Social Security

John McCain

Barack Obama

*Translation

McCain plans to reform Social Security without raising taxes. Instead, he would slow the growth in benefits and supplement the current system with personal individual investment accounts. McCain says he would work with Democrats and Republicans and will act with or without support from the opposing party. Individual investment accounts put the risks on the individual, who would be in charge of his or her own savings.

People making more than $250,000 per year would be asked to contribute 2 percent to 4 percent more to Social Security. Obama says he would strengthen retirement savings. By reforming bankruptcy laws, Obama would protect workers, retirees and their pensions. Automatic workplace pensions would be created. Employers not offering plans would be required to enroll employees in an Individual Retirement Account . A savings match would be created for low-income and middle-class families. He opposes privatization of Social Security.

Sixty percent of senior citizens get at least half their income from Social Security. It works, but it does have a financing problem. Not only is Social Security a base protection for senior citizens, it also is the most important source of life insurance for children. For a married working person with two young children, it is the equivalent of a $433,000 term life insurance policy. About 4 million children — mostly the young dependents of the deceased, severely disabled or retired workers — receive these benefits.     To provide lead time for financing problems that might arise, each year Social Security’s board of trustees issues a report projecting the program’s financing 75 years out. In 2008, the trustees reported that the program has sufficient funds to meet all obligations until 2041.     McCain would move toward private accounts, which he supported during the Bush administration. But McCain doesn't want to say this would radically reduce guaranteed benefits, particularly for the younger generations. Also, McCain does not explain the implications on the long-term financing of the program, or redirecting substantial revenue from Social Security and into private accounts.     From a technical point of view, it is relatively easy to “fix” Social Security. There is no need for radical changes such as the ones President Bush has proposed. Moreover, such changes would undermine Social Security’s financing and further diminish the economic security of today’s young workers. The Social Security payroll tax is waged on a smaller proportion of workers’ earnings that it was in 1983, when the U.S. Congress last passed major financing reforms: 83 percent today compared to 90 percent of all earnings then. Forty percent of the projected deficit could be addressed by restoring the payroll tax base to the 90-percent level over the next 32 years. Other possible solutions include maintaining the tax on estates over $3.5 million and directing the proceeds into Social Security, diversifying trust fund investments so that a small portion goes into the stock market, increasing the age of eligibility for full benefits, or imposing a modest payroll tax increase. Obama's proposal to have people with $250,000 or more in earnings pay a little more is in line with the idea to restore the cap. Obama has a value base that aligns with Social Security, with the idea that "we are all in this together" and responsible for each other. From Eric Kingson, professor of social work and public administration at Syracuse University.