2005 NCIL Statement of Values On Social Security and Private Accounts

Social Insurance and My House on Fire

NCIL values both social insurance as well as savings and investments as successful tools to plan and contribute to an inclusionary life. NCIL values and supports institutions such as Social Security and the tax code as the vehicles for providing social insurance and individual and family saving and investment incentives respectively.

NCIL will vigilantly scrutinize proposals that confuse, sacrifice or do harm to one means of providing security for the perceived benefit of other financial tools or products. NCIL believes strongly that social insurance, in contrast to private saving and investment, is a distinct and separate mechanism for the common goals of independent and productive living in one’s community.

America’s successful role in establishing social insurance in a free society during the 1930’s is unparalleled in our history and has been replicated around the world. The American model, Social Security with its links to Medicare, contains a family package of insurance that mitigates or reduces poverty and maintains health care for family members of all ages.

"The Social Security programs are insurance programs, not investment programs, designed to reduce risk from certain life events."
- Marty Ford, Consortium for Citizens With Disabilities

Social Security has solvable financial challenges. According to most American social insurance experts, including Social Security actuaries, Social Security is not broken.

Not even including Social Security retirement benefits paid, and including the disability benefits paid in Social Security’s Supplemental Security Income Program (SSI), NCIL estimates from the private account literature to date that the men, women and children of at least 10,000,000 American families would be adversely affected by reductions in benefits caused by introducing private accounts into social insurance.

Millions of Americans pay home-owners’ fire insurance premiums. Many more millions pay into 401(k)s and other IRS approved Individual Retirement Accounts (IRAs and Roth IRAs). When someone’s home burns down, Social Security and the Roth IRA have no interest in the event. The home-owner’s fire insurance policy has interest in the event. If the Social Security beneficiary informs the fire insurance company they have to pay less for their fire insurance to meet new savings goals, the fire insurance company may well lower the premium to keep the customer, and lower the fire insurance coverage to stay in business.

Retirement investments and savings will not replace your home burned down. The appropriate amount of fire insurance is the method most Americans use to meet this unplanned event. If your home does not burn down, you receive nothing but peace of mind and security. If it burns down, you get a new home from the insurance policy. This is not rocket science.

The disability community urges Congress to request a beneficiary impact statement from SSA on every major proposal for Social Security private accounts, or every component of a proposal, under serious consideration before Congress. In a program with such an impact on millions of people of all ages, it is simply not enough to address only the budgetary impact of change. The “people impact” must be studied and well understood.

For people with disabilities, our very lives depend on such analysis.

Individual and Family Saving: A Government-Supported Policy Objective

NCIL values and educates members on Individual Development Accounts, IRS-approved retirement products, and IRS tax code provisions such as IRAs and Roth IRAs. These policies support and reward individual and family initiative to save for the future. The federal and state tax codes have been the traditional vehicles for encouraging saving and investments, not America’s social insurance system called Social Security.

NCIL will hold policymakers accountable. NCIL will ask policymakers to explain views, positions, and proposals that mix up, confuse or do harm to social insurance for the perceived or unfounded benefit of other financial tools for independent living.

In January, 2005, Vice President Cheney said, without context or explanation:

"Young workers who elect personal accounts can expect to receive a far higher rate of return on their money than the current system could ever afford to pay them." (Associated Press, 1/14/04)

NCIL offers this context from Congressional testimony:

“For the average wage earner with a family, the Social Security Administration (SSA) has estimated that OASDI insurance benefits are equivalent to a $400,000 life insurance policy or a $350,000 disability insurance policy.”

NCIL and its disability community partners such as the World Institute on Disability promote saving with the Access to Assets Program and Equity Webzine at www.wid.org, as well as using social insurance when applicable. See also Disability Benefits 101 at www.DB101.org .

NCIL members state:

“Social insurance and savings … Never one at the expense of the other.”

“OLD-AGE, SURVIVORS, AND DISABILITY INSURANCE, The OASDI program—which for most Americans means Social Security—is the largest income-maintenance program in the United States. Based on social insurance principles, the program provides monthly benefits designed to replace, in part, the loss of income due to retirement, disability, or death. Coverage is nearly universal: About 96% of the jobs in the United States are covered. Workers finance the program through a payroll tax that is levied under the Federal Insurance and Self-Employment Contribution Acts (FICA and SECA). The revenues are deposited in two trust funds (the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund), which pay benefits and the operating expenses of the program. Benefit payments totaled over $343.2 billion in fiscal year 1996. In December 1996, 43.7 million persons were receiving monthly benefits totaling $29.4 billion. These beneficiaries included 30.3 million retired workers and their spouses and children, 7.4 million survivors of deceased workers, and 6.1 million disabled workers and their spouses and children. Social Security is an important source of retirement income for almost everyone; 3 in 5 beneficiaries aged 65 or older rely on it for at least half of their income. Social Security is also an important source of continuing income for young survivors of deceased workers: 98% of young children and their mothers or fathers are eligible for benefits should a working parent die. Four in five workers aged 21-64 and their families have protection in the event of a long-term disability.” Social Security Programs in the United States, Social Security Administration, Office of Research, Evaluation and Statistics, SSA Publication No. 13-11758 July 1997.

“The actuarial view is that the system is probably in need of a small adjustment of the sort that Congress has approved in the past. But there is a strong argument, which the agency acknowledges as a possibility, that the system is solvent as is.”

A Question of Numbers, THE CONSERVATIVE NEW DEAL, © The New York Times, January 16, 2005, by Roger Lowenstein.

“Over a third of the benefits paid … go to 17 million non-retirees. These include disabled workers and their dependents, and spouses and children of workers who are retired or deceased.

Of particular concern are:

These non-retirees might suffer the most under the principal privatization scheme proposed by the President’s Social Security Commission. The plan would offset the traditional benefits of retirees based on the assets in their private accounts and then apply a reduction that is unrelated to the private accounts to all traditional benefits - including those of non-retirees, who will have no private accounts to access or will have accounts with very little assets.”

Social Security: A Human Needs Issue (1/14/05), the CHN Human Needs Report: January 14, 2005 edition, Coalition on Human Needs, Washington, DC.

Hearing on the Final Report of the President’s Commission to Strengthen Social Security, Senate Finance Committee, October 3, 2002, Testimony of Marty Ford, Co-Chair, Social Security Task Force, Consortium for Citizens with Disabilities (CCD) http://www.c-c-d.org/.

Ibid.

Presentation to the Coalition on Human Needs, January 7, 2005, by Joan Entmacher, Vice-President and Director, Family Economic Security, National Women’s Law Center.