Good Jobs for All Newsletter

With the election of the pro-privatization Bush administration, the National Jobs for All Coalition has stepped up its efforts to debunk the phony Social Security "crisis."

The phony crisis is the alleged Social Security shortfall, trumped up by anti-government forces and pro-privatizers. The real Social Security crisis is the campaign to invest part of the trust funds in the stock market. That campaign is undermining confidence in the nation's most successful social program. If it prevails, Social Security will indeed be in financial trouble--and so will the millions of people whose benefits would be cut.

Coalition fights privatization

What are we doing to defeat privatization and support and strengthen Social Security? The Coalition has issued a "Social Security Packet," joined protesters in the street, and sent our message to the media.

Meetings in Washington this spring convinced Coalition leaders that public information is crucial for dispelling the myths circulated by Social Security's opponents and winning the fight against privatization. Consequently, the Coalition updated "Social Security Is Not in 'Crisis,'" a piece originally published in 1999 that debunks the shortfall as well as the privatization fix. Two newer pieces, "Social Security and Minorities" (see page ) and "Social Security Isn't Just for Seniors," show the wide-ranging benefits of Social Security.

Our "Social Security Packet" also includes a reprint, "Women and Social Security," issued by the National Council of Women's Organizations. And, to include analyses of both the latest forecasts by the Social Security trustees and the Bush Commission's privatization plans, we've added "Social Security Shortfall Long Way Off," a piece by Christian Weller of the Economic Policy Institute. The packet also includes "Guidelines for Action" and a "Summary of the Social Security Program."

The Coalition has distributed part of the "Social Security Packet" to our members, posted its components on the our Web site, made it available for classroom use, and distributed it at demonstrations and public meetings, particularly when members serve as speakers. We urge members to use and distribute the packet when they attend meetings and visit their senators and representatives; we encourage teachers to use it in classrooms; and we recommend that the material be used for letters to editors and op-ed articles.

Bernice Crane, who recently joined our executive committee, is in charge of outreach. About 100 media representatives, legislators, and labor officials have already received the "Social Security Packet." To reach a wider audience, the Coalition, along with the Labor Institute and the National Council of Churches (NCC), is raising funds to popularize and illustrate parts of the "Packet" and to finance wider distribution. We are grateful for a grant from the Sunflower Foundation that has already provided support for our Social Security Campaign and made it possible to adapt one of our basic movement pieces, "Employment Statistics: Let's Tell the Whole Story" (Uncommon Sense 4) for a wider audience.

Task Force

To sharpen its message and coordinate distribution, the Coalition formed a Social Security Task Force. The group includes representatives from the NJFAC executive committee, Karen Hessel, deputy general secretary of the National Council of Churches and chair of the NCC's Women's Network, and David Langer, chair of the employee benefits committee of the Actuarial Society of Greater New York.

When Treasury Secretary Paul O'Neill came to Wall Street last fall to launch a $20 million pro-privatization campaign, Coalition members were among those to greet him. Exceeding his boss's public pronouncements, O'Neill stated at the time in an interview with the Financial Times that "able-bodied adults should save enough … to provide for their own retirement and health and medical needs."

Coalition members joined a street meeting to protest O'Neill's position and the Wall Street initiative. The protestors included the Joint Public Affairs Committee for Older Adults, New York Seniors, the New York Central Labor Council, District Council 37 of the American Federation of State, County and Municipal Employees, the AFL-CIO, which was represented by its Treasurer Richard Trumka, a member of the NJFAC advisory board, and members of Congress, including Jerome Nadler (D-NY). I had the opportunity to speak at the rally, which attracted print and TV coverage.

The Coalition's campaign to protect--and improve--Social Security is another opportunity to send a message about our basic issue: that full employment-more people working at livable wages-is the way to solve or reduce many of our most pressing problems. When we took aim at welfare "reform," we pointed out that real reform had to include JOBS FOR ALL AT LIVABLE WAGES.

In the case of Social Security, full employment would mean that more people are contributing to its trust funds and fewer are forced to retire early and collect benefits. Note how a few years of low official unemployment have extended the life of the trust funds-even with the unduly pessimistic economic assumptions that the government uses. That's why we say, "The best insurance for Social Security is full employment."

Gertrude Schaffner Goldberg is director of the doctoral program at the Adelphi University School of Social Work and NJFAC Chair.

Is the recession over? By June Zaccone

No sooner was it announced in November 2001 that the recession had started the previous March, than some were already declaring it at an end. ut that announcement must have rung hollow to the increasing numbers of unemployed.

