Barbara R. Bergmanm and Jim Bush - Is Social Security Broke?

Is Social Security Broke?

A CARTOON GUIDE TO THE
ISSUES

TEXT BY BARBARA R.BERGMANM
ILLUSTRATIONS BY JIM BUSH

Ann Arbor

T HE U NIVERSITY OF M ICHIGAN P RESS

Copyright by the University of Michigan 2000
All rights reserved

Published in the United States of America by
The University of Michigan Press
Manufactured in the United States of America
Printed on acid-free paper

2003 2002 2001 2000 4 3 2 1

No part of this publication may be reproduced, stored in a
retrieval system, or transmitted in any form or by any means,
electronic, mechanical, or otherwise, without the written
permission of the publisher.

A CIP catalog record for this book is available from the British Library.

Library of Congress Cataloging-in-Publication Data applied for

ISBN 0-472-09743-1 (cloth: alk. paper)

ISBN 0-472-06734-5 (pbk.: alk. paper)

ISBN 13 978-0-472-09743-2 (cloth)

ISBN 13 978-0-472-06743-5 (paper)

ISBN 13 978-0-472-02305-9 (electronic)

We are grateful to Charlotte Phelps for introducing the two collaborators. We owe thanks to Michael Ames, whose enthusiasm for this project in its early stages gave us the encouragement that helped us to push ahead. Helpful comments were received from Henry Aaron, Peter Diamond, Estelle James, Ralph Estes, Eileen Applebaum, Edie Rasell, Joyce Miller, Phillip Corfman, Harriet Presser, Beverly Cohen, Stuart Cohen, Bette Anne Osterhoudt, Frank Osterhoudt, Alan Isaac, Christopher Clague, Lynn Penner, Suzanne Helburn, Regina Greenspun, and Nathaniel Greenspun. In thanking them, we do not want to imply that all of them agree with all of it. Our spouses, Fred Bergmann and Julia Bush, gave many valuable suggestions and were supportive throughout. Last but not least, we thank Ellen McCarthy, our editor at the University of Michigan Press, for her faith in the project and her indispensable help in carrying it out.

Bill and Betty Boomer, like lots of other Americans, are worried about Social Security

Betty Boomers parents, Ed and Ethel Elderly, 75, have also heard that the Social Security system is in trouble. The basic idea of Social Security is that, when you retire, you get a pension that the government will pay as long as you live. When people feel they can rely on Social Security, they are relieved of the worry that they will end their days in destitution or be dependent on their children. But the predictions of Social Securitys bankruptcy have robbed many people of their peace of mind.

Social Security has two other kinds of benefits, besides pensions, that insure Americans against extreme hardship. If a worker dies leaving a child, Social Security will pay survivors benefits to the family. If a worker becomes disabled before the age of retirement and cant work, Social Security will provide disability benefits. Of the 44 million people receiving benefits, 30 million are retirees and their dependents, 6 million are disabled workers and their dependents, and 7 million are survivors of deceased workers.

Retired people are worried too

The Boomers daughter and son-in-law, Sue and Steve Sprout, are in their twenties and wont retire until well into the twenty-first century. They have heard many times that Social Security will be nonexistent by the time they retire. That makes them edgy about paying into the Social Security system and more willing to listen to suggestions that the system we have should be abandoned.

Many young people doubt they will ever benefit from Social Security

Everybody has heard claims that Social Security has no future, and many people have come to believe it. You almost never hear it said that Social Securitys problems are fixable and that there is plenty of time to do the fixing.

Pollsters Question: How confident are you, yourself, in the future of the Social Security System?

Scary predictions often get on TV and into the press

People need straight and clear answers about what Social Securitys problems are and how they can be fixed. It helps if they know how the system works. Fortunately, it isnt hard to understand.

But are these stories about Social Security really true?

Social Security cant go bankrupt. A business can go bankrupt when it needs to make payments but doesnt have enough money to make them and has no place to get the money it needs. The same is true for a person. But Social Security can never be in that fix.

Social Security gets the money it needs to make benefit payments from taxes. Those taxes can be adjusted, when necessary, by our democratic processes. Social Security payments can be adjusted in the same way.

Could the Social Security system go bankrupt, leaving the old people without support?

The money to pay the Social Security benefits that retired people get in any year comes from the Social Security taxes that are collected that same year from people still working.

The Social Security system is run on a pay as you go plan in which each generation of workers pays for the pensions of their retired parents and grandparents. In other words, the retired dont get their benefits out of a pot of dollars they have personally put into the Social Security system. Those dollars have already been used to pay for the pensions of the generation that retired ahead of them. When you retire, the money to pay your pension will come from the taxes of the younger people still working.