Social Security Reform

You may want to take a look at this piece from my partner Laury Adams on Social Security. Laury has studied Social Security all her life, both academically and experientially, so she’s the one I call when I have a question about it. I trust her judgment about how we can strengthen Social Security, so I’m proud to post her thoughts about it here. Laury is unabashedly partisan, and I guess that’s part of her charm for me. But Laury, what do you really think?

Social Security Needs INFORMED REFORM!

How will millions of Americans live a quarter of their lives without paychecks? The answer to that question will be determined by any changes that are adopted in the Social Security system. It is a matter that should be foremost in the minds of every American for it affects more people than heart disease, cancer and Aids combined! There is no issue that touches more people in our country than Social Security!

The debates about Social Security seem to be growing exponentially. But anyone who has an understanding of the system knows it is very complex with no easy answers. So how might we accept the challenge of restructuring a governmental program that must successfully fulfill obligations to beneficiaries without placing undue responsibilities on contributors.

The Process and Participants

To use appropriate methods for reaching effective outcomes, we should look to the fields of organizational development and conflict resolution. An initial step is to agree on 1) a process and 2) the people to be involved in creating solutions. Is this going to be a “top down” or “bottom up” process? It is a known fact that the most effective solutions are created by those who ultimately will be affected by the outcomes. In the matter of Social Security, this would mean gathering people from various demographic groups and encouraging dialogue that would evolve into workable solutions.

What is the purpose; the mission?

An important first step in any major undertaking is to agree on a purpose. Mission statements are commonly developed by organizations and businesses before proceeding with tasks.

In 1935, Social Security was adopted as an insurance program to address the widespread poverty in this country following the Depression. It was meant to provide a “floor of protection” in the finances of elderly individuals who were no longer employed and could not support themselves.

In 1939 and 1956, additional beneficiaries were added to the system. These include widows, children, and dependent spouses, and disabled workers. Today, the media and many administrative and Congressional leaders treat Social Security as a retirement program. How many of the above non-retiree beneficiaries have we seen featured in newspapers and on TV? Very few, if any! Instead, we see young employees talking about the anticipated future return on their Social Security contributions and retired workers opposing the reduction of their current benefits!
Discussions of the return on contributions encourage the public mindset of Social Security being a retirement program. Therefore, it’s easy for us to forget that our contributions must be used to pay benefits to people who may never have contributed to the system. If workers divert some of their Social Security contributions to private accounts and payments are made to the current non-contributing beneficiaries, how will solvency in the system be achieved?

Any Social Security reform must be preceded by clarification and agreement on the purpose of the system! Changing Social Security to a retirement program requires major changes in policies! There is no viable retirement plan that can afford to pay benefits to non-contributors without reducing benefits to employees who paid into the system. It is well known that at retirement, employees must make an election in pension plans for the payment of benefits. If an employee wants to guarantee continued payments to surviving beneficiaries, there are options for reducing benefits during the life of the employee. Under Social Security, benefits to survivors are increased instead of decreased!

If we continue covering all the beneficiaries eligible under the current policies, are we operating a retirement system or an insurance program? There is no doubt that answering this question by revisiting the purpose of Social Security will require examination of our core values and incite some strong emotions. This will be evident if we systematically start reviewing the problems of Social Security that are not currently being discussed. Do we have the courage to do this?

Identifying of Problems of Social Security.

Again, we might look to the field of conflict resolution for guidance in using an effective process. Professional resolutionists are cautioned against jumping to solutions before thoroughly identifying problems.

The pressure for a quick fix to the obvious fiscal problems in Social Security has caused various groups to advocate for what they believe to be the best solutions. The administration is using a marketing blitz to entice us into accepting changes without having addressed some of the underlying problems in the system. The current situation might be likened to people arguing over how to repair a warped hardwood floor when the causes are leaking pipes in the wall and a hole in the roof.

Most people acknowledge that maintaining solvency in Social Security is a future problem. The 2004 Social Security Trustees Report estimates that by 2018 the contributions will not cover payments to beneficiaries. In order to fully fund payments to beneficiaries at that point, we must depend on repayment of the $1.5 trillion in government IOUs that have accrued in what is suppose to be the untouched Social Security Trust fund. Those IOUs are estimated to be depleted between 2042 and 2050. If there are no changes, there will still be contributions in future years, but payments to beneficiaries would have to be reduced by approximately 25%.

Does the future insolvency of Social Security constitute a problem? Definitely YES! Is this a current crisis? Depending on how you define crisis, probably NO! Is the system bankrupt? In thirty seven years, it will not be able to fully fund its obligations. This does not mean there will be no money to pay beneficiaries!