In April, at the time of this writing, unemployment was 6%, up from a low of 3.9 percent in October 2000. Since then, another 3.1 million people have joined the ranks of the officially unemployed. Black unemployment is again double-digit. Consumers, however, seem to be optimistic; and the stock market has recovered some of its fall. Alan Greenspan and the Fed are confident enough to have stopped cutting interest rates.

What's going on? Despite the persistence of unemployment, there are reasons to believe that the recession, whether it is over or not, is not as deep as some had feared, but even so, chronic imbalances threaten the nation's future economic health.

What braked the developing recession? Many factors were at work:

The Federal Reserve's 11 small interest rate cuts last year encouraged auto companies to offer cars at interest-free loans and households to refinance their mortgages, then spend the extra money.
Government spending has gone up, specifically federal spending on the military. The surge, which started in October, has continued into thismonth at a yearly rate of more than $100 billion. Additional spending on highways, schools, Medicaid, and unemployment insurance also helped.
The tax cut--not the big one, targeted by the Bush Administration to those with income above $130,000 a year but the small one, spread over most taxpayers that went into effect this year--has provided an economic stimulus. The tax rebates of last year may have also helped.
Consumer spending, which is two-thirds of economic activity, has remained strong despite higher unemployment and high debt, helped by the tax changes.

But two types of spending are continuing or future sources of weakness:

Business investment--adding structures or equipment--is being hampered by partially idle factories. Businesses in the fourth quarter continued to cut investment, a key reason for the economy's weakness. After-tax profits of U.S. corporations fell nearly 16 percent in 2001, the first annual drop since 1982. Profits, a major source of financing, indirectly affect investment.
Rising state and local deficits have forced budget cuts, which will act as a drag on the economy.

Chronic imbalances remain, and threaten expansion:

Unemployment and unemployment benefits: However low unemployment in the 1990s (at their best, rates just under 4 percent), there are always millions of unemployed workers, official and unofficial. Only about two out of five of the officially unemployed collect benefits. This is particularly absurd, as their spending, much more dependable than that of higher income groups using their tax reductions, helps to offset recession
Lagging pay: Despite modest improvements toward the end of the 1990s, private sector average hourly pay (in inflation-adjusted dollars) is below what it was in 1973. This wage crisis, afflicting especially younger workers, has limited workers' spending and retirement saving.
Inequality: Income inequality has widened over the last 25 years. The distribution of family income, virtually unchanged from the end of World War II until the late 1960s, has sharply worsened since then. Both the absolute income and the share received by the bottom half of the population have fallen. The poverty rate, which by 1973 had dropped sharply from its postwar peak, has since risen.
Consumer debt: It is not surprising that lagging pay has been accompanied by a rise in consumer debt in relation to income, an upsurge that began in the 1970s. Over the last several years, consumer debt continued its rise at roughly 8 percent a year--far faster than household income.
Business debt and current profits: According to economist Dean Baker's analysis, manufacturing profits fell by 48.8 percent between 2000 and 2001. The gloomy profit picture is a consequence of higher depreciation rates, as shorter-lived investments, like computers, need to be replaced more quickly. Business debt has expanded rapidly, and poses a problem when the means of servicing it-profits-are weak. A Federal Reserve paper reports that "viewed as a share of GDP [output], such debt has now reached unprecedented heights."
International debt: Our chronic trade deficit, now at a yearly rate of nearly $400 billion, has accumulated an enormous debt, financed by our trading partners. The United States is now the world's largest debtor. If the U.S. debt were denominated in a currency other than its own dollar, we'd long since have been subject to the tender mercies of the International Monetary Fund.

These chronic weaknesses-which have persisted for 25 years throughout expansions and recessions--affect the ability of the economy to right itself.
The end of the recession may create an illusion that all is well. But a long-term cure to profound economic problems-inequality, chronic unemployment and lagging pay for the poorest and middle-income workers--will require significant changes in public policy.
Economist June Zaccone is a member of the Coalition's executive committee.

Unemployment Benefits Extended--But System Needs Repair By Helen Lachs Ginsburg

The economic recovery package enacted in March makes many jobless workers in every state eligible for temporary, emergency unemployment insurance benefits.

Federally funded, these last for up to 13 weeks after a worker still looking for a job runs out of regular, state-financed UI (generally after 25 weeks). Jobless workers in some states can also get an additional 13 weeks of federally-financed benefits, but only if the number of unemployed collecting benefits reaches 4 percent of their state's labor force. This doesn't help unemployed people in most states.

Ironically, a crisis is looming in New York because statewide its unemployment is too low to set off the trigger. So the jobless in New York City, with heavy unemployment, do not qualify, even with the Big Apple's economy still reeling from the aftermath of 9/11 superimposed on a faltering local economy with large numbers of former welfare recipients.

Clearly, the federal-state UI program- the main safety net for unemployed workers since 1935-needs overhauling. Now, states must meet certain federal standards but set their own rules governing coverage, eligibility, benefit amounts and revenues. The result, a recent report called Failing the Unemployed shows, is a patchwork quilt rife with shortcomings and inequities.

Jointly issued by the Economic Policy Institute, the Center on Budget and Policy Priorities, and the National Employment Law Project, the state-by-state examination of unemployment insurance systems finds, for example, that, nationally, only about two out of five of the jobless receive UI-a ratio that sinks to one in five in Louisiana and rises to nearly three out of four in Massachusetts. Unemployed people most in need of benefits-low-income and part-time workers, recent labor force reentrants, former welfare recipients and women-are most likely to be ineligible to receive them. And, if eligible, meager UI benefits, which vary widely among states, typically replace less than half of a worker's lost wages. In some states, the maximum benefit is below the government's paltry poverty standard for a three-person family.

Failing the Unemployed rates states on five critical areas: eligibility requirements, benefit levels, revenue, trust fund adequacy and recession preparedness. Twenty-three failed outright and many others just squeaked by with the equivalent of a "D." The report's recommendations include expanding benefit eligibility, better benefits, and tax policies that increase employer obligations and insure the adequacy of state UI trust funds. The report is available at http://www.epinet.org/briefingpapers/bp122.html.

Rising Retirement Insecurity, By Gregory N. Heires

As the Bush administration and its allies in Congress and right-wing think tanks persist in their campaign to privatize Social Security, reality is biting back.

The Enron scandal and the stock market decline have focused attention on the risk of relying on individual savings accounts like 401(k) plans.
For privatization advocates, the Enron demise amounts to a political landmine because thousands of Enron employees who had dedicated most of their 401(k) savings to the company's stock lost much of their retirement funds.
"Corporations have saved billions of dollars as they have stopped offering their workers a traditional pension with a guaranteed income," said Gertrude Schaffner Goldberg, chair of the National Jobs for All Coalition. "And just as corporations are destroying the traditional pension, privatization supporters will ruin the Social Security system if they succeed in their goal of establishing individual savings accounts, which means government will no longer guarantee a minimum retirement income for recipients."

Meanwhile, the Social Security trustees continue to push back the year in which the trust funds will be empty. The most recent projections indicate that the trust funds will dry up in 2041, which is twelve years later than predicted in 1997.

But despite good news for Social Security and bad news for private schemes, ideological-driven organizations like the Cato Institute continue to press for privatization.

What crisis?
"We have always disputed that Social Security faces a crisis, and the government's figures are showing that the doomsayers' warnings are overblown," said economist Helen Ginsburg, a Coalition executive board member and author of the Coalition's "Social Security and Minorities" ("Uncommon Sense 25"). Many analysts say the projected shortfall could be largely addressed by raising the cap on the regressive payroll tax.

As the drop in the Stock Market and the Enron debacle point to the problem with introducing individual investment accounts in the Social Security, it is increasingly clear that many of the privatization advocates are driven by ideology rather than sound public policy.

Normally, blue-ribbon presidential commissions allow, in theory, for differing positions. But the Bush Social Security panel was entirely stacked with people who favor privatization. Five of the 16 members have ties with the rabidly free-market, anti-government Cato Institute, which has been part of a global effort to privatize social security systems for a generation.

Unable to agree upon a single plan, the Bush commission late last year recommended three privatization options. All would reduce retirees' living standards because the amounts in individual accounts would not offset benefit cuts. All would require a massive infusion of tax dollars to cover transition costs, undercutting the privatizers' assertion that individual savings accounts would address the Social Security's alleged funding crisis. One proposal would raise the retirement age for workers. And the diversion of funds to private accounts would lead to a reduction in benefits for workers with disabilities and survivors of deceased workers.

401(k) plans fall short

While the Stock Market boom of the go-go '90s created widespread enthusiasm for 401(k) accounts and a misguided popular faith in private investment, recent studies are showing that the retirement security of baby-boomers and the middle class is precarious.

Retirement wealth for the middle class actually fallen in recent years, according to a recent study by New York University economist Edward N. Wolff for the Washington-based Economic Policy Institute.

The study projects that 40 percent of households headed by persons between the ages of 47 and 64 will not be able to replace even half of their pre-retirement income when they stop working. Nearly 20 percent of the workers in that age group will have retirement incomes below the poverty line, according to the study.

A disturbing new book, The Great 401(k) Hoax by William Wolman and Anne Colamosca, shows that 50 percent of Americans have less than $14,000 in their 401(k) accounts-clearly much too little to retire on.

This situation will only get worse if the financial managers of Wall Street get their hands on the Social Security system.

"The threat of privatization is still out there," Ms. Ginsburg said. "We have to continue to dispel the myth that Social Security faces a crisis. And we have to make it clear to the public that privatization means loss of benefits and tell politicians that they will be held accountable if they vote to set up individual savings accounts."
Gregory Heires is senior associate editor of NYC-based Public Employee Press, the official publication of DC 37, AFSCME.

FOCUS ON SOCIAL SECURITY: A Crucial Benefit for Minorities
By Helen Lachs Ginsburg and Gertrude Schaffner Goldberg

Before Social Security was enacted in 1935, organized business and Republicans bitterly opposed it. But due to fear of reprisals at the polls, most Republicans opposition collapsed. Since then, conservatives have continued to criticize Social Security. One criticism of Social Security is that it is unfair to African-Americans and other minorities, which implies that it is not an important program for them. Nothing could be further from the truth.

Greater Reliance on Social Security

Proportionately fewer elderly minorities than whites receive any pension income. Minorities, with average earnings considerably less than those of whites, are also less likely to have income from assets such as savings, stocks, and bonds. Thus, Social Security is a much more important source of their retirement income. In 1996, almost half of minorities collecting Social Security relied on it for more than half of their income, compared to one in three whites. And one in three African-American and Hispanic beneficiaries but only one in six whites relied on Social Security for all of their income.

Minority Poverty

Blacks typically earn less and are more likely to be unemployed than whites. This reduces their Social Security benefits, which are related to earnings and years of employment. Since they also have less income from pensions and assets, poverty is more widespread among black than white elderly persons. In the late 1990s, nearly one in four African-Americans 65 and older was poor (using the official poverty standard) compared to less than one in ten whites. Without Social Security, around 60 percent of elderly African-Americans and Latinos would have been poor, compared to slightly less than half of whites.

Social Security pays low-wage workers a higher proportion of their past earnings than average or high-wage workers. Thus minorities, with lower average earnings, benefit from this progressive benefit formula even as they end up with smaller average monthly payments than whites. The discrepancy is due to inequality in the labor market, which Social Security only partially offsets. While minorities benefit from the progressive benefit formula, the Social Security payroll tax is regressive because it is currently capped at $84,900. The result is that minorities are more likely to pay the Social Security tax on all of their earnings. However, the tax could be made more progressive by eliminating the income cap or in several other ways.

Important Surviror, Disability Benefits

Those who claim that Social Security does not benefit African-Americans often point to their lower life expectancy than other demographic groups. A smaller proportion reaches retirement age, and
those who do, on average, do not collect benefits as long as whites. But poorer health during working years and more premature deaths mean that disability and survivors' benefits are more important to African Americans. And progressive benefits more than offset the difference in longevity, so that the claim of some conservatives that minority men get a negative return on their Social Security taxes is wrong (The Actuary, Sept. 1998).

Disadvantaged minority groups depend more on disability benefits than do whites because low- income workers have much higher rates of disability. While about half of African-American and other minority beneficiaries receive retirement benefits, compared to nearly three out of four white beneficiaries, minority beneficiaries are much more likely to get disability and survivors' benefits. One out of four African-Americans but only one out of eight white Social Security beneficiaries collects disability or survivors' benefits. One out of four benefits awarded to surviving children goes to African- Americans even though they are only 15 percent of children under 18 years old.

Toward the Future

Privatizing and weakening Social Security's basic protection in other ways will jeopardize the income that is so necessary for minorities. As the Urban League's Maya Rockeymoor put it, "...funding private retirement accounts by diverting money away from the current system would increase retirement insecurity and undermine the viability of the survivor and disability components of the Social Security system-the very programs upon which African-Americans and their children heavily rely." Full employment at decent wages would improve Social Security benefits. It would raise the earnings of low-wage workers and increase their future Social Security benefits at the same time that it would add more money to the Social Security Trust Funds. Other government policies-for example, universal health care-can also reduce and then eliminate racial gaps in life expectancy, disability, wages and unemployment.

In the meantime, it is important to raise the special minimum benefits paid to lifetime, low-wage workers and to strengthen Social Security in other ways that are especially important to minority workers and their families. One important way is to roll back the Social Security retirement age, which is gradually rising to 67 by 2022.

Excerpted and adapted from Uncommon Sense 25, part of the National Jobs for All Coalition (NJFAC) Social Security Packet. Helen Lachs Ginsburg, Professor Emerita of economics at Brooklyn College, is on the NJFAC executive committee. Gertrude Schaffner Goldberg, director of the doctoral program at the Adelphi University School of Social Work, is NJFAC chair.

The National Jobs for All Coalition is a project of the Council on Public and International Affairs.

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