The phone rings. It's your 75-year-old Aunt Mildred, the one who helped you and your brother financially after your father died. She also helped your first cousins whose mom was disabled, and always had a little extra for her brother Steve who had difficulty making ends meet after he retired. Aunt Mildred is calling to ask for your help managing her finances. She wants to be able to continue helping her family as she ages, and to continue providing for those family members who have the greatest unmet needs.
Like Aunt Mildred, the Social Security system at age 75 needs assistance to manage its finances and continue helping the people of all racial and ethnic groups in the United States who receive its benefits because of disability, retirement or a family member's death.
The nature of the "75-year tuneup" for the system is likely to be shaped by the deliberations of the National Commission on Fiscal Responsibility and Reform, which was established by President Barack Obama to report to Congress by Dec. 1 on ways to create a balanced budget by 2015. The board of trustees for the Social Security system has projected that shortfalls (pdf) will arise within the next 75 years. Although FICA taxes and reserves in the Social Security trust funds are expected to cover all obligations through 2037, after that point, taxes and reserves are projected to cover only 76 percent of obligations. Meanwhile, the commission is eyeing Social Security as a potential source of revenue to help balance the federal budget, despite the system's projected future shortfall.
Weakening Social Security, however, would fly in the face of public sentiment and would leave impoverished many who are already economically vulnerable — in particular the 54 percent of unmarried elderly African Americans and the 62 percent of unmarried elderly Latinos who rely on Social Security benefits for 90 percent or more of their income. The average annual Social Security income for African Americans and Latinos 65 years and older ranges from a "high" of $13,289 for African-American men to a low of $9,536 for Latinas. (African-American women average $10,631.) These benefit levels indicate that many who have worked throughout their lifetimes are impoverished during their retirement years. Although a special minimum benefit was created in the 1970s specifically to avoid this situation, the benefit was not indexed to keep up with wage growth, so it is not working as intended.
Americans value and support Social Security. A 2009 poll featured in the Joint Center for Political and Economic Studies brief African American Perspectives on the Social Security System found that 54 percent of all Americans, and 68 percent of African Americans, think that Social Security should provide a minimum standard of living to all contributors, even if some receive benefits that exceed the value of their contributions. Large majorities — 92 percent of African Americans, and 83 percent of Americans overall — also believe that Social Security should provide long-term low-wage workers with support sufficient to meet their basic needs.
Americans also want to strengthen the Social Security system and do not want its revenues used to balance the federal budget. When asked last year in a poll conducted by the National Academy of Social Insurance (NASI) (pdf) whether they favored strengthening the Social Security program or tapping its reserves as a means to reduce the national deficit, two-thirds of Americans — including 73 percent of African Americans and 67 percent of Latinos — responded that they favored strengthening the system.
How should we do this? One approach is to simultaneously make changes to ensure the solvency of the system and enhance the adequacy of benefits. For example, according to a 2009 report (pdf) from NASI, eliminating the wage cap (currently $106,800) — the earnings level above which Social Security FICA taxes are no longer deducted — but not counting the additional covered earnings toward future benefits for workers would generate more than enough additional revenue to eliminate the deficit projected to arise within the next 75 years. This increase in the Social Security system's reserves would also make it possible to set the special minimum benefit to 125 percent of the federal poverty level for a 30-year worker at full-benefit age without impairing the solvency of the system.
A 75th birthday is an occasion to take stock, for Aunt Mildred and Social Security alike. The best course for both is to seek advice and help from others, but to make changes with great care. For too many Americans — especially low-wage workers and people of color — Social Security is an economic lifeline. Tampering with it will not help us as a nation achieve a lasting balanced budget. Nor will it allow us to sleep comfortably at night, knowing that we have removed the economic safety net for so many of the neediest among us.
Wilhelmina Leigh is a senior research associate at the Joint Center for Political and Economic Studies. She is also a member of the Experts of Color Network and the Closing the Racial Gap Initiative of the Insight Center for Community Economic Development and has been an elected member of the National Academy of Social Insurance since 1996.