What if Social Security didn't exist in
Central Wisconsin? What would
the impact be on our friends and neighbors? Let's take an imaginary 35 year
old worker, Paul Public, making $20,000 per year. He, his wife, and his two
children live in Central Wisconsin. If Social Security did not exist, Paul
would have an additional $29.42 in gross pay per week. Now, he might invest
that money for his future, as some Social Security critics predict. These
critics advocate scrapping the system because people just have the common
sense to voluntarily provide for their own futures. Or, Paul might spend that
money locally, putting his "excess" dollars into goods and services in Central
Wisconsin. The odds are that Paul would, in fact, spend the money, as most of
you can imagine. He and his family might gain a new dinette set, bought on
time, treat themselves to a weekly dinner out at the local Pizza Hut, or
perhaps purchase sports equipment for the children. What Paul and his family
stand to lose is an insurance policy, Social Security, that would provide
$1056 per month if Paul became disabled, an average monthly retirement income
for Paul and his wife of $1067, $1252 per month for his wife and children if
he should die, and a $584 monthly widow's pension for his wife at age 60.
What would
Central Wisconsin gain if Social Security didn't exist? Employers would
save hundreds of thousands of dollars in weekly FICA taxes. These dollars
could be invested in businesses, buildings, new technology, more employees, or
higher dividends. But what would
Central Wisconsin lose in the absence of Social Security? Chart 1 shows
the number of current Social Security beneficiaries in
Central Wisconsin. A total of
69,100 people in Marathon, Langlade, Lincoln, Taylor, Clark, Wood, Portage,
Adams, and Juneau Counties receive $37,063,000 per month in Social Security
benefits. This money, a substantial portion of the beneficiaries' monthly
income, is spent right here in Central Wisconsin on food, clothing, shelter,
and other consumer goods.
Nationally it is estimated that the number of retirement and
survivor beneficiaries will increase by 16 percent by the year 2005. In this
same time period the number of disability beneficiaries is anticipated to
increase by 50 percent. If these figures hold true, locally we can expect
73,312 retirement and survivor beneficiaries and 8850 disability beneficiaries
for a total of 82,162 beneficiaries by 2005. Assuming no cost‑of‑living
increases, these 82,162 beneficiaries would have a monthly income of
$43,295,316. Assuming a conservative 3 percent annual increase, these 82,162
people would be receiving $62,350,446 per month by the year 2005. Again, this
money is spent right here in
Central Wisconsin. Our beneficiaries are your customers. SSA benefits
are, at least indirectly, a part of your business income.
TABLE 1
Beneficiary Status
Current Current
Est. 2005 Est. 2005
Counties Benefic.
Benefic. Benefic.
Benefic.
______________________________________________________________
Marathon
Clark
Langlade
aRSI $35,500 $19,208,000
$41,180
$22,360,740
Taylor
aDI 3,200
1,521,000
4,800
1,891,200
Lincoln
Wood
Portage
bRSI
27,700
15,535,000 32,132
17,447,676
Adams
bDI
2,700
1,299,000
4,050
1,595,316
Juneau
Totals
$69,100
$37,063,000 $82,162
$43,295,316
a Data includes
first set of listed counties
b
Data includes second set
of listed counties
With a 3% annual
cost-of-living increase $62,350,446
RSI = Retirement and
Survivors Insurance Benefits
DI = Disability Insurance
Benefits
Without Social Security checks, the 69,100 current
benefit recipients are not just going to disappear. A large number of these
beneficiaries will not have the resources to support themselves through
periods of disability, unemployment, or the loss of a family wage earner. For
60 percent of beneficiaries SSA provides more than 50 percent of monthly
income, for 25 percent SSA provides 90 percent of monthly income, and for 14
percent SSA provides the only monthly income. For these individuals and
families alternative income assistance would have to be provided ‑ unless we
are willing to stop benefits to the aged, the disabled, the widows, and the
orphans of this country. We either put these people on the streets, place the
burden on their (perhaps non‑existent) families, or we pay for their support.
That support could come in the form of a totally federally subsidized welfare
program, or as state or county programs. The cost of welfare subsidies,
whether on the federal, state, or county level, would by far exceed the FICA
tax advantages business and industry might gain if the Social Security program
did not exist. So rather than pinning our financial hopes on making Social
Security a voluntary program, or on eliminating it altogether, let's see how
we can continue the program.
Funding ‑ Can We Cover It? The answer is, to a point yes. The good news of
funding is that you are covered for retirement, survivor, and disability
benefits, as are your children, and in some cases, your grandchildren. The bad
news is that the following generation isn't. According to middle‑range
estimates of economic growth, inflation, interest rates, fertility, mortality,
and immigration, the
Social Security system will experience positive annual balances (income
exceeding benefit payments) until the year 2017. Despite shortfalls
thereafter, interest on the trust funds would continue to cause fund growth
until 2027. Compare this to the projections of the authors of the Social
Security Act who projected a deficit by the year 1965.
