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Seniors Gear Up For Fight
- Some Elderly Shudder At Thought Of Privatization -
By Wally Kennedy, The Joplin Globe
January 2, 2005
Merlin Zollars, of Pittsburg, (left) talks with Lila Hudson about his views on Social Security reform Wednesday at the southeast Kansas Area Agency on Aging.
PITTSBURG, Kan. - Merlin Zollars and friend Lila Hudson like to sweeten their spaghetti by squirting a little ketchup on it. Other than that, their fruit pudding, salad and toast are ready to eat.
The two often sit next to each other for lunch at the nutrition center operated by the Southeast Kansas Area Agency on Aging. Each pays $1.65 for lunch. It's a way to get a good, hot meal five days a week and catch up on the news with friends.
Zollars and Hudson also share something else: they shuddered at the thought of privatization.
"I would say do not privatize it," he said. "Don't mess with it at all, and put the money you stole from it back in it. If they would leave it alone, there would be plenty of money there. It's not going in the hole. It's the way they manage it."
Zollars, 79, retired in 1987. He has been living off his Social Security check and a pension he receives from the state of Kansas for his 25 years as a teacher. And, as a Navy veteran of World War II and Korea, the costs associated with his prescription drugs are covered through the Veterans Administration.
Zollars said he is not participating in the Medicare drug-card program that recently was offered to the nation's seniors. He describes it as "a fiasco in which we (seniors) were sold down the river to help the pharmaceutical companies. The system has gone crazy with greed. But, I will survive."
Like Zollars, Hudson, 69, is struggling to stay afloat on her Social Security check, which amounts to $800 a month. She, too, is a Navy veteran who receives help from the VA to cover her prescription costs.
She recently sought additional assistance but was turned down.
"I could not qualify for commodities because my income was $30 a month too much," she said. "I'm not griping. It doesn't do any good to gripe. I can take care of myself, and that's what I'm going to do."
The frustration and irritation with the system expressed by Zollars and Hudson is something that Melvin Potts, 83, a retired professor at Pittsburg State University, would like to channel into a nationwide movement.
Potts is a local chairman of the AARP, one of the most powerful lobbies in Washington. Early in December, the association informed its 35 million members that it was coming out against Bush's plan to reform Social Security with private, individual accounts.
"Social Security is worth strengthening, not replacing," Potts said. "Private accounts would not strengthen Social Security. They would make the problem worse.
"It would be expensive to initiate. The estimate is it would cost $2 trillion. There would be benefit cuts, additional risk for retirees and a bigger national debt. Wall Street would be the real beneficiary."
Asked whether he would have opened such an account early in his work history, he said: "If anyone has followed the stock market over the last few years, they know that stocks can become worthless, and that could happen again. No, I would not want a private account."
The AARP argues that Bush's plan would damage the most successful program in government history and go back on a promise made to future retirees who have paid into the system.
"Taking some of the money that workers pay into the system and diverting it into newly created private accounts would weaken Social Security and put benefits for future generations at risk," the AARP said in a statement.
That statement, fired like a shot across the bow of Congress, comes as the White House is gearing up to take on the issue, one that until now has been politically untouchable. Emboldened by his Nov. 2 re-election, Bush two weeks ago said, "This is an issue on which I campaigned, and I'm still standing."
Fund full of IOUs
In recent statements, Bush has suggested that Social Security is in a crisis. Advocates of reform say the system is in imminent danger of collapse and have predicted that the program will go into the red in 2018. But, critics of the president's plan say the crisis is being fabricated to give Congress the pretext to further the politics of privatization.
Social Security is not in a crisis, according to the Center for Economic and Policy Research. Mark Weisbrot and Dean Baker, with the center, recently wrote "Social Security: The Phony Crisis."
The researchers argue that Social Security can pay full benefits as promised until 2042, based on this year's Social Security trustees' report. The Congressional Budget Office, using similar projections, extends full benefits to 2052. Thereafter, Social Security would be able to pay 75 percent to 80 percent of promised benefits, the CBO says.
According to the Social Security Administration, the system now collects more in payroll taxes than it pays in benefits. The excess is borrowed by the Treasury Department, which in turn issues special-issue Treasury bonds to Social Security. The bonds totaled $1.5 trillion at the beginning of 2004. The borrowing started in 1983.
By 2018, officials say, the system will start to receive less in payroll taxes because of a shrinking work force and the retirement of the baby boom generation. When that happens, the system will need to tap the surplus, which is held in U.S. Treasury notes. By 2042 or 2052, depending on whose research is being cited, that surplus would be used up. At that point, the payroll taxes would cover a portion of the system's obligations.
The problem, according to Olivia S. Mitchell and Thomas R. Saving, professors of economics who served on the President's Commission to Strengthen Social Security in 2001, is that the trust fund is full of IOUs because the government has not saved the surplus payroll taxes.
The trust fund, they say, boils down to the promise that the Treasury Department will find those dollars when they are needed by the Social Security Administration. The economists say the IOUs are now worth about $1.9 trillion. To come up with that money, the economists say, government programs will need to be cut, taxes will need to be raised or new money will have to be borrowed.
Those calling for the creation of private accounts say the longer Congress waits to make changes, the more painful the changes could be.
Weisbrot, with the Center for Economic and Policy Research, said a tax increase on higher income earners in the next five to 10 years could cover the shortfall in 2018. In 2005, the cap on income subject to Social Security taxes is set at the first $90,000 in wages.
Social Security relies on payroll taxes deducted from workers' checks to pay benefits. Currently, wage earners pay 6.2 percent of their wages into the system. That is matched by a 6.2 percent contribution from the employer.
Bush has yet to provide any specifics about his plan. Some White House observers are saying he could propose allowing workers to divert 2 percent of the 6.2 percent payroll tax on wages into private investment accounts.
'New business opportunity'
Scott Haar, 29, Duenweg, thinks people should be able to control their Social Security dollars.
"Anytime, especially for young people, when we can get some of our tax dollars back and put them to work in our community, I think it's a good thing. We can impact our communities in ways that are much better than the current system."
Responding to the question of individual responsibility, Harr said that when people have a vested interest in the system they will make the responsible decision.
"People are going to do the right thing with it when they have a vested interested in their own future.
Larry Cowger, with Arvest Asset Management in Joplin, said investment products exist that "guarantee return of principal no matter what. These products would work very well in a self-directed, investment account. They would protect the principal from a downturn in the market."
"For young people, who would have so much more time in the market, maybe 25 to 40 years, a mutual fund with a 10 percent return on it would be awesome. I would advise them against picking individual stocks."
Cowger said he understands why some might be reluctant to invest in stocks for their retirement.
"Absolutely, I understand the concern because many people lost money when the bubble burst in tech stocks," he said. "If I were, let's say, 55, I would be very concerned about the risk."
Cowger said that if the Bush plan gets through Congress, virtually every financial company in the nation "will be ready to roll on that. It will be a new business opportunity."
It's an issue that could pit generations against generation, but not necessarily.
Mark Peron, 21, a senior political science major at Missouri Southern State University, said he would not want a private investment account, because he feels that Social Security is the government's responsibility.
"The current system has a lot of flaws in it," Peron said. But I still think the government should be responsible instead of having the individuals do it all themselves. The government, I feel, would be more informed and better able to handle the situation with Social Security."
Potts, the local AARP chairman, said: "It has always been emphasized to me that Social Security is only one part of your retirement program. You should try to work for a company that gives you a pension, and you should be investing some of your own money on the side.
"If you do that and stick with traditional Social Security, you should do OK. If it's not broken, why fix it?"
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