Congresswoman Maloney Hosts Queens & Manhattan Town Hall Forums on Social Security
QUEENS, NY - Today, in the auditoriums of Long Island City High School in Queens and the Simon Baruch Middle School in Manhattan, Congresswoman Carolyn Maloney (NY) spoke to almost 300 New Yorkers, detailing how the President’s scheme to privatize a large portion of Social Security funds would require major cuts in guaranteed benefits to Social Security participants, while at the same time requiring the federal government to borrow trillions of dollars just to fund the risky project. Maloney said the plan could leave seniors without security and would leave the country deeply in debt.
Congresswoman Maloney said at the event, “While the President has yet to put forward a concrete proposal, what we have heard so far makes it clear that privatization of social security would be extremely unhelpful and risky for current and future retirees in New York and throughout the nation. In order to continue payments to Social Security recipients, while at the same time diverting current contributions to a privatization scheme, the country would have to borrow $1.4 trillion in the next 10 years and $3.5 trillion in the 10 years after that - meaning that all existing Social Security Trust Fund assets would be used up by 2031 - a decade sooner than is currently projected if we did nothing at all.”
Maloney continued, “The Bush administration proposes reducing the amount of debt by requiring people to pay back what the federal government would have earned on your money if they had been able to invest it in T-bills - 3% per year, plus inflation. Some call it a privatization tax, others refer to it as the clawback. That means you are going to lose roughly 70% of anything you earn in your private account right off the top. And if your investments do not do as well as they predict - if you earn less than 4.6% per year in the market, you’ll owe more than that.”
David Kallick, of the Fiscal Policy Institute, was a special guest speaker at the forum. He noted that the privatization plan would not help extend the duration of the Social Security Trust Fund and would in fact cost the federal government trillions of dollars over the next twenty years.
Maloney answered several questions and comments from participants at the Town Hall forums. The following facts are helpful when considering the future of Social Security and the impacts of the Bush administration privatization scheme:
SOCIAL SECURITY: A VITAL PROGRAM FOR SENIORS
• Social Security cuts the poverty rate among seniors from nearly 50% to 8%
• For nearly two-thirds of seniors, Social Security provides the majority of their income.
• Four in 10 widows rely on Social Security to provide 90% or more of their income.
SOCIAL SECURITY NEEDS SUPPORT, NOT AN OVERHAUL
• The current Social Security system is at no financial risk through 2052 according to the Congressional Budget Office.
• Social Security as it is now, is remarkably efficient, spending less than one percent on administrative costs.
• Up to 30% of the money invested in private accounts would be consumed in administrative costs according to the Congressional Budget Office (and backed up by a University of Chicago study that had similar results). That’s a $940 billion windfall for money managers.
THE RISKS OF PRIVATIZATION
• From 1999-2002 near-retirees saw the value of their personal 401-ks drop by an average of
25%. Many had to put off retiring because they just couldn’t afford it. A privatized Social Security system would put near-retirees in the same market conditions in which 401-ks exist.
• Some economists worry that the billions of social security money would create a bubble in the market as too many dollars chase too few assets.
• In Chile and England, two countries that have experimented with privatized security accounts, people who invested in the private accounts have less income than if they’d remained in the old guaranteed benefit type systems, and the administrative costs have been huge.
PRIVATIZATION WILL NOT ADDRESS THE SOLVENCY OF THE SOCIAL SECURITY TRUST FUND
Maloney recently questioned Alan Greenspan when he testified before the House Financial Services Committee, and he confirmed that the privatization scheme will do nothing to bolster the solvency of Social Security.
PRIVATIZATION WILL INCREASE THE DEBT BY SEVERAL TRILLION DOLLARS
• Since this Administration took office, the debt ceiling had to be increased three times.
• Our nation’s debt is now higher than it has ever been.
• The President’s own 2004 Economic Report predicts that privatization would increase our debt for the next 60 years.
EVEN SO-CALLED SAFE INDEX FUNDS HAVE GONE DOWN, FORCING SOME TO POSTPONE RETIREMENT
• The S&P 500 Index dropped nearly 700 points from August 2000 to February 2003, from a high of 1517 to a low of 841, and it still hasn’t gone back to the high levels. (Source YahooFinance - Quotes and Info)
• From 1999-2002 near-retirees saw the value of the 401 Ks drop by an average of 25%.
Maloney explained one of the central problems in the President’s plan, noting, “If you divert money from current retirees to invest money in the stock market, there isn’t enough money to pay for existing beneficiaries. The President’s plan actually makes Social Security’s financial condition WORSE than if Congress did nothing. President Bush says he will guarantee that current beneficiaries and near retirees will face no reduction in benefits - but he is not guaranteeing that benefits will continue to rise to keep pace with inflation.”