While lawmakers are to be commended for a visionary approach, we must realize there is time to fully explore the problems and create workable solutions. It is interesting to note that great urgency has been placed on Social Security problems that will occur 18 to 37 years in the future, while a current annual budget deficit of over $400 billion is receiving much less attention.

If Social Security reform is be successful, there are at least two components of the Social Security system that must be addressed—fiscal and social! Current proposals have focused solely on the former. In order to fulfill the current needs of our citizenry, final solutions must evolve from examining social changes that have occurred in our society in the last seventy years as well as fiscal matters.

Think of the changes in families, lifestyles, relationships, and work patterns that have taken place since 1935. These have not been considered in the current proposals.

Longevity has increased. There are many more people living in the later years of life. Of those who reach 65 years of age, women are expected to live an additional 20 years and men, an additional 17 years.

Many differences can be seen in work patterns of the labor force. There is an increasing number of two-income earner families. This can occur out of need to support the family or for the desire to advance careers. Without a provision in Social Security for sharing earnings records and future benefits accrued during the years of marriage, the spouse earning the lower income is disadvantaged.

Relationships have also undergone tremendous change. Divorce is far more prevalent today than it was in the past. Nearly half the marriages end in divorce. It is common for one marriage partner to have been a dependent spouse or lower income earner while assuming caregiver responsibilities for children or elderly members of the family.

In 1984, the Employees Retirement Insurance Act (ERISA) granted equal spousal rights to retirement plans. There is no such provision in Social Security.

Under the current Social Security system, a caregiver who has no earned income and is divorced with less than 10 years of marriage has zero ($0) credits toward future social security. In other words, one’s care giving efforts are worth nothing unless that person can stay married to an employed spouse for at least 10 years!

There are other anomalies in Social Security that escape the awareness of most people. It may be shocking to know that under current policies, a retired employee can be worth much more dead than alive to a current dependent spouse of at least one year and former dependent spouse from a marriage that lasted at least ten years. If an employee retires having a current maximum benefit of $1939 per month, the dependent spouse and ex-spouse would each receive $969 per month. If the retired employee dies, each of the spouses could increase their monthly benefit to $1939, that of the deceased employee. If the dependent spouse and ex-spouse both live for twenty years, each will collect an additional $232,560 for a combined total of $ 930,240 from Social Security. This means that 1) during a retired employee’s life the system may pay benefits to several beneficiaries based on a one person’s contributions, and 2) when the retired worker dies, benefits to more than one person can increase instead of decrease!

Anyone entering marriage today should know that marriage partners are not treated equally under our current federal laws. There is no consistency between ERISA and Social Security. Under the latter system, a spouse who is the lesser income earner can be greatly disadvantaged if the marriage does not last! If we espouse family values, any changes in Social Security must address how the contributions of marriage partners will be equally recognized during the years of marriage.

It is obvious that the Social Security is a very complex system with no quick “fixes.” There is time to search for workable solutions so this doesn’t turn into a sinking ship. So what must we do now?


• to delay advocating for solutions to Social Security until both fiscal and social problems can be identified and addressed

• to reach solutions through dialogue with people of various demographic groups who will be affected by the outcomes, and

• to find solutions that provide equal spousal rights to divide earnings records and share retirement benefits accrued during the marriage.

PLEASE TAKE ACTION—our future depends on it!

Bush is Blind to Real Culprits in Social Security

Many debates about Social Security sent me on a hunt for my Master’s thesis completed at Purdue University twenty-six years ago, “Women’s Knowledge of Social Security and How it Affects Them.” At that time, only three facts were known by over half the subjects: 1) that employers as well as employees make contributions to the system, 2) that reduced benefits could be taken at the age of 62 years, and 3) that there is no guaranteed return on what has been paid in. I doubt that people would be any more knowledgeable if the survey were conducted today. Our leaders are proposing changes in a system that affects how we will live a quarter of our lives without paychecks when we have limited information and little opportunity for input.

The 2004 Social Security Trustees Report estimates tax revenues will fall below the program’s income in the year 2018, and will be completely depleted by 2042. That is reason for concern. The current administration has embarked on a crusade to change Social Security in an effort to ¬portray fiscal responsibility. But have the problems been accurately identified? Are the problems due only to the fact that there are now 154 million contributors passing through dollars for benefits to 47 million beneficiaries?

Having worked as a divorce mediator and financial resource consultant for over twenty years, I have had a unique opportunity to observe ways in which people are affected by the Social Security system. I fear some important aspects of the system have been overlooked. In order to reach workable solutions to any problem, we must seek answers to relevant questions. The following are only a few that may reveal inherent culprits that are seldom discussed.

1. How many beneficiaries are receiving payments based on the contribution of only one employee? A retired worker who was married for more than ten years to two never-employed spouses can have three people receiving benefits from that sole individual’s contribution to the system. What corporation would have a viable pension program by extending additional benefits to former spouses without reducing the employed spouse’s benefit? To what extent should Social Security be an entitlement program for those who are married but have never been employed? How might such a benefit be responsibly funded?

2. In the event of divorce, should there be federal laws that treat one source of retirement income during the marriage as a divisible asset of the marriage and other laws that do not recognize that monetary benefit as being equally divisible? ERISA was amended in 1984 to create spousal rights to pension benefits through qualified domestic relations orders. There is no such provision in Social Security! Therefore, if a 66 year old retired employee receives a Social Security benefit of $1500 per month and decides to divorce, a lifetime never-employed spouse would receive $750 per month. If both live twenty years, one spouse would be paid $180,000 more than the other! If this benefit were a company pension plan, a provision in ERISA could be used to equally divide that account at the time of divorce.

3. Should we perpetuate a system whereby non-employed spouses who have never contributed to the Social Security system can receive a benefit equal to earners who contributed to the system by working every year of their lives? In many cases the spousal benefit for a person who has never been employed could be greater than the benefit of an individual who has worked for a lifetime at a modest wage.

There have been many changes in families, relationships, and work patterns since Social Security was created in 1935. Have these differences been understood, examined, and factored into current proposals? There is no doubt reform is needed, but this is a very complex system with personal values at its very core. It deserves more than quick fiscal fixes.

Social Security was never meant to be a retirement program. The original purpose was to provide “a floor of protection” for retired workers. Has the purpose changed? Might it be appropriate for more of us to be part of the solution or must we be subjected to a marketing campaign to convince us to accept the consequences of a plan deemed to be good by those who will never need Social Security as a primary source of income during retirement?

Social Security Requires More Than Fiscal Fixes

“You’re worth more to me dead than alive!” I said to my husband during our divorce. I couldn’t believe those words were coming from my mouth, but they were based on facts—facts about our Social Security system!

I had grown up in a family that was adequately supported by my father. During marriage, I played a supportive role for my husband’s career as a university professor. While as a traditional housewife, I joined the League of Women voters in Lafayette, Indiana and began researching the ways our federal and state laws affect women. Indiana was a separate property state. I was shocked to learn the decisions we had made in our marriage might lead me to being one of the bag ladies we were studying!

Finding employment seemed to be the thing to do. Although I had an undergraduate degree from prestigious Northwestern University, the only job I could get in Lafayette at that time was at a local restaurant paying the same wage earned by my teenage son. Instead, I chose to work on a Master’s degree in financial counseling at Purdue University. My major professor, Dr. Flora Williams, was most supportive of my thesis entitled, “Women’s Knowledge of Social Security and How It Affects Them.”

Although I worked part time in a financial counseling and mediation I started, thirty-three years of marriage was spent giving priority to my husband’s career. When a divorce was eminent, I knew exactly what I was saying in the “better dead than alive” statement. I had figured that based on Social Security laws, my husband would collect in excess of $140,000 more than I would during retirement years and that would not be divisible by any law at the time of divorce!”

In working as a divorce mediator and financial counselor for twenty-five years, I have had the opportunity to observe ways in which individuals are affected by our laws. I do not pretend to be an expert on Social Security. What I do know is that it is a very complex system for which there are no quick fixes.

An astonishing 94 percent of those surveyed in the 2004 Senior Sentiment Survey conducted for Financial Freedom expected Social Security to be their primary source of income. How much do people know about a system that affects how they will live a quarter of their lives without a paycheck?

The results of my thesis twenty-six years ago showed that only one-half the subjects were knowledgeable about only the simplest facts regarding Social Security:
1) that reduced benefits may be taken at the age of 62 years
2) that an employer makes a contribution equal to that of the employee, and
3) that there is no guaranteed return on money paid into the system.

Would the results of a survey today produce any different conclusions? It is doubtful. Most of us know that we pay into Social Security while we or our spouses are working, and at retirement age, we will receive some benefit. Statements that are now issued by Social Security give workers a dollar amount of a benefit that can used for retirement planning. The statements give employees a chance to correct errors in their records and become aware of an estimated amount for the benefit they will receive in the future.

Now, the current administration has embarked on a crusade to change Social Security. In my profession of mediation, we are taught fully explore a problem before jumping to solutions. In listening to the many debates on Social Security, I am certain the problems have not been fully examined before promoting the solution of privatization. We are already experiencing the consequences of decisions that have been by this administration without having accurate information and fully exploring alternatives. We cannot afford to continue on this path of decision-making for a system that will affect the way so many of us will live in the future.

In a sincere effort to exercise fiscal responsibility, our leaders have looked at projections for the monetary aspects of our Social Security system and clearly see that we are headed toward the brink of disaster at some time in the future. This time frame differs according to calculations and assumptions. However, the 2004 Social Security Trustees Report projects 2018 as the point at which tax revenues will fall below the program’s income and 2042 as the year it will be totally depleted.

One obvious reason for this disaster is that the system was constructed as a “pay-as-you-go” program with current contributors paying the benefits of the recipients. At the end of 2003, there were 47 million beneficiaries, while it is estimated 154 million people paid payroll taxes. This means there are 3 contributors for every beneficiary whereas in 1935, when the system was created, there were 15?? (check this) contributors for every beneficiary. Through the years, payroll taxes have been increased, but additional beneficiaries have been added to the system.

There is no doubt that some “fixes” are needed for the system. A good business model uses a mission statement to guide decisions that are made. Might this be a way to start with Social Security changes? In 1935, the mission was to provide a” floor of protection” for employed workers. It was never meant to be a savings plan for retirement. Is the original purpose still viable? If the purpose changes, who should participate in this change? This is a system that affects millions of people–every employer, employee, and retired employee. Is it important to get these participants to buy into the purpose or to impose changes on them by promoting ideas of a few proclaimed knowledgeable individuals through marketing and a media blitz.

There are at least two components of the Social Security system that must be addressed—fiscal and social. It is the latter that has been completely overlooked.

Does it make sense to first acknowledge that our responsibility for change must encompass an examination of social changes in our society as well as fiscal matters in order to reach a solution that fulfills the changing needs of members in our _____ society as well as making the system financially viable for our government?

Whenever laws are made, the values of those making the laws and those affected by the laws come into play. What changes have taken place in our society since 1937 to cause us to reexamine or original premises? How have families and lifestyles changed that might require a change in our policies?

The most obvious change in the last ___ years has been the change in families and marital relationships. Statistics.

The perception of roles in the family has also undergone a change. Whereas, the husband was formerly thought to be the “breadwinner,” that role is often shared by a wife. The stay-at-home Mom was the norm rather than the exception. Now having one spouse in the home can be determined by class.

In earlier years, it was a basic assumption in separate property states is that the assets earned by one person would be the property of that person. In long term marriages, that assumption worked because as long as a marriage survived, both parties would benefit. Social Security was structured so that a dependent spouse would receive a benefit that would equal an amount of one-half the employed spouse’s benefit. In retirement, they would have a benefit of 1 ½. Whatever pension or retirement accrued by the employed spouse, would also be there to share as long as the marriage lasted.

But marital relationships changed. An increasing number of marriages ended in divorce. Many times the retirement plans of the employed spouse was the main marital asset. In separate property states, this was the asset of the employed spouse. By 19 ___-the government recognized that marriage was a joint venture. In acknowledging the contributions of both spouses, they enacted ERISA, a law that mandated retirement plans for married employees be an asset of the marriage. They could be divisible in some manner at the time of divorce.

It is interesting to observe that Social Security benefits received NO such treatment. Our old laws still remain and when fully examined, causes one to wonder why there haven’t been demands for changes long before this. The only plausible explanation is that very few know how the system works.

If my thesis survey was repeated today, the outcome regarding the knowledge about the Social Security system would most likely be the same as it was twenty-six years ago. Only three facts about Social Security were known by over half the subjects. Women were knowledgeable about very simple facts: 1) that reduced benefits may be taken at the age of 62 years 2) that an employer makes a contribution equal to that of his employee, and, 3) that there is no guaranteed return on money paid into the system.

What anomalies affect us today?

One obvious affect for every divorcing person who has been a dependent spouse is the lack of acknowledging that the results of an employed spouse is of equal value to both people in a marital relationship.

There is no issue that affects more people in our country than Social Security. Even those who do not owe federal income taxes pay Social Security taxes on their low incomes. It is a system that affects many without an understanding of how it works. Does that make it easy for some in Washington to sell us a “bill of goods” through marketing and media blitz with a hoped outcome of seeming fiscally responsible? It is interesting that suddenly fiscal responsibility has become an issue in dealing with a matter concerning the elderly, but seems to have had little consideration in the cost of engaging in war with a changed purpose of bringing freedom inhabitants of a country the size of California. Values was an issue in the last election. Let’s keep it an issue as we debate the fate of our workers when they live a quarter of their lives without a paycheck.