One On One With Kenneth Apfel
By Clyde Weiss
This year marks the 67th anniversary of the signing of the Social Security Act. Since that historic day in 1935, more than 135 million Americans — retirees, survivors and the disabled — have received Social Security benefits. It's been a tremendously successful program. But as members of the Baby Boom generation move into their retirement years, the system will come under severe pressure, leading some to suggest privatizing it — that is, letting people divert some of their Social Security taxes to invest in the stock market.
Former Social Security Commissioner Kenneth S. Apfel believes that would be a big mistake. When he took office in 1997, Apfel became the first commissioner since the agency gained independent status two years earlier. Now a professor of public affairs at the University of Texas/Austin, Apfel is well qualified to consider the ramifications of privatization and to suggest better ways to secure Social Security for generations to come.
Is Social Security in good shape for the foreseeable future?
The aging of America will create real strains on our retirement system, but Social Security will be a strong foundation for the future. Modest changes, phased in over a number of generations, will keep the system strong.
Yet President Bush has said: "Today, young workers who pay into Social Security might as well be saving their money in their mattresses." If the system is in good shape, why is the President disparaging it?
The rhetoric is to build a crisis mentality in order to justify privatizing the system. But that would be a fundamentally poor decision. Social Security is an inter-generational system. Younger Americans are now building for their own economic security, but they are also helping to pay for their parents' — and their grandparents' — retirement. So Bush's statement that [their money] is better in a mattress is just wrong.
Bush's Social Security commission has proposed three options for privatizing the system. Each would allow — but not require — workers to invest a portion of their payroll taxes in the stock market. What's wrong with that?
If individuals opt out of Social Security, then those Trust Fund revenues will decline, putting the Social Security system at greater risk. The commission's privatization proposals all call for steep reductions in the guaranteed benefits — placing many families at serious risk in the future. Replacing the current system with individual savings accounts also puts the disabled at risk.
The disabled?
About a third of all benefits go to the disabled — and survivors. When my wife was a young girl, her dad died, leaving her, her mother and her three sisters. A Social Security check helped that family enormously. Millions of families have come to rely on Social Security after the death or disability of a loved one. And I have yet to see a privatized proposal that would not create a significant reduction in benefits for the disabled and survivors.
So, what are younger workers to do if they worry whether Social Security will carry them comfortably through retirement?
Younger Americans need to save for their own retirement, and I strongly support the creation of a universal savings system — on top of Social Security — so workers can put assets aside for that day. To replace Social Security instead puts both generations at risk. For older Americans, the Trust Fund would deplete much more rapidly. For younger workers, they would lose part of the guaranteed benefit that's now there for their future.
Some people believe they can do better investing their retirement dollars on their own than by counting on guaranteed benefits. Shouldn't they be allowed to try?
Look at the market uncertainties we've seen over the last two years. It's clear that people will be placing their economic future at risk by investing their Social Security taxes in stocks. Many people are considering delaying retirement right now because of the stock-market drop. If Social Security benefits were based on the investor's rate of return, that would put them at greater risk.
Starting in 2041, the Baby Boom generation will begin to draw more in benefits than is raised through payroll taxes to pay for them. When that happens, what can we do to ensure that Social Security stays afloat?
We are going to need more revenue. That's going to mean somewhat higher payroll taxes — modest increases. I'd also like to see the wage cap on Social Security raised so that upper-income people pay more into the system.
President Clinton had proposed securing Social Security's future with what was then projected as a 15-year budget surplus. Today, of course, the surplus is gone and not likely to return soon. But should anything be salvaged from Clinton's plan?
It was an excellent proposal. Although we no longer have that surplus, we should roll back [Bush-sponsored] tax cuts for upper-income taxpayers and use that money to shore up Social Security.
What is Social Security supposed to accomplish for the individual and for our society — and is it doing a good job of achieving those objectives?
From the very beginning, Social Security was designed to provide a foundation of support for the elderly. Its main mission was economic security: for retirees, survivors and, starting in the 1950s, the disabled. I believe it has been the single most successful program for Americans in the 20th century — profoundly successful in meeting its goals. Would privatizing the system help it meet those goals? Absolutely not.