TABLE 2
Estimated Financial Status of Old Age Insurance Plan as Approved
by
Committee on Economic Security (projected in 1936)
(In
millions of dollars)
Net contri‑ Interest
Federal Benefit
Year butions on reserve
subsidy payments
______________________________________________________________
1937
306.0 ‑‑‑‑‑‑‑‑ ‑‑‑‑‑‑‑‑
0.7
1938
308.9 9.2
‑‑‑‑‑‑‑‑ 2.0
1939
312.0 18.7
‑‑‑‑‑‑‑‑ 3.0
1940
314.9 28.4
‑‑‑‑‑‑‑ 4.3
1945
672.3 106.0
‑‑‑‑‑‑‑‑ 190.1
1950
1,073.3 211.9
‑‑‑‑‑‑‑‑ 577.1
1955
1,520.0 329.6
‑‑‑‑‑‑‑‑ 1,149.6
1960
1,979.2 431.9
‑‑‑‑‑‑‑‑ 1,924.3
1965
2,095.3 470.0
‑‑‑‑‑‑‑ 2,532.3
1970
2,137.5 468.0
507.3 3,112.3
1975
2,216.7 468.0
926.5 3,611.2
1980
2,216.7 468.0 1,387.9
4,072.5
In 2027, again using moderate estimates of economic growth,
the funds would begin to decline due to increasing .payments and the need to
use interest from and eventually to redeem the special issue government
securities in which SSA surpluses are invested. By 2041 the trust fund
balances would be 0. Thereafter the system would have to rely on federal
subsidies, planned for back in 1936, to make up the difference between annual
benefits and annual trust fund income. If the system is to remain
self‑supporting, however, some changes obviously will be necessary.
What Changes? When the marriage vow, til death do us
part, was originally created, death meant age 35! In 1890 only 3 percent of
the population was over age 65; by 1930 the percentage had risen to 5.4
percent. Today it stands at 11.3 percent and is projected to reach 12.6
percent by the year 2005 , and 20.4 percent by 2041. As we become a healthier,
older population, further changes in the benefit structure, or in entitlements
must be expected. The 1983 Amendments to the Social Security Act proved for
Trust Fund income increases by mandating FICA coverage for newly hired federal
employees and employees in nonprofit organizations, increases in the normal
retirement age, a one‑time six month delay in cost‑of‑living adjustments,
modifications to future cost‑of‑living adjustments, and taxation of some
Social Security benefits.
Over the past few years, we have witnessed the demise
of benefits for college students, death benefits to funeral homes, a reduction
in young wife's benefits by two years, and the start of an offset against SSA
checks if the beneficiary is entitled to worker's compensation (not in all
states) or other government pensions. We may well see more of these types of
benefit reduction/revenue enhancement activities. Other possibilities may
include increases in FICA withholding rates an/or different formulas for
taxation of SSA. benefits. Efforts to keep workers on the job, including
providing improved preventative healthcare would improve the financial future
of disability insurance trust funds by increasing revenues and decreasing
benefits payable. A sustained and healthier economy, as well as upward trends
in immigration and birth rates would also result in more favorable trust fund
balances.
What Can We Do? The Social Security Administration
must do its part to ensure that correct payments are made. Appendix 1 shows
the cost to the trust funds or error rates that look relatively low. As you
can see, even a 0.1 percent error rate can have a major negative impact, given
the enormous volume of items that Social Security deals with annually. We need
to do our best to hold down administrative expenses and to detect and deter
fraud and abuse of the benefits we do pay. We need to inform the community
about the need for, as well as the viability of, our social insurance system.
We need to continue the 55 year tradition of serving the American public with
compassion, courtesy, efficiency, and accuracy.
Business and industry need to do their part to increase and
stabilize the worker base and invest time and resources to help provide a
motivated youth with skills that make them fully employable. Further, it is
necessary to ensure the skill levels and health of current workers, to keep
them "in the system" rather than on disability benefits resulting from severe
physical or less severe vocational disabilities. We all need to look at
employing and training our new immigrants and their children, and aid in
assimilating immigrant people educationally and vocationally. And, knowing the
extent of the coverage and the impact that Social Security has on all our
communities, we need to make informed decisions about the support we give to
those who would dismantle this important support system which provides a
"safety net" for us all.
Appendix
Effects
of Errors at SSA
* Over one
million Social Security cards are issued each year to people age 16 and over,
many of whom have employment, taxpayer, or social service needs. Delays in
issuing cards cause people to recontact SSA. Each one percent of recontacting
means 197,000 inquiries for a cost of $500,000.
*
Incorrectly assigned numbers, (one number assigned to two people or two
numbers assigned to one person): 0.1 percent error = 19,700 SSNs incorrectly
assigned. Estimated cost: $1,000,000.
* 0.1
Percent Benefit Payments Error Cost: for each 0.1 percent, $210 million in
error is introduced, about two‑thirds of which involves underpayments.
Overpayments would cost $35 million in unrecovered benefits, and $3.8 million
to find and collect the detected overpayments.
