Legislative — 3

Social Security

Heady with victory in their fight to weaken Medicare, Republican congressional leaders indicate Social Security may be next on their hit list. Aides of President Bush have outlined plans to resurrect his earlier scheme to privatize Social Security by diverting a portion of payroll taxes into the stock market.

Shortly after taking office, Bush appointed a commission to study the proposal. “The commission recommended three approaches that would each cost at least $2 trillion to make up for the money that would need to be paid in benefits but would no longer be coming from younger workers.”

For more than sixty years Social Security has been the most successful social program this country has had. Social Security has helped to raise the standard of living of many seniors over the years as well as keep many others above the poverty line and out of the poor houses. But the Social Security system did not stop there. Social Security has not only acted as a retirement plan, it has responded as a family protection plan by providing millions of Americans disability and survivor’s benefits also. As stated above, the debate over the survival of Social Security as we know it continues on Capitol Hill and will be a major issue in this years election. Just like your car needs an oil change or your house a new roof, Social Security also needs a little preventive maintenance from time to time. Annually, the Social Security Administration reviews the status of the system and projects seventy-five years out its solvency. In 2003, the Social Security Administration projected that the system can continue to pay out full benefits until 2042, after which they can support 75 percent of benefits. Another factor that should be noted about Social Securities 75 year review is that this is a very conservative estimate of what the economy might do over the projection period, for example, the estimate of growth is only about one half of what it has been in the last 75 years.

There are many today in Congress, on Wall Street and in corporate board rooms that would have Americans believe that there is a crisis with the Social Security system. They would have Americans believe the situation was so severe that Social Security system should be scrapped and privatized. They are wrong.

What these money mongers will not tell you is that there is approximately $280 billion at stake. Over a twelve-year period $280 billion of your dollars in administrative costs or around 14 or 15 percent in fees would go to the banks and brokers, while administrative cost for Social Security currently is less than 1 percent. They will not tell that what you have in your fund is what you get in the end. In other words, if something were to happen to a younger worker whether it was a permanent disability or death, all that worker’s family would get is what is in that individual’s fund and when the money runs out, your family is then on it’s own.

We should not be fooled by all the rhetoric concerning the solvency of Social Security. Social Security is not in crisis and still remains a sound and successful social program. Likewise, as the Legislative Department pursued common sense reforms with Medicare, we will do the same with Social Security.

Pension Security

To build real retirement security, working families need secure pensions and savings in addition to Social Security. Yet today’s workers feel anything but secure as employers have cut and eliminated real pensions and corporate scandals and the stock market plunge have battered their retirement savings.

With workers’ retirement security at state, the IAM continues to urge Congress to consider tax and other incentives to encourage employers to offer and to help maintain defined-benefit plans and to pass meaningful 401(k) plan reforms.

According to the U.S. Department of Labor, only 19 percent of American workers in the private sector today have defined-benefit plans, compared with 37 percent of workers in 1979. And, during this economic downturn, these plans are facing tremendous funding demands, with temporary funding measure enacted in 2002 due to expire. The House-passed 401(k) “reform” bill failed to include the key protections needed to help prevent the tremendous 401(k) losses suffered by works at Enron and WorldCom from reoccurring. The bill further would have rolled back protections that exists under current law.

Last November, we were victorious against President Bush “Cash Balance” pension plan. The President’s plan would have allowed companies to freely change their pension plans, even if those changes would result in the loss of half their employees’ pension benefits. Congressional negotiators reached an agreement on language that will make it harder for employers to convert traditional employee pension plans to benefit-robbing cash balance plans. The compromise worked out between House and Senate conferees would prohibit the Treasury Department from using any funds to formulate new regulations condoning the conversion of traditional defined benefit pension plans to cash balance plans.

Hundreds of corporations rushed to cash in on cash balance plans before a moratorium blocked the practice. Opposition skyrocketed as workers reported thousands of dollars in pension cuts when their employers switched to cash balance plans. In 2002, a federal judge in Illinois ruled cash balance plans violated federal age discrimination laws.