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Is the Social Security System on the Brink? This Expert Says No

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Each January paychecks for millions of wage earners shrink as social security deductions begin again. The good news for 1979: this year the bite only goes up from 6.05 percent to 6.13 percent. The bad news: while last year deductions stopped when annual earnings reached $17,700, this year the cutoff is $22,900. It increases to $25,900 next year and $29,700 in 1981. Many experts, like Nobel prize-winning economist Milton Friedman and ex-Secretary of the Treasury William Simon, worry that social security benefits (now pegged to keep up with inflation) and the aging U.S. population may combine to bankrupt the system. At present 106 million Americans contribute to it, and 34.5 million collect $100 billion annually. To head off a shortage in funds, the Carter Administration is considering a $600 million cut in benefits next year.

“The most knowledgeable person in America about social security,” according to Senator Edward Kennedy, is Robert M. Ball, 64. The son of a Methodist minister, Ball started out at the Social Security Administration 40 years ago and served as its Commissioner from 1962 until his retirement in 1973. He recently published Social Security Today and Tomorrow (Columbia University Press, $14.95) and is now a senior scholar at the National Academy of Sciences’ Institute of Medicine in Washington. Ball gave his prognosis for the social security system to Clare Crawford of PEOPLE.

Are you worried about the future of social security?

I have a granddaughter who will be 65 in 2035; my grandson will be 65 in 2032. I care very much about their income security then, just as I do about older men and women, disabled people, widows and orphans today. I am not worried, but I am concerned.

What are the biggest misconceptions about social security?

One is that social security is an automatic annuity payable at a given age. If people continue to work after 65 and don’t get a payment right away, they think it’s unfair. But the point is, social security is an insurance against lost income when you retire, become disabled or die.

What’s another misconception?

That there is going to be a big increase in contributions for everybody this year. Actually, the increase for the average worker—who in 1979 will earn about $10,000—will be $8. For a person earning $15,000, the increase will be $12. For the 10 percent who have earnings above $22,900, the maximum increase will be about $333. The increase for some citizens seems large now because of the way the collection system is set up: they don’t have to contribute in the final months of the year. When January comes, deductions begin again—right along with the Christmas bills. That helps explain why these people are complaining so loudly now.

Will those who pay more eventually receive more?

Yes. An important point is that the earnings that are subject to social security tax are the same amount credited for benefits. So people paying on higher earnings will get higher benefits.

Do you approve of linking benefits to income earned?

Yes. Social security is a form of insurance, and it should reflect what your earnings have been whenever you face a loss of those earnings.

What will people receive in the future?

If a person of 43 continued to earn the average wage, he or she would receive about $15,000 annually upon retirement in the year 2000. If the person were in his 20s, he would get about $45,000—after making contributions throughout his career. A couple would receive about $67,500. That seems high, but of course by then the average wage would be over $100,000 at present inflation rates. This means the average single worker would be getting 41 percent of his salary and a couple 62 percent—the same as now. Benefits will keep up with the level of living in the U.S. wherever it goes.

What changes in the system would you make?

I would like to take the Social Security Administration out from under HEW so it can operate as a wholly independent, nonpartisan agency. I also want to give a better break to the couple where both parties work, to single workers and to widows. Women earn less in their working years, and that means they have lower benefits.

What about covering housewives?

There are a great many problems, because you would have to treat the housewife like a paid worker—make up a wage for her, decide who’s going to be the “employer” and who pays the tax. Do you give the same wage credits to a woman with five children as opposed to one who takes care of a single child and has a maid? What if the husband helps around the house? Does he get credits, too? Finally I see a very real problem in how to deal with the estimated million and a half couples living in an apparently stable relationship, but not a formal marriage. I just don’t know how to handle it.

Are you satisfied with the way the disability part of the system is working?

The increasing incidence of disability that gave many of us concern a few years ago has leveled off. What does concern us is that fewer and fewer people return to work after receiving disability benefits. We still have to worry about incentives—how to get these people back on the job. Clearly we ought not to pay them more disability than they got in earnings.

Do you think social security coverage is broad enough?

No. About 90 percent of the workers in the country are under the system. But federal civilian employees are not, nor are about 30 percent of state and local employees. Yet after they leave government, these people can pick up social security coverage with relatively short periods of employment in other jobs. Thus, the ratio of contribution to benefit is quite favorable for them. Everybody else has to pay in for their whole career. It’s unfair.

Aren’t you one of the people who would be subsidized in this fashion?

Yes. I probably will not take a benefit until I am age 70, and then I will get both my government pension and social security. I should have had to pay in my whole lifetime for the latter.

The Carter Administration wants to save $220 million annually by repealing the $255 lump-sum death benefit now paid to survivors. Is this a good idea?

On the contrary, I am in favor of raising the death benefit to $1,000. The $255 figure was set years ago, and today it is almost never enough to pay funeral expenses, let alone the expenses of a last illness.

Should people pay taxes on their social security benefits?

I would propose taxing one half of the social security benefit. I say one half because throughout your working life, you’ve paid income tax on your own contribution. So it wouldn’t be fair to tax that again. But the half contributed by the employer should be taxable to the employee.

Do you favor gradually increasing the age at which workers become eligible for benefits from 65 to 70?

I am very much for the opportunity for older people to work. But if you raise the age at which people get full benefits, you’ve cut benefits for people who can’t get or hold a job.

How are you going to finance the system when the baby-boom kids turn 65 in the year 2010?

There’s no way if people retire at 65. Between 2010 and 2030, the number of people over 65 is going to leap from 35 to 55 million. One of the most important things our society can do is to increase the opportunities for older people to continue to work. The birth rate is so low today, we might even have a labor shortage in the year 2010. Firms might be much more interested in hiring and keeping 65-, 66-and 67-year-olds.

Right now nearly 50 percent of men aged 62 to 65 claim benefits. How do you reverse that trend?

The 1977 social security amendments provide something of an incentive. You now get 3 percent a year in increased benefits for every year you work after 65. It used to be just 1 percent. Still, we also have to change the attitudes of employers and unions to create the opportunity for older people to work longer.

Is the social security system in danger of collapsing?

Overall, the system as it’s now written into law is soundly financed for the next 50 years. If anything, the Congress has somewhat over-financed the system for the next 25 years. I would be glad to have increases stop with the 1980 cutoff of $25,900. But Medicare is a problem. Over the long run I would like to see some general revenue funds used to beef up Medicare.

As an architect of social security, are you satisfied?

Social security is America’s most successful program of social reform. It’s very important that the whole system is based on the principle of earned rights—people knowing they’ll receive this protection because they have paid toward it and it is based on their earnings. Without an earmarked contribution for social security, there would be proposals to turn it into a relief program—pay only those with very low incomes. It’s your contribution that guarantees you the benefits as both a legal right and an earned right.