From Communication Workers of America

What's At Stake! Protect Social Security: Don't yield an inch.

What's Wrong with Individual Investment Accounts?

Some political leaders and special interest groups are deliberately undermining support for the system and pushing for individual investment accounts in place of Social Security's guaranteed, defined benefits. While individual accounts are being sold as a free lunch, they really come at a high price.

What's wrong with privatizing Social Security?

Privatization would cost a bundle-and the burden of paying for it would be devastating for working families.

Initially, at least, we'd have to pay for two Social Security systems at the same time: today's program for current beneficiaries and the privatized system. The added costs would require: Raising the retirement age to 70 or older, Deep cuts in guaranteed benefits Cutting or eliminating cost-of-living adjustments Creating huge new federal deficits or, some mix of these bad choices. Raising the retirement age to 70 or older would be especially hard on workers in physically demanding jobs and workers of color (many African American men, for example, wouldn't live long enough to ever collect benefits because their life expectancy is 66.1 years).

We could expect privatization to cost more than Social Security long after the transition period. Social Security spends 1 percent of its money on administration. Administrative costs for private insurance range between 12 and 14 percent, according to the American Council of Life Insurance. Under Chile's privatized retirement system, investment companies are collecting fees of 15 to 20 percent. Privatization would replace guaranteed benefits with benefits dependent on workers' luck or skill as investors and the ups and downs of the stock market.

While the stock market has performed well in recent years, stocks do fall. Since 1956, there have been nine major downturns in the stock market. Prices have tumbled by 20 percent or more for months and even years at a time. If Social Security is privatized, pray you don't retire the day or year after a crash.

Privatization would mean millions in fees for banks, insurance companies and investment firms.

'This could be huge for us.' -- An executive at State Street Bank, who did not want to be identified.

'Wall Street would not make a cent out of preserving the current system.' -- Teresa Ghilarducci, economist at the University of Notre Dame.

Social Security Myths:

Myth #1: Social Security won't be there for me when I retire.

Reality: Social Security has provided a lifeline to millions of Americans with millions of checks, and in more than 60 years has never missed a payment-and this track record can continue. Social Security is basically a sound system that can meet 100 percent of its obligations for the next 39 years, and with responsible changes it can continue to do so indefinitely.

Myth #2: The Social Security trust funds will run out of money in 2042.

Reality: The Social Security trustees project that the Social Security trust funds, now growing by $165 billion a year, will be drawn down to zero in 2042 if no changes are made. (A separate report from the Congressional Budget Office says the date is 2052.) But after 2042, Social Security will not be broke. As it does today, Social Security will continue to collect payroll taxes from workers and employers. In fact, Social Security payroll taxes will be sufficient to finance about 70 percent of the payments that will be owed to the program's beneficiaries. With responsible modifications to the program, Social Security will be able to continue meeting 100 percent of its payment obligations to retirees, disabled workers and survivors.

Myth #3: Social Security and Medicare won't be able to pay for all the Baby Boomers when they retire.

Reality: The Social Security tax has been set higher than necessary deliberately to help defray the costs of the Baby Boomers' retirement. This money has been saved in the Social Security trust funds. At present the trust funds are running an annual surplus of nearly $165 billion; by the end of 2002, more than $1.37 trillion had been saved in the trust funds for the retirement of the Baby Boom generation. Finally, we should not look only at the number of dependents (retirees and children) per worker. It is projected that in 2030, there will be about 79 dependents per 100 workers-well below the ratio in 1965 of 95 dependents to 100 workers.

Myth #4: Ending all the bureaucratic waste would solve the projected shortfalls for Social Security and Medicare.

Reality: Administrative costs for Social Security are less than 1 cent per dollar paid out in benefits. This is much lower than the average administrative costs of 12 to 14 percent for private insurers. In Chile, which instituted a system of mandatory private savings accounts in the early 1980s, administrative costs exceed 20 percent.

Myth #5: We can't afford Social Security.

Reality: The Social Security system was put in place during the Depression. If we could afford it then, we can afford Social Security today when the country is four times richer. The United States is the richest country in the world, and we can provide for our elderly--as do nations not nearly as rich as we are.

Myth #6: Social Security is a welfare program.

Reality: Social Security benefits are earned by workers through payroll tax contributions that they pay on their wages. And when workers or their families become eligible to receive benefits under the rules of Social Security (because a worker has retired, become disabled or died), those benefits are paid.

Myth #7: I would have a lot more to retire on if I put my money in the stock market rather than paying into Social Security.

Reality: Individual stock market accounts would cost a bundle. We'd have to pay for two Social Security systems at the same time: today's program for current beneficiaries and the privatized system. To cover the price tag, we would have to raise the retirement age, cut Social Security benefits, hike taxes, cut or eliminate cost-of- living adjustments--or some mix of these bad choices. Privatization would be good for Wall Street, banks and insurance companies-just the folks who are supporting the idea. But it would be bad for working families. Social Security benefits are guaranteed, lifelong and protect whole families. The security of these benefits-which provide the foundation of retirement, disability and survivor protections for working families-should not depend on how well individual workers can play the market or whether a worker retires shortly after the stock market has plunged.