Chairman Pomeroy’s Opening Statement at Hearing on Social Security at 75 Years: More Necessary Now Than Ever

WASHINGTON, D.C. – Social Security SubcommitteeChairman Earl Pomeroy (D-ND), issued the following statement (as prepared for delivery) today at a Ways and Means Subcommittee hearing on Social Security at 75 Years: More Necessary Now Than Ever:

 "Our hearing today is intended as a commemoration of the upcoming 75th anniversary of the enactment of Social Security, and as an appropriate opportunity to understand how important Social Security is to the lives of millions of seniors, people with disabilities, children, and survivors.

"In 1929, the stock market collapsed and lost 40 percent of its value.  The Great Depression followed with unemployment exceeding 25 percent.  Between 1929 and 1932, the total amount of wages declined from $50 billion to only $30 billion.  Traditional sources of economic security – assets, labor, family and charity – failed to alleviate the devastation wreaked on most Americans by the crisis. 

"In 1934, President Franklin Delano Roosevelt announced to Congress his intention to provide a program for social security.  In January 1935, FDR submitted a legislative program that included the Social Security retirement program.  

"On August 14, 1935, upon signing the Social Security Act, President Roosevelt said that the law, represents a cornerstone in a structure which is being built but is by no means complete. It is a structure intended to lessen the force of possible future depressions. It will act as a protection to future Administrations against the necessity of going deeply into debt to furnish relief to the needy. The law will flatten out the peaks and valleys of deflation and of inflation. It is, in short, a law that will take care of human needs and at the same time provide the United States an economic structure of vastly greater soundness.

"The promise of Social Security as a measure of protection against a poverty-ridden old-age has held true for 75 years.  Today, as the economy struggles to recover from the worst recession in decades, seniors, persons with disabilities, survivors and their families can still count on a basic income from Social Security.

"Simply put, Social Security is life-long wage insurance, paid for by premium payments from workers and employers.  The ingenious design of the program is that everyone who contributes will benefit.  Social Security belongs to the workers who pay into it –  their payroll contributions are specifically dedicated for Social Security benefits and no other purpose.

"All of us together protecting each of us – that is how it works.  Social Security embodies the American values of independence, dignity and family, by rewarding work, instilling prudence, and sharing responsibility. 

"To make sure that Social Security remains a viable program not just today but also for our children and future generations, we need to mark the milestone occasions like 75 years. 

"Today's hearing will look at how the program that helped bring this nation out of the Great Depression stood up to its most recent test -- this great recession -- and how it helps American families face today's economic challenges. 

"Today, 75 percent of Americans believe that they would need to provide greater support to their parents or grandparents without the independence provided by Social Security benefits.  I am sure that folks, like me, remember how grandma or grandpa almost always came to live with them.  Because of Social Security, today seniors can live independently.  Over the years, Congress has ensured that benefits are more adequate, and that they keep up with economic growth and inflation. 

"As we consider the future of Social Security and the potential adjustments needed to strengthen the program for the long-term, it is vital that policymakers recognize that Social Security is not just a set of numbers on a ledger.  Instead, it represents the ability of our seniors to live independently and with dignity during their retirement.

"For 6 in 10 seniors, Social Security provides the majority of their income. Yet, the benefits are modest.  The average Social Security benefit for a retiree is just $14,000 a year.  In North Dakota, the average annual retirement benefit is only $12,900, $1,100 less than the national average. 

"It is important to also note that the median income of all senior households is only $24,000. Among those over age 65, only those with incomes in the top one-fifth of beneficiaries (income over $56,000) have another source of income that is greater than Social Security.  Often, this is because they are working and earning wages, but this will shift when they stop working.

"It is also very important to remember that Social Security is not just a retirement income program.  One of every three beneficiaries is not a senior, but a dependent family member of a beneficiary, a person with a disability that prevents them from working, or a child or widow of a deceased bread-winner.  In fact, Social Security provides income to 4 million children and actually lifts 1.3 million children out of poverty, making it the largest children's program of all.

"Social Security's disability and survivors benefits represent the kind of wage insurance most Americans could not afford to purchase in the private market.  For a married, 30-year old worker with two children, this protection is equivalent to life and disability insurance policies worth over $450,000. 

Social Security is Uniquely Valuable

"The recent recession highlights the critically unique role that only Social Security is able to play for working families.  Social Security benefits are a more important source of retirement income than even just a few years ago, as the value of other household assets that families might look to for retirement have collapsed in value since 2008:

• 401(k) and Individual Retirement Accounts lost $2.8 trillion in aggregate value by year end 2008 (32 percent of their value), and
• American households lost $6.8 trillion in home equity value (more than half) since the end of 2006.  Home owners' equity in household real estate fell from $13.1 trillion at the end of 2006, to $6.3 trillion at end of the first quarter of this year.  Many families had hoped they could tap their home equity in retirement.

"Social Security cannot be matched by private savings vehicles, which recent experience shows are not fully reliable for retirement income. Social Security has no investment risk, which is important when paying for basic living expenses.  Its retirement benefits cannot be out-lived, and unlike private saving and most private pensions, its purchasing power is protected against inflation. 

"Without Social Security benefits, one of every two seniors would be living in poverty; but with Social Security benefits, only one in ten seniors falls below the poverty line.  Through these troubled economic times, monthly benefits have remained rock solid.  In contrast, had the average $14,000 annual Social Security retirement benefit been invested in a private account, like a 401(k) plan, it would have lost nearly a third of its value, and retirement income would have fallen to about $9,500.  No doubt, more seniors would be living in poverty.

Social Security is Sustainable

"Over the years, Congress has made adjustments when needed to keep the Social Security trust fund in balance, such as in 1983 when contribution rates increased to pre-fund some of the anticipated costs of benefits for the large Baby Boom generation.  These surplus taxes have accumulated in a trust fund that is invested in safe, secure U.S. Government bonds.

"As the baby boomers retire, Social Security outlays will shift slightly upward –  from the current 4.9 percent of the gross domestic product (GDP) to 6.2 percent of GDP in 2035 when all baby boomers will be older than 65.  Thereafter outlays will stabilize at between 5.8 and 6.1 percent of GDP through end of the 75-year projection period.  This is an increase of just 1.3 percent of the entire economy over 75 years.  Not only can we afford Social Security, we cannot afford not to have Social Security, and the American people want us to strengthen it.

"We will need to make modest adjustments in order to cover a future shortfall.  There are a number of policy options that others have suggested to address the shortfall.  As stewards of Social Security, Congress and especially this Subcommittee should carefully evaluate these options, not just for their effects on the balance sheet, but also for their impact on the lives and the incomes of seniors, people with disabilities and survivors.  Our first priority should be to maintain what has been true about Social Security for 75 years: the American people count on it and Social Security has never failed to be there for the American people.

"We still have time to consider our options carefully, without resorting to radical ideas that would dismantle the program as we know it.  Several years ago, the American public overwhelmingly rejected President Bush's flawed plan to take money out of Social Security and put it into private Wall Street accounts.

"Some have recently dusted off those ideas and sanitized the descriptions with names such as "progressive price indexing" and esoteric discussions about benefit computations.  But this cannot hide the unambiguous truth that if enacted, my children would have Social Security payments replacing about one-fifth to one-third less of their wages when they retire than I would.  I do not think this proposal effectively "saves" Social Security.

"At this important milestone for Social Security, it is vital that we understand how the story of Social Security has been interwoven with the story of the American Dream, and how a strong Social Security program is absolutely necessary if the country is going to continue to have a vibrant middle class."

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