No matter whether you are thirty-something, or fifty-something, the decisions
being made by the Bush-appointed 16-member commission to reform Social
Security affects you. The commission, co-chaired by AOL Time Warner's
African-American co-chief operating officer Richard Parsons, plans to
partially privatize the 65-year-old program by letting America's workers
invest some of their payroll taxes in their own stock and bond portfolios.
The commission's challenges are huge. They have to face the Old Age
Survivors and Disability Insurance program's long term problem - an unfunded
liability of $20 trillion, which represents the amount by which promised
benefits over the next 75 years exceed payroll taxes. They say the only way
to address this problem is to increase the abysmal rate of return of today's
pay-as-you-go system offers. People like Parsons say the best way to do this
is to introduce voluntary personal investment accounts as apart of a workers
Social Security retirement package. This comes as polls show that a broad
majority of Americans - 100 million of whom invest in the stock market - like
the idea of reaping a much richer return on their investments in the
financial markets than the 1 or 2 percent return that most workers can expect
from Social Security.
Although, African-American Democrats in Congress are critical of the plan,
something has to be done because the Black community is especially reliant on
Social Security programs. For 40 percent of African Americans age 65 percent
or older, it's the only source of retirement income. In 1999, African
Americans were 12 percent of the U.S. population, but made up 18 percent of
those receiving disability benefits and 23 percent of all children who
receive survivor benefits. African-American children are almost four times
more likely to be lifted out of poverty by Social Security than are White
children.
Blacks may not have a history of investing in the market, but maintaining the
solvency of Social Security is an issue whose time is now. Bush has to
figure out how to guarantee income security for retired and disabled workers
when there is more money going out of the U.S. Treasury than there will be
coming in. Historically, Social Security worked because of the high ratio of
workers to beneficiaries. However, as the population has aged - 35 million
Americans are at least 65 and another 24 million are 55 to 64 - the ratio of
workers to beneficiaries has fallen. Fifty years ago, there were 16 workers
for every one retiree. Today, there are only three workers per retiree, and
in 30 years there will only be two for each retiree.
Social Security will start running short of money in the next few decades. By
2016, payroll taxes will no longer cover benefits, forcing Social Security to
begin redeeming government bonds it holds. By 2038, the bonds will be gone
leaving the system able to pay less than three-quarters of benefits. Parson's
plan is for a radical change in the structure of Social Security
contributions. His commission will propose allowing taxpayers, particularly
young workers, to divert two percentage points of their FICA obligations to
personal retirement accounts (PRAs). These contributions would be voluntary,
but 71 percent of the nation's young workers say they favor private
individual retirement accounts.
Black politicians need to support the commission's search for a solution.
And, the Africa-American community should prepare to become more involved
with the investment processes that fund and run our nation's capitalistic
economy. William Reed is the author of "Who's Who in Black Corporate America." For questions or comments email him at businessexchange@metroconnection.info or call
him at 202-547-4125. |