Saturday, March 26, 2005

NNN Special Report: "We Have A Problem"

by Kyle Michaelis
The New Nebraska Network is honored and pleased to present its first article from a contributor. All opinions are those of the author, but we are happy to host them and look forward to future contributions from our readers.

We have a Problem
By: Peg O’Dea Lippert, MSW, LCSW
Sarpy County
“I’ve got a lot of educating to do to convince people not only that we have a problem, but we need to come up with a solution to Social Security,” said the President after a two-day swing through three Southern states. (Omaha World-Herald, 3-12-05)

Perhaps, the “educating” should begin in the White House.

We have a President who appears to have chosen, regrettably, to capitalize on the terrible events of 9/11 and use the crisis of that dreadful day to define his presidency. Wanting to get rid of Saddam Hussein, which had nothing to do with 9/11, became the crisis of weapons of mass destruction. Weapons of mass destruction became the crisis of pre-emptive war. Likewise, mislabeling the long-term viability of Social Security as a crisis becomes the excuse for privatization, to “create wealth.”

When the President criticizes his opponents he does not acknowledge their disagreement with him regarding personal accounts, but rather accuses them of denying there is a problem. Reasonable leaders see there is a problem, not a crisis, as he would have us believe...(continues)

We are honored to have two such leaders in Nebraska. Senator Chuck Hagel had the courage to propose a specific plan, something the President has not done. His plan, however, continues the Bush myth about “creating wealth” by establishing private accounts. “Creating wealth” is a Wall Street term and, for certain, Wall Street will benefit by the creation of such plans. That’s where the eight hundred billion to three trillion dollars--borrowed from foreign countries and increasing our national debt beyond reason or imagination--to set up the accounts will go and not to solve the Social Security “crisis.” He agrees with Bush on not raising taxes, thus, disallowing consideration of raising the ceiling on which current Social Security contributions are made, something that has been done in the past. In theory, raising the upper salary/wage limit on which contributions are made, is not raising taxes, it is taxing at the same rate on a higher amount.

Senator Hagel proposes delaying the retirement age. The latter is a realistic approach as many people continue to work beyond the age, previously, believed to be retirement age and/or seek other employment upon retirement. In fact, in 2003 the eligible age of receiving full Social Security benefits began to move upward. That upper limit could be further extended. As now, people would retain the choice of drawing a lesser amount at an earlier age.

Senator Ben Nelson, on the other hand, identifies two issues. (Meet the Press, 3-13-05) He acknowledges a problem, not a crisis. Solvency is the number one issue, he says. The other issue, the one marketed by the President as the solution, is the creation of personal investment accounts. The two are mutually exclusive.

The President seems to be losing ground on his “solution.” A recent AARP survey in Nebraska revealed when people understood that the creation of private accounts would reduce the guaranteed benefit and increase the national debt, even those who originally favored the idea of private accounts, dropped to as low as 14% or as high as 31%, depending on particular elements. (AARP Nebraska Social Security Survey, February 3, 2005.) Even he seems to be saying something different as he travels in the West. He continues to cling to private accounts. One might ask: “Why is the President traveling across the country selling investment accounts that do not solve the Social Security problem?” ” Whom does he work for? Wall Street? The American people?”

Farmers and mechanics know when to overhaul the machinery and when to replace it. Mothers know the difference between a well-baby check-up and a trip to the emergency room.

This is the part of “educating” the President. In his crisis leadership style, he would have us get a new tractor and take the baby to the emergency room when an overhaul or a well-baby visit would suffice. He picked the solution he wanted, privatization, before defining the problem, which he labeled a crisis. (Hey, why not, it worked before!) He, apparently, missed school the day the scientific method was taught: define the problem, identify the possible solutions, select the best approach, implement the solution (make the repairs necessary to sustain the program), and continue to evaluate over time.

Consider the market for the last five years. Investors saw their stock reduced by one-third or, in the case of many in Nebraska and across the country, by nearly 100 percent with the demise of Enron and World-Com and the crash of Utilicorp/Aquilla--due to corporate greed. Investing remains a gamble. Remember the old axiom, “Only invest what you can afford to loose.” Who can afford to gamble his/her basic retirement income? Certainly, it is not those with a limited income and little or no ability to save when even those with considerable investments can loose all of their savings, as in the above situations.

Although, unspoken, it appears the Administration’s purpose is to change Social Security, to use corporate benefit terms, from a “defined benefit” plan to a “defined contribution” plan. The former guarantees a fixed amount of retirement income over the life of the insured, opportunity for a survivor benefit and with no risk to the insured. The latter creates full risk for the investor with no guaranteed benefit and is the trend in the corporate world today.

If the federal government takes this approach--even in part--a welfare safety net will be required to provide for those who may, at time of retirement, be in poverty. This is in direct conflict with the intent of a social security system. Social Security was designed to save the retired or disabled worker and his/her survivors from poverty. It was not designed to create wealth.

Preserving and protecting families from poverty is not to be confused with creating opportunity for families to have more income at their retirement. Diverting some of the input to Social Security in the name of “creating wealth,” via privatization, while reducing the guaranteed payout to create that opportunity, puts both at risk. As Senator Nelson pointed out, they are separate issues: solvency and the creation of personal accounts.

Senator Ben Nelson wants the actuaries to look at the numbers. All options are to be considered, he says. There are solvency issues such as increasing retirement age, and/or raising the ceiling of taxable salary and, possibly, a different ratio of employee to employer contribution at a certain salary level. How can such options be “tweaked” without reducing the benefit? Citizens might ask, “Mr. President, where do you stand on these issues?”

The other issue, the issue of personal accounts, has to do with opportunity. How can the government enhance the opportunity for ordinary wage earners to increase the long-term quality of their lives during and after employment? Again the actuaries and financial experts are needed to look at the overall implications of such possibilities as: increasing the IRA annual contribution level, raising the ceiling on SEP contributions, giving tax credits to small businesses who set up matching saving accounts (401k-type) for employees, and other possibilities. How can such opportunities be created/enhanced, apart from Social Security, without jeopardizing basic retirement income?

Such assessments call for a reasoned approach by analytical minds and, a willingness to come to the middle, the gray, and look after the well being of all the people. Such considerations do not suit the style of our crisis-orientated president who leads with the emotional dialectics of either/or, good/bad, for me /against me,
black/white, all/nothing.

Who can we trust to look at all the possibilities? Do we need a commission to fully, and with integrity, evaluate the possibilities--a commission, that will seek and listen to the testimony of citizens representative of all the people, not just the experts and the privileged?

It is the President who needs the educating, and maybe a little therapy, to turn his mind, to listen, to plan and to foster a rational approach, not a crisis approach, not shooting from the hip, Texas-style.


Post a Comment

<< Home