The Social Security Act of 1935 is arguably the most significant piece of social legislation passed by the US Congress. Largely the work of Secretary of Labor Frances Perkins, Social Security has, more than any other program, kept older and widowed or disabled Americans out of poverty.
(illustration by Michael McNeal)
Today, Social Security faces a serious crisis. George W. Bush has launched a program to cut benefits soon, and to dismantle Social Security entirely in the future. The plan would work two ways. First, it would divert huge amounts of money from the current program to private investment companies. Second, it would change the way social security benefits are calculated. Instead of calculating benefits according to wages, it would tie the calculation of benefits to an inflation index. This would be disastrous for all Americans, especially women. This plan must be stopped.
The decision to link Social Security benefits to wages was a compromise accepted by Perkins and other supporters of the original Social Security Act in 1935. Perkins and others viewed benefits as an entitlement to all citizens. However, congressional opposition forced a compromise. To save the plan, Perkins and her supporters in Congress suggested that Social Security benefits be linked to payroll taxes paid by employers and employees. The strategy worked, and Congress passed the Social Security Act. However, the plan had built-in race and gender biases.
African American, Latino and workers who were either seasonally or marginally employed were not covered at all. Women, viewed as dependents and not permanent members of the labor force, suffered also. Historian Alice Kessler-Harris points out that this evidenced a bias against all marginally employed segments of the population.
The money diverted into private accounts would come directly from Social Security’s guaranteed benefits, cutting benefits for future retirees nearly in half.
Things have changed somewhat over the years. Women are now taken more seriously as workers. Men whose wives were the family’s primary breadwinners may now collect survivor benefits – evidencing that women are now taken more seriously as workers. Low-income benefits are now adjustable enough to increase (though not much) with inflation. And the current Social Security system, though not perfect, has enough money to pay full benefits for several more decades. The Bush Administration plan will reverse all of this progress.
The National Women’s Law Center points out that women of color, especially, will suffer under the Bush plan. African American women and Latinas have low lifetime earnings and long life spans. They draw heavily on Social Security’s benefits for disabled workers and for the families of workers who become disabled or die prematurely. Additionally, more African American women and Latinas rely solely on Social Security for their income in retirement. This is not to mention the 15 percent of African American beneficiaries who are children. The Bush plan jeopardizes Social Security benefits more for these groups than others, hence hurting most those who have least.
Bush’s plan would require deep cuts in all types of Social Security benefits, even for those who do not participate in private accounts. The money diverted into private accounts would come directly from Social Security’s guaranteed benefits, cutting benefits for future retirees nearly in half. Since Social Security comprises a larger portion of women of color’s retirement incomes, these cuts would impact them disproportionately.
Since African American women and Latinas are among the lowest paid workers, the diversion of their benefits into private accounts would not yield enough savings for them to survive in retirement. The National Women’s Law Center calculates that African American women would be able to invest less than $400 per year and Latinas less than $300. After the deduction of management fees, these low investments would not keep them out of poverty.
Furthermore, privatization would not compensate for planned cuts in disability and survivor benefits. This would impact those who die or are disabled at a young age, because there would not be enough in the private account to provide for the worker’s family.
Do you subscribe to Political Affairs?
click image to find out how
Why does Bush want to alter Social Security? According to Kim Gandy, president of the National Organization for Women, Bush has "a big debt to pay to his friends on Wall Street, and he wants to do it fast so the next group can belly up to the taxpayer trough." The math is staggering. The transition money – estimated at 2 trillion dollars – would produce a huge boom for mutual funds fat cats. The financial industry would gain approximately $75 billion per year. And the money would come from American workers.
Gandy points out that women are less likely than men to have pensions, and more likely to rely solely on Social Security during their retirement years. Since women live longer than men, their savings, if they have them, run out sooner. And, the administrative costs of small private accounts consume a huge portion (as much as half) of the total contributions to the plan.
To accomplish his goal, Bush will soon launch a huge advertising campaign to publicize his program. This $40 million dollar TV ad blitz will tell Americans that our grandchildren will have no Social Security unless it is privatized.
Conservative groups such as the Heritage Foundation and the Cato Institute are working together to support the campaign. Lobbying groups with progressive-sounding names are telling women that the social security system is broken, and that privatization will ensure their futures. An example is the right-wing "Women for Social Security Choice," a group led by Republican Congresswoman Jennifer Dunn (Washington). Dunn and her ilk push the idea that women are smart enough to make their own choices about their Social Security contributions. African American women and Latinas in low paying jobs might counter that their low incomes yield fewer choices for them and a smaller payoff when they retire. This is hardly progressive.
The National Council of Women’s Organizations has a much clearer picture of the impact of privatization. Attacking the Cato Institute’s claims that privatization would help women workers, the NCWO points out that women would pay more for their annuities because they live longer, that private inflation-adjusted annuities, if available at all, would be cost prohibitive to low-income women workers, and that "earnings sharing," a tenet of the Bush plan, eliminates spousal benefits entirely.
Call to Action
All working women must fight the Bush administration’s efforts to rob them of their Social Security retirement benefits. Education is one key to defeating privatization. Organizations such as the Democratic National Committee, the National Women’s Law Center, the National Organization for Women, and the Institute for Women’s Policy Research all have excellent websites with information about why the Bush plan is all wrong for women. Women should write to Congress and insist that Social Security not be raided to benefit the wealthy private sector at their expense. There is still time to fight – and fight we must. For ourselves, and for the legacy of women like Frances Perkins, who fought so hard to keep America’s working women out of poverty.
--Anna Bates is a contributing editor of Political Affairs.
