FOR IMMEDIATE RELEASE: February 28, 2005
Schumer Unveils New Social Security Calculator Showing How Much 700,000 Central New Yorkers Lose Under Privatization Plan
New Web Calculator Tabulates How Much New Yorkers Could Lose Under Privatization Scheme
Schumer Hosts Live Demonstration of Social Security Calculator with New Yorkers Inputting Individual Age and Income
Schumer: We Will Not Allow Washington to Play Retirement Roulette
US Senator Charles E. Schumer, unveiling a new Social Security web calculator, demonstrated how much Central New Yorkers stand to lose under the Administration’s proposal to privatize Social Security. Joined by Syracuse residents who input their year of birth and average income, Schumer released a new program that computes a side-by-side personal comparison of the Bush Privatization Plan and the current Social Security system. Schumer also pledged to protect Social Security from privatization and preserve the benefit for generations to come.
"When it comes to cutting Social Security, my answer is no way, no time, no how," Schumer said. "The federal government made a promise to all Americans that if they worked hard, paid their taxes, and played by the rules, they could retire in dignity and get their benefits. The privatization plan that is on the table puts everyone’s benefits at risk.”
The Social Security calculator, which can be accessed through a button on Schumer’s website, www.schumer.senate.gov, allows Americans to simply plug in their average annual salary and year of birth and see a side-by-side comparison of the benefits between the Bush Privatization Plan and the current Social Security system. The calculator shows the expected annual benefits under both systems, the difference between the two plans as well as the percent reduction that Americans will face under the Bush Privatization Plan.
All numbers for the calculator are annual benefits adjusted for inflation. Calculations are based on Congressional Budget Office (CBO) economic assumptions. The President has said that individual accounts would do nothing to restore long-term solvency and that further benefit cuts are necessary. Since he has not made a specific proposal, these estimates assume that benefits are “price indexed,” a proposal made in Plan 2 of President Bush’s Social Security Commission. The calculator also incorporates the Privatization Tax that Senate Democrats discussed last week.
In Central New York, approximately 700,000 people are under age 55, and could lose Social Security benefits. Social Security has become an essential facet of American life, with one in every six Americans receiving a Social Security benefit and more than 95 percent of all workers covered by Social Security. Today, 47 million people receive these benefits. Nine out of ten individuals age 65 and older receive Social Security benefits, and roughly two-thirds of beneficiaries receive 50 percent or more of their income from the program. Social Security also provides benefits to disabled workers and survivors of deceased workers.
The President’s proposed privatization plan worsens Social Security’s already existing long-term financial problems. According to the Social Security Administration, Social Security will be able to pay full benefits until at least 2042. With the President’s private accounts and no other changes, the system would only be able to pay full benefits through 2031. Privatization shortens the Social Security trust fund by eleven years because payroll taxes that would otherwise go to pay benefits are diverted to private accounts, which forces the government to borrow trillions more to pay benefits to current retirees.
“Its simple math,” Schumer said, “You can’t use the same dollars for two different things.”
Then, to restore solvency, the privatization plan slashes benefits in two ways. The first, price indexing, targets young Americans who are just entering the work force. The younger a future social security recipient is today, the smaller their initial Social Security benefit will be.
The second cut, the privatization tax, is the additional amount of a promised Social Security benefit that a recipient loses as a result of having set up a private account. Under the privatization plan, recipients get to keep what’s in their account, minus any administrative fees. But the guaranteed Social Security benefit will be reduced by whatever is contributed to an account plus some interest. Private accounts only help if the annual rate of return earned on investments exceeds the rate of inflation plus three percent. If the money is invested poorly, or the market drops right before retirement, then the expected payout will drop accordingly.
The President’s plan also increases the birth tax - the amount of debt that is laid on the shoulders of each newborn child. It is already high enough, but the President’s plan adds almost $17,000 to every child’s birth tax, because it adds nearly $5 trillion in new debt over the first 20 years.
“It is morally irresponsible to be passing such a huge birth tax to future generations. All of this borrowing will eventually have to be repaid with interest, just like a home mortgage or a personal credit card,” said Schumer.