Patricia Donohue has a poem for the policy makers proposing cuts to her Social Security benefits.
“Let us shout it to the skies / This is the truth, a word to the wise / There is no reason to privatize and also the retirement age should not rise / To cut our benefits would be a crime.”
Donohue, who reads her poetry at events hosted by the grassroots organization Citizen Action of New York, is one of more than 52.5 million in the nation who rely on Social Security,the 77-year-old tax-supported program that provides income to the elderly and disabled. Social Security is an entitlement program – meaning that all Americans, regardless of income, is entitled to its benefits.
Now, Social Security is facing a budget shortfall that won’t be able to meet the full need of the system’s beneficiaries after 2032. That’s, in part, because of the large number of aging baby boomers and fewer younger workers to pay into the system. Social Security is also under political pressure from those who are concerned it comprises too large a portion of the government’s spending. The issue of Social Security’s future is among the country’s most politically volatile.
Fearing the system won’t hold up for future generations, some are proposing major changes to the the programs funding, eligbility rules and the government’s role in providing Social Security. But some experts say Social Security’s problems are not dire and don’t need wide-scale changes.
“Read the newspapers, listen to the talking heads, you would think that there’s a financial crisis in Social Security,” said Eric Kingson, a social work professor at Syracuse University who studies Social Security. “But in fact, there isn’t.”
Social Security works like this: Social Security is funded through payroll taxes that get funneled into a government trust fund. The first $110,000 of a person’s income are taxed. In 2012, workers pay 4.2 percent of their paycheck and employers contribute another 6.2 percent. In January, workers’ share of the payroll tax is expected to return to its usual 6.2 percent unless the Obama administration and Congress agree on to keep it lower as part of federal budget negotiations to avoid automatic tax increases nicknamed the “fiscal cliff.”
Social Security now has a surplus and is able to pay its beneficiaries in full. But the surplus is forecast to run out by 2033, according to the federal government. After that, the system will be able to cover 75 percent of the promised benefits from payroll taxes it receives.
Some key Social Security statistics:
- In 2012, Social Security will pay approximately $620 billion to 45 million beneficiaries nationally.
- Social Security is not included in the federal budget, but the shortfalls are being added to the nation’s budget deficit. The total Social Security shortfall is $166 million, with $112 million of it coming from money Congress borrowed to fund a payroll tax cut that’s set to expire in January.
- In October 2012, the median payment to a beneficiary was $1,131.
- In 2011, for 65 percent of beneficiaries, Social Security provided at least half their income.
Social Security is a vital safeguard against lost wages, providing benefits to the disabled, acting as a life insurance policy to children with parents who died and doling out payments to retirees said SU social work professor Kingson. Amid the financial tumult of the last five years, of declining savings and lost homes, Social Security remained constant, he said. “The one system that no one had to worry about was Social Security,” he said.
Kingson likens Social Security to the nation’s highway system — sturdy but in need of repair on occasion. Some proposed solutions to Social Security’s problems:
- Raising the eligibility age
In 1983, the government addressed another looming shortfall in part by raising the retirement age from 66 to 67, said John Palmer, an SU public policy professor and an expert on Social Security who formerly was one of two government-appointed trustees overseeing the program’s finances. Another rise in the retirement age would mean fewer new beneficiaries coming in during a given year and help ease Social Security’s shortfall, Palmer said.
- Raising the payroll tax
The rise in eligibility age passed during the 1980’s was accompanied by an increase in payroll taxes. To help workers during the recent recession, the government temporarily reduced the Social Security payroll tax from 6.2 percent to 4.3 percent. Part of the debate on the nation’s budget deficit is about whether to allow the Social Security tax to return to 6.2 percent.
- Removing the income tax cap
Social Security beneficiaries are taxed up to $110,000 of their annual income. Removing the cap means individuals who make over that amount would pay taxes on anything over $110,000.
- Privatizing Social Security
Privatizing Social Security would move Social Security money into private, individual accounts instead of a government trust fund shared by everyone. Doing so would allow beneficiaries to oversee their own money. But it would also remove the entitlement to a tax-supported income safety-net for retirees.
For her part, Donohue, the poet and Citizen Action of New York member, fears that any change in the system could be devastating. Before retiring, Donohue bounced between a number of jobs in furniture manufacturing, theatre and, most recently, as a receptionist. After her Binghamton office shut down, Donohue struggled to find a job and retired with a minuscule $3,000 pension. She survives on Social Security payments, which deplete by month’s end.
Thirty-percent of her monthly income, or $160, is put toward rent in low-income housing. The remainder of the check is quickly divvied among Donohue’s remaining obligations — a telephone bill, car maintenance. She receives food stamps, but sets additional money aside for groceries.
Without Social Security, she said, “I don’t know what I would do.” Added Donohue: “I don’t know where I would turn.”
(Debbie Truong is a junior majoring in newspaper and online journalism.)
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