B. COMPARISON WITH BLS INTERMEDIATE BUDGET Income adequacy was the number one priority of the 3,400 delegates at the 1971 White House Conference on Aging. Delegates at the Income Section, for example, recommended that the standard be in line with the BLS intermediate budget for a retired couple." But this modest standard of living is beyond the means of nearly one-half of all aged-couples, and social security benefits are substantially below these projected levels of adequacy. Throughout 1973 and 1974 older Americans ran a losing race with inflation. From October 1972 (the month that the 20 percent Social Security increase was delivered), the consumer price index jumped by 23 percent (as of December 1974), an almost unprecedented advance. During this period Social Security benefits were boosted by only 11 percent in two stages, as a partial installment on the cost-ofliving rise for July 1975. The forthcoming automatic adjustment, now projected at about 8.7 percent, is based upon the increase in the consumer price index from the second quarter in 1974 to the first quarter in 1975.5 This amount, plus the earlier 11 percent Social Security increase, will produce an aggregate raise of almost 21 percent (see footnote 2, page 11, for discussion of compound effect of Social Security increases). 3 The BLS Intermediate Budget provides a standard of measurement for a hypothetical couple in an urban area. The budget takes into account food, living arrangements, medical expenses, and other costs. The budget assumes that the couple is healthy and has an adequate inventory for furniture and household appliances. Practically all experts describe the BLS Intermediate Budget as a very modest standard of living. The actual cost-of-living increase will be 8 percent because the inflationary rate subsided in early 1975. 5 Public Law cited in footnote 1. However, this increase is still below the 23 percent rise in the overall cost-of-living from October 1972 to December 1974. And, if the inflationary rate continues at its present pace, the increase in the consumer price index will reach 29 percent by July 1975. SOCIAL SECURITY INCREASES LAG HEARINGS ON "FUTURE DIRECTIONS" In mid-March 1975, the Senate Committee on Aging resumed its hearings on "Future Directions in Social Security." One major purpose was to determine the impact of inflation upon the elderly. Much compelling testimony was received before, during and after the hearing. From December 1973 to December 1974 the Consumer Price Index rose by 12.2 percent, the most rampant increase in over a quarter of a century. Contrary to the 1973 experience (when the increase was largely concentrated in certain areas, such as food and fuel), the 1974 inflation was across-the-board. But in the four areas where the elderly have their greatest expenditures-housing, food, medical care, and transportation-the rate of increases exceeded the rise in prices for all other items in the Consumer Price Index by 29 percent to 42 percent. These four items account for about 80 percent of the BLS Intermediate Budget for a Retired Couple. Price Rises Are Especially Severe For the Elderly. ... Items That Take Most of Their Budgets Are Rising at Faster Rates Family of Four Retired Couple Retired Couple Source: Bureau of Labor Statistics, U.S. Dept. of Labor, Autumn 1973. Elderly persons throughout the Nation wrote the Committee and described in personal terms the effect of rising prices upon them. They also expressed resentment over President Ford's proposal to "freeze" the forthcoming increase at 5 percent. Among the examples: From Tucson, Arizona: I am 85 years old. I paid income taxes 1920 to 1970-Social Security taxes 1937 to 1970. I have a home paid for which high taxes are about to take from under me. I had enough money saved for my last illness and burial. This eaten away by inflation. Very little income other than Social Security. What can be done for the millions like me-we also helped The superstores are go build our wonderful economy. ing wild since Feb. 1, increasing some 20 percent. From Erie, Pa.: Rents hereabouts, even the slummiest, are so high, by the time they are paid, 3/4ths of one's income is gone. Soc. Sec. $92+S.S.I. (Supplementary Security Income) $93=$185 a month. That's my only & total income. (Oh, yes, $46 of food stamps for $36). (Then, they are going up, too) the rents well, what isn't. Think suicide will solve all problems. From Carnegie, Pennsylvania : ... the cost-of-living has been so high that any increase was gone before we got it our pensions are so eroded that all we can do is buy the least expensive food we can find and wait each year to find out how much our rent was going up. From Santa Rosa, California: I am sure you will not be a party to ripping off the senior citizens by lowering the scheduled increase of 8.7 percent in Social Security. As a matter of fact, to compensate fully for the increase in living we should ask for an increase. From Stoney Brook, New York: I have worked all my life to support myself and my family Never collected unemployment. Now I understand we are to get an 8.7 percent increase cost-of-living expense and instead we are told it will be five percent. I am very bitter and disturbed . We cannot maintain good health if we cannot buy food and necessities. From Pittsburgh, Pennsylvania: The Government should be ashamed at themselves fighting over what to do about Social Security. Trying to cut it down is like cutting our throats. From Maywood, Illinois: Inflation is stealing from my lifetime savings. Unless inflation is abated soon, I may be among those low-income senior citizens on relief during 1975-6. I believe Congress and the Senate should veto the President's proposed five percent limit in his S.S. program and enact their own law with payments to conform to the cost-of-living index, as means of arriving at living cost adjustments. Inflation is expected to taper off in 1975. However, the overall rate is projected to be substantially above our historical experience and well above acceptable levels. Consequently, older Americans can expect little relief from the whipsaw effects of rising prices. (For fur ther discussion of Committee hearings on "Future Directions in Social Security," see pp. 16 and 21). III. ATTACKS ON SOCIAL SECURITY Social Security came under attack on several fronts throughout 1974. Critics raised serious questions about the actuarial soundness and even questioned bedrock concepts. Part of the concern arose from reports about an increase in the actuarial deficit. ESTIMATES OF THE SITUATION 6 In June 1974 the annual report of the Board of Trustees (the Secretary of the Treasury, the Secretary of Labor, and the Secretary of Health, Education, and Welfare) disclosed a 2.98 percent long-range (over a 75-year period) actuarial deficit. Three major factors were cited by the Trustees: 1. A change in the demographic projections (primarily fertility assumptions) which accounts for about 76 percent of the increase in the actuarial deficit; 2. A higher estimated inflationary rate; and 3. An increase in the number of disabled-worker benefits being awarded. The Board of Trustees declared: Although the new population and fertility projections will have a major impact after the turn of the century on the longrange cost estimates, they will not have a significant effect in the short run. (Emphasis added.) According to present shortrange cost estimates, action to increase the combined income of the OASDI and hospital insurance systems for the next 5-10 years is not necessary right now. . . . The Board noted that one of the possible ways that the projected short-range excess of outgo over income in the cash benefit funds can be avoided is a reallocation of the total program income among the three funds (OASI, DI, and HI) by revising the contribution rates scheduled in present law without increasing the total rate." In February 1975 a special Panel on Social Security Financing submitted its report, based upon new data to the Senate Finance Committee concerning the actuarial condition of the cash benefits program. The six-member panel projected a 6 percent long-range deficit. The advisory panel, which was appointed by the Senate Finance Committee, listed two reasons for projecting a larger deficit: a higher anticipated rate of inflation and a less rapid increase in birth rates from the present low level. Certain critics of Social Security seized upon the projected longrange deficit to attack the program on several fronts. Many of the • House Document No. 93-313, "1974 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds," Letter from Board of Trustees Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds, 93d Cong., 2d sess., June 3, 1974. 7 Page 38 of House Document cited in footnote 6. 8 "Report of the Panel on Social Security Financing" to the U.S. Senate Committee on Finance pursuant to S. Res. 350 (93d Cong.), 94th Cong., 1st sess., February 1975. |