Magazine article Black Enterprise

Building Our Own Safety Nets

Magazine article Black Enterprise

Building Our Own Safety Nets

Article excerpt

Is the Social Security system really in crisis? It depends on who you ask. On one hand, there are those who project that the system is on track to run out of money as early as 2042. The officially projected shortfall: an eye-popping $3.7 trillion in today's dollars. As a solution to the problem, President Bush is pushing hard to allow younger workers (below the age of 55) the option of investing part of their payroll taxes in private accounts that can take advantage of the stock market, which can easily outperform Social Security returns of 2% a year after inflation. Others propose that the problem can be fixed through a combination of modest tax increases and a gradual reduction of Social Security benefits (for example, adjusting annual benefits to reflect longer life expectancy).

On the other hand are those who say that using the term "crisis" exaggerates the issue. They believe that the projected shortfall will not occur as long as the U.S. economy and population sustain their current rates of growth over the next 75 years. In fact, the official projections are based on conservative assumptions about economic growth that have been adjusted every year since the mid-90s. With each adjustment, the date of Social Security's impending insolvency has been pushed further into the future. Assuming continued economic growth, according to this optimistic view, the currently projected shortfall could hit in 2052, 2062, or be pushed back indefinitely.

Who's right? Only time--and politics--will tell. But the outcome of this debate is beside the point, as is President Bush's argument, long promoted by conservative think tanks such as the Cato Institute, that black Americans are shortchanged by Social Security because of our shorter life expectancy as compared to whites. Here's the real bottom line: With an average payout of only $14,000 a year, Social Security was never designed to be a major source of wealth. …

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