Future benefits be adjusted at least every six months whenever the consumer price index rises by 3 percent or more. RECOMMENDATIONS MADE AT HEARINGS The Committee's three days of hearings again sounded a strong vote of confidence for the Social Security system. Witnesses also urged several proposals to improve the financing of the program. Former Commissioner Robert Ball recommended that the maximum taxable wage base be increased in 1977 from the projected level of $16,500 to $24,000. With this change, it would be possible to reallocate the scheduled 0.2 percent increase in the Medicare contribution rate to the cash benefits program, without undermining the actuarial soundness of the Hospital Insurance program. Mr. Ball added: These changes in financing will have two effects: (1) The cash benefit trust funds will start to build up again and, under the most likely assumptions, the build-up will continue far into the 1980s or later. After these changes there would be no short-term financial problem for either the social security cash benefit program or the Medicare hospital insurance program. (2) The increase in the contribution and benefit base will increase the protection as well as the payments for the 15% of wage earners who are not now paying social security contributions on their full earnings. For example, a person earning at the maximum amount covered by social security and now age 55 would get, when he or she retired at 65, a benefit of over $100 a month above what he or she would get under present law. An individual earning the maximum amount and now 60 would get about $50 a month more than under present law when he or she retires at 65. Mr. Nelson Cruikshank, President of the National Council of Senior Citizens, recommended a four-prong approach. In addition to incorporating the two elements of Mr. Ball's suggestions (see above), Mr. Cruikshank proposed: 1. Employers should pay contributions on total payrolls, instead of the maximum covered wage base. 2. There should be greater use of general revenues to finance Social Security. VI. CONCERN ABOUT SSI The Supplemental Security Income (SSI) program became effective in January 1974.23 The program provides a guaranteed national income to those persons formerly assisted by State programs for the disabled, blind and aged. Administered by the Social Security Administration, SSI payments have been provided for those individuals transferred from the old welfare rolls, newly determined eligible individuals and so-called "essential persons", e.g., wives under 65 years of age who have spouses of eligible aged recipients who have themselves reached the age of 65. States have the option to supplement the Federal payment to a level equal to or greater than its former State assistance 23 Public Law 92-603 was signed into law on October 30, 1972. level. Thirty-nine States have opted to supplement the Federal payment and according to the Social Security Administration in all but three of these States, the average combined Federal and State payments are higher nationwide than those under the former assistance programs for the blind, disabled and aged. A. A YEAR OF LEGISLATIVE AND ADMINISTRATIVE CHANGES The 93rd Congress passed several bills which amended the SSI law. Included were provisions to: Increase the monthly income standards in two stages from $130 to $146 for an individual and from $195 to $219 for a couple; 24 24 Public Law 93-233, enacted December 31, 1973. Provide for automatic cost-of-living adjustments in the SSI system; 25 Provide for an extension of food stamp eligibility for SSI recipients through June 30, 1975;26 Exempt the value of maintenance and support furnished by private, nonprofit retirement homes in determining eligibility for SSI.27 Although legislation assisted in several ways to improve the effectiveness of the program, SSI was still seriously affected by various problems and inadequacies, including lags in distribution of checks and emergency payments; delays in replacement of lost or stolen checks and effective and timely determinations of eligibility; and lengthy appeals procedures. Staff shortages caused and intensified such problems.28 According to Social Security Commissioner James B. Cardwell, the error rate for persons not receiving checks or receiving incorrect checks was about 5 or 6 percent, caused chiefly by faulty data resulting from the conversion of State recipients' rolls and partly due to problems in Social Security's data system.29 The Commissioner stressed that hours of overtime were being put forth to correct and overcome these administrative hurdles. B. SSI'S SHORTCOMINGS Although described as a major step forward in assistance program philosophy, SSI is still a far cry from becoming what its original drafters intended it to be. Its major obvious flaw is failure to provide an income to eliminate poverty.30 This criticism was expressed quite explicitly by David Mueller of the Idaho State Office on Aging during a Committee field hearing. Mr. Mueller said: The basic flaw of SSI lies in its ineffectiveness to provide purchasing power to the elderly consumer. Since the original legislation in 1972, inflation has eroded its intent.31 Senator Frank Church echoed this concern when he observed: To guarantee an income to needy individuals is superficial unless adjustments can be made to assure the individuals of sufficient assistance to combat inflation. I'm glad that the original levels of $130 and $195 have been increased to $146 and $219, but SSI still does not meet everyday needs.32 When Senator Church questioned Commissioner Cardwell about the cost of raising the income level to at least the poverty threshold, the Commissioner responded that it would: Increase the cost of the program in 1975, by over $3 billion I am not optimistic frankly about our capacity to finance 25 Public Law 93-368, enacted August 7, 1974. 26 Public Law 93-335, enacted July 8, 1974. 27 Public Law 93-484, enacted October 26, 1974. 28 In the Administration's budget request for fiscal year 1976, the Administration also made a supplemental request for fiscal year 1975 for $121 million for 11,500 new staffing positions for Social Security, with approximately 7,000 positions earmarked for the Bureau of SSI. 29 Testimony before the Senate Committee on Aging, "Future Directions in Social Security," July 15, 1974. 30 The current poverty threshold is estimated by the Bureau of Labor Statistics to he $2,490 for an individual and $3,210 for a couple (1974). 31 Testimony before the Senate Committee on Aging, "Future Directions in Social Security," Twin Falls, Idaho, May 16, 1974. 32 Opening Statement remarks during Senate Committee on Aging, "Future Directions in Social Security," July 15, 1974. it at this stage given the mounting pressure that is developing Senator Church responded by pointing out that the Congress is: Being asked to approve $100 billion for the military this coming year... I suppose it just comes down to what priority we can give how many people, and how much we care about abolishing poverty in this country.3 33 VII. HISTORIC ACTION ON PENSION PROTECTION Congress acted in 1974 to protect pensions of approximately 35 million persons now participating in private employee benefit plans. The historic bill, the Employee Retirement Income Security Act of 1974 (Public Law 93-406) was the product of 3 years of intensive action by the Senate Subcommittee on Labor, which conducted extensive research to make the case for pension reform. Senator Harrison A. Williams directed the pension study from its inception. The Senate Committee on Finance took part in intensive scrutiny of the need for the bill and its provision. Similar cooperative action took place in the House. A special analysis of the bill, and a description of follow-up action taken since enactment, appears as Appendix 1, page 143, of this report. SUMMARY OF FINDINGS AND RECOMMENDATIONS Social security is the chief financial defense for workers and their families against loss of earnings because of death, retirement, or disability. It should continue to remain the primary means of providing economic security against these three contingencies. Some recent attacks on social security have been based upon misleading or inaccurate information. These accounts have only created needless apprehension and concern for social security beneficiaries and workers who are now contributing to this system, instead of making any meaningful contribution to the national dialogue concerning the future directions of social security. Prompt action by appropriate congressional units, the administration, and the general public is needed to deal with social security financing issues. The Committee on Aging, however, wants to reemphasize that this problem is clearly solvable if approached in an intelligent and dispassionate fashion. In this regard, the committee plans to devote special attention to recommendations for bringing the Social Security Trust Funds into actuarial balance. The committee is firmly committed to the principle that the social security program must be built upon sound actuarial, policy, and economic considerations. It will also be vigilant in assuring that (1) the early warning signals of the board of trustees and the panel on social security 33 Colloquy between Commissioner James B. Cardwell and Senator Frank Church during Senate Committee on Aging, "Future Directions in Social Security," July 15, 1974. 48-635 O 75 - 4 financing are heeded, and (2) appropriate corrective action is taken to guarantee the integrity of the trust funds. Additionally, the committee recommends that: Legislation should be enacted as soon as possible to: (1) reconstitute the Social Security Administration as an indedependent, nonpolitical agency outside the Department of Health, Education, and Welfare; (2) prohibit the mailing of political announcements with social security or SSI checks; and (3) separate the transactions of the social security trust funds from the unified budget.34 The cost-of-living adjustment mechanism should also be made applicable for special minimum beneficiaries under the Social Security Act.35 The retirement test under social security should be liberalized to allow older Americans to earn greater income. The income standards of the supplemental security income program should be raised to a level to abolish poverty for older Americans. Consideration should be given to provide cost-of-living adjustments more than once a year whenever the consumer price index rises by 3 percent or more, and to develop a special elderly index. The committee's continuing study into "Future Directions in Social Security" will also seek to develop recommendations for (1) the special problems of minority groups, (2) equitable treatment for women and men under social security, (3) improvements in disability coverage, (4) coverage of persons with little or no work experience under social security, and (5) other crucial issues. 34 Senator Church introduced S. 388 (the Social Security Administration Act) on Jan. 27, 1975, to implement these three objectives. 35 Senator Church introduced legislation (S. 650) on Feb. 11, 1975 to implement this recommendation. |