A Commitment to All Generations: Social Security and the Common Good, March 1999
The Statement A Commitment to All Generations: Social Security and the Common Good is an updating of the 1983 Statement on Social Security. It was approved by the Committee on Domestic Policy, approved by the Administrative Board in March 1999, and issued by the Board in its own name. A Commitment to All Generations: Social Security and the Common Good is authorized for publication as a statement of the Administrative Board of the United States Conference of Catholic Bishops by the undersigned.
Monsignor Dennis M. Schnurr
The current public discussion about the Social Security system has raised questions about how to ensure the strength and stability of the program, which is a national achievement that has served our people well. Currently, Social Security is financially sound and stable, but it will face fiscal stress in the next thirty years. While headlines predicting bankruptcy are much overstated, after the year 2032 the income to the program will be reduced as the number of contributing workers declines. At the same time, the number of beneficiaries will be increased by the retirement of millions of "baby boomers." This imbalance is what drives the current Social Security reform debate.
Social Security reflects our commitment as a society to ensure a minimum level of security for all workers, their families, and persons with disabilities. Any changes in this essential program should extend our individual commitment to care for others across generational and economic lines. Because of the program's commitment to workers, their families, and persons with disabilities, the Social Security reform discussion should address not only economic and political issues but also moral issues. As bishops, our concerns are especially focused on how discussions will affect the most vulnerable workers and their dependents—those least likely to have other forms of financial security. This statement is intended to offer information about the principles of Catholic social teaching and Social Security reform. People of good will can and will disagree about specific applications and policy judgments, but we believe these principles can contribute to the public dialogue on preserving our commitment to our children, our parents, and ourselves through Social Security.
Catholics have several reasons to participate in the developing public discussion about Social Security. We are citizens, and our lives and families are directly affected by these discussions. Our Church has experience as an employer, and its members are employers and employees in the public, private, and religious sectors. The Church, through its various ministries, also helps to meet the needs of people—young and old—for security in times of old age, disability, and death.
In 1983, the Administrative Board of the U.S. Catholic Conference issued a statement on Social Security. It did so in order to offer a moral perspective to the discussion taking place at that time. In that statement, the bishops recognized that the Social Security program is the largest and one of the most successful social programs in the United States. It provides an effective, dignified way for Americans to honor their responsibility to provide basic income security and medical insurance (through Medicare) for the elderly, persons with disabilities, and their dependents.1 Social Security has helped reduce poverty rates for the elderly, from 35 percent in 1959 to less than 11 percent in 1996. Low- and average-wage workers often benefit as much or more from the disability part of the program as they do from the retirement part. In addition, Social Security benefits lift more than one million children out of poverty each year through the survivors' benefits due them upon the death of a parent. If we separate out these various programs or pit one part of the program against another, we put at risk the security of persons with permanent disability as well as the surviving spouses and children of workers and all those who rely on Medicare and Medicaid for their health insurance. Any proposed changes in the system must be viewed carefully given the success of the program and the millions of families who contribute to and depend on it.
II. Principles for the Dialogue
The 1983 Statement on Social Security recognizes that principles of Catholic social teaching are reflected in the Social Security program. These principles, which are the foundation for the Church's support of the program, include protecting human dignity, preserving the common good,2 option for the poor and solidarity, and subsidiarity. It is appropriate to reaffirm and review these principles in light of the current discussion because the question is how to ensure the Social Security system's strength and integrity while preserving the values and principles it reflects. Given the importance of the program to us as individuals and to the nation, adherence to these principles is vital so that we do not abandon our national commitment to ensure a life of dignity for our parents, ourselves, and our children.
- Human Dignity: The dignity of each person is a gift from God. This gift is protected by basic human rights that are universal and inherent in the very nature of the human person. Included among these rights is the right to security in case of sickness and old age.3 The elderly and persons with disabilities do not forfeit their claim to basic human rights because they are old or disabled. We must recognize our responsibilities to the elderly and persