Americans Should Be Leading The Charge For Social Security Reform
by Eddie Huff
By calling for Social Security
reform, President Bush has signaled he is serious about taking
on the "third rail of American politics." This comparison
to the lethal electric rail on a subway implies that politicians
risk certain death - or at the least getting seriously burned
- should they take up the issue.
By now, it's understood President
Bush says what he means and means what he says. As was the case
regarding Iraq, the President seems unafraid to take on this
very difficult mission. But, as with Iraq, the administration
seems to be inept at communicating the problems faced by Social
Security and the benefits of reform.
African-Americans can and should
be the strongest proponents of Social Security reform for one
simple reason: Transferability.
Elizabeth McDonald said on
Forbes on Fox: "The Bush Administration should be out there
every day driving home the fact that the new system will allow
you to pass Social Security benefits on to your survivors regardless
of the circumstances."
As a financial advisor, I deal
with estate planning every day. In my experience, Black Americans
seem least likely to properly plan for and take the necessary
actions required to leave an behind estate of any real worth.
Some of this can be attributed to lower income levels and poverty,
but that is not always the case.
While other groups often leave
enough behind for their survivors to build upon, successive generations
of African-American families appear to have to start from scratch.
It is like rolling a large stone up a hill all of one's life,
only to let it roll back down at the end. Then their kids must
roll it back up again. The insane, vicious cycle continues.
Surviving spouses and children
under 18 years old now receive Social Security benefits if a
worker dies before age 65. Once the child turns 18 (or 23, if
a full-time student) or the spouse dies, the funds disappear.
President Bush has discussed making the funds transferable in
the future, so they can be passed on like life insurance.
This is something Black America
understands. The Bush Administration needs to drive home the
fact that transferability is a key facet of reform.
Latching onto terms like "private
accounts" and "privatization," liberal opponents
of Social Security reform want people to think they would be
totally responsible for investing and managing their own money.
They seem to think people are not sophisticated enough to make
the right financial decisions. They imply there are disreputable
businessmen waiting to get rich while haphazardly squandering
This is simply not true. Reform
proposals still make paying FICA taxes mandatory and benefits
unavailable until retirement or death. There would not be unlimited
freedom to invest in fly-by-night hedge funds. Proposals call
for strict guidelines and oversight of the bond or equity funds
allowed for investment.
New savings plans can range
from the conservative to more aggressive, regulated based upon
age. It is geared toward creating greater savings rather than
simply sitting in a general fund (into which Congress now dips
its sticky fingers).
The biggest difference remains
the fact that the money is never lost due to death.
But the President's current
arguments for reform do not go far enough. For instance, only
a small portion of FICA taxes are to be set aside for personal
accounts. The majority still goes into the general fund, supposedly
to protect current beneficiaries and those about to retire. How
about expanding it to half or more? The idea that people cannot
control their money tends to prevail in Washington, especially
among those on the Left.
And when critics say the President's
proposals are geared to the rich, remember that FICA taxes only
apply to the first $89,800 of one's salary. Anything more is
untouched. That means someone earning $1,000,000 doesn't pay
FICA taxes on over $910,000 of their salary. Most people pay
up to 15.5 percent on their entire income. The President wants
the ceiling raised.
Do the math. The rich would
contribute more money per paycheck under this Social Security
To cut through all the rhetoric,
consider the options: Under the current Social Security plan,
when you die, your spouse dies and your kids are over 18, the
government keeps your money. Under reform proposals, when you
die, you get to pass on the money - your money, and hopefully
more of it - to your survivors.
Eddie Huff, a financial services
specialist in Tulsa, Oklahoma, is a member of the national advisory
board of the Project 21 black leadership network. Comments may
be sent to [email protected].
Published by The National Center for Public Policy Research.
Reprints permitted provided source is credited. New Visions Commentaries
reflect the views of their author, and not necessarily those
of Project 21.
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