Social Security’s Role in Economic Performance, Pooling Risks and Social Progress William M. Rodgers III Heldrich Center for Workforce Development Bloustein School of Planning and Pubic Policy Rutgers, The State University of New Jersey June 2010 1
Public investment in people has stalled, coinciding with the growth in income inequality. (US Human Expenditure Ratios: 1959 to 2009) Human Priority Concerns/GDP 0.250 0.200 0.150 0.100 0.050 0.000 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 Federal & State Federal Only Notes: All human priority concerns are defined as government social benefits to persons, social insurance funds, housing and community services, health recreation and culture, elementary and secondary schools, higher education, libraries and other, 2 and income security.
Public investment in people has stalled, coinciding with the growth in income inequality. (US Federal and State Human Expenditure Ratios) Human Priority Concerns/GDP 0.400 0.350 0.300 Trend Line: Based on Growth from 1959-1975 0.250 0.200 0.150 Trend Line: Based on Growth from 1959-2000 0.100 0.050 0.000 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 Actual Predicted (1959-1975) Predicted (1959-2000) Notes: All human priority concerns are defined as government social benefits to persons, social insurance funds, housing and community services, health recreation and culture, elementary and secondary schools, higher education, libraries and other, 3 and income security.
Public investment in people has stalled, coinciding with the growth in income inequality. (US Federal Human Expenditure Ratios) Human Priority Concerns/GDP 0.180 0.160 Trend Line: Based on Growth from 1959-1975 0.140 0.120 0.100 0.080 Trend Line: Based on Growth from 1959-2000 0.060 0.040 0.020 0.000 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 Actual Predicted (1959-1975) Predicted (1959-2000) Notes: All human priority concerns are defined as government social benefits to persons, social insurance funds, housing and community services, health recreation and culture, elementary and secondary schools, higher education, libraries and other, 4 and income security.
Since the mid-1970s, U.S. family income inequality has widened. (Cumulate growth in mean income received by each fifth and top 5%) 140% 120% Change in Percent 100% 80% 60% 40% 20% 0% 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 Lowest Third Highest Top 5% Source: U.S. Census Bureau.. 5
A New Surge in Inequality • Why: – Tepid growth in Gross National Product will lead to weak job creation – State and local governments cutting back services and employment – Budget deficit dominating job deficit: Solutions compete with one another – Lack of Congressional political will to invest in jobs – Systemic risk’s continued adverse impact on low/moderate income families • Porous safety nets • Age of less over site will continue • Economies are more interconnected 6
How do we minimize a resurgence in inequality? • Emergency funds: – UI and health insurance – State and local governments • Stimulate job creation • “Stop the bleeding” of the erosion in the government’s oversite of the economy • Ensure long-term security of Americans and their families. Social Security only needs modifications to further ensure its important role. 7
In fact, Americans support a range of improvements. • Lift the Social Security tax cap so that all workers pay the same payroll tax rate (83%). • Dedicate the estate tax solely to Social Security (70%). • Add a 5% tax on families earning over $250,000 and individuals earning more than $125,000 (69%). 8 Source: “Economic Crisis Fuels Support for Social Security: Americans’ Views on Social Security,” National Academy of Social Insurance, August 2009
Americans favor raising taxes over reducing benefits. • To protect Social Security’s ability to pay out benefits, raising taxes is most popular. – Raise taxes on workers (46%). – Raise the retirement age (31%). – Reduce benefits for workers (11%). – Don’t know (12%). 9 Source: “Economic Crisis Fuels Support for Social Security: Americans’ Views on Social Security,” National Academy of Social Insurance, August 2009
The benefits of investing in Social Security’s future outweigh the costs. • Benefits • Costs – Reduces poverty – Expenditures required to pay benefits and administer – Helps achieve self-sufficiency the programs – Hedge against uncertainty and – These costs have minimal systemic risk impact on the economy – Last through retirement years – Survivor’s and disability benefits – Program is Healthy: Can pay all future benefits through 2044 with no modifications – Maintains social compact – Strong Public Support 10
For the budget deficit hawks, there are other more efficient and effective ways to reduce long-term deficits. • Financial Transactions/Speculation Tax • Congress pays for clinical testing of drugs and then allows all new drugs to be sold as generics (CEPR, March 2008). • Public Insurance Option (CongressDaily, September 25, 2009. 11
Public investment in people has stalled, coinciding with the growth in income inequality. (Cumulative Increase Since 1959) 0.120 0.100 Cumulative Increase 0.080 0.060 0.040 0.020 0.000 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 Federal & State Federal Only Notes: All human priority concerns are defined as government social benefits to persons, social insurance funds, housing and community services, health recreation and culture, elementary and secondary schools, higher education, libraries and other, 12 and income security.
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