SEIU Local 1199WI

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The Facts on Restructuring Social Security

Fact #1 - The "Crisis" is Overblown

Using the President's own numbers (worst case scenario), Social Security can pay all promised benefits for 37 years with no changes whatsoever. It is true that a shortfall develops after 37 years, but the projected shortfall is far less than shortfalls projected in earlier decades and fixed with relatively minor changes.

Fact #2 - We Face Far More Significant Crises in Other Areas

Health insurance costs are increasing by double digits each year. The federal government's debt as a percentage of our economy is approaching a fifty year high . By comparison with these and other pressing crises, the long term problem with Social Security is minimal.

Fact #3 - Privatizing Social Security will explode the Federal Deficit

Transitioning to private accounts will require paying for current Social Security benefits with tax dollars rather than current Social Security revenues. The estimated costs would be $4.9 trillion over the first 20 years, and $15 trillion over the full 40 years.

Fact #4 - Wall Street Firms would make Gigantic Profits

Goldman, Sachs estimates that they could make 10 percent in fees and charges from the private accounts. In Chile, where they privatized their retirement system, 20 percent has been going to administrative fees and charges. By comparison, Social Security currently has an administrative cost of less than 1 percent of all revenue.

Fact #5 - Retirements would be Less Secure

The privatization plan being discussed by our President would include a 40 percent decrease in the guaranteed Social Security benefit. With a significant reduction in the guaranteed benefit, low income workers are sure to lose. The rest of us will experience significant risk with the money in private accounts. Most estimates are that the overall payout in retirement would be less due to fees and charges made to Wall Street firms.

Fact #6 - Privatizing does Nothing to Make Social Security more Solvent

Privatizing actually would weaken Social Security by diverting money from the trust fund to pay for private accounts. Not only would the plan add to the shortfall, it would significantly increase government borrowing, saddling future generations with larger interest payments and less ability to resolve problems with Social Security.

Fact #7 - Other Critical Parts of Social Security would be Weakened

Social Security is more than just a retirement system. It is also life insurance and disability insurance. Millions of people depend on Social Security when they are disabled and unable to work. Diverting money from the trust fund threatens to undermine these vital functions.

Fact #8 - Because it's Universal it Works

Two generations ago, when the stock market collapsed, businesses closed and pension funds evaporated, our forbears built Social Security as a critical safety net. Countless seniors have escaped dire poverty as a result. The system is extremely efficient and has operated with just minor modifications for many decades because it is simple and straight forward. Radically altering Social Security could undermine this very feature.

Further Information

For an excellent list of fact sheets and links on the plan to restructure Social Security, visit
http://www.aflcio.org/issuespolitics/socialsecurity/links.cfm