people with disabilities. These beneficiaries include disabled wage earners, and disabled dependents and survivors of wage earners. Further, according to a statement released recently by the Consortium for Citizens with Disabilities Social Security Task Force, a person who is 20 years of age today has a 1 in 6 chance of dying and a 3 in 10 chance of becoming disabled before reaching retirement age. Therefore, it is imperative that Social Security reformers address the impact their proposals would have on this population.
For instance, with regard to proposals that would create individual personal accounts, will these proposals provide workers who have been disabled for part of their working life with adequate benefits once they reach retirement age? Currently, once disabled workers reach retirement age, their benefits convert from disability to retirement benefits. If the benefit amount is made dependent upon how much the worker has contributed to an individual account, and how much interest has been realized on the worker’s investment of those funds, the worker may reach retirement with much less than he or she would have under the current system. The proceeds from the individual’s account would necessarily be limited because while disabled and not working, the worker made no additional contributions of either principal, or investment return, to the account. In addition, a substantial number of disabled adult children of wage earners would have very small, or no accounts at retirement age, because of the limits their disabilities place on their earning capacity. A comprehensive Social Security reform plan must address these concerns.
Will the proposal provide adequate protection by requiring workers to purchase disability insurance? Some of the proponents of individual account plans have attempted to address the need for disability coverage by providing that users of the accounts would have to purchase disability insurance. However, to my knowledge, disability insurance is never indexed for inflation, and no disability insurance policy is available today which pays benefits to members of a disabled worker’s family, as Social Security does. Moreover, people who already have disabilities cannot buy disability insurance.
These are just a few of the questions being asked of the White House, members of Congress, and the Social Security Administration, as they grapple with Social Security reform. I will attempt to examine these issues more fully, and to address others as well in a series of articles regarding this issue, which will appear over the next few months. It is my hope that we can make the issues understandable and provide you with information that will enable you to express your concerns to your elected officials. Stay tuned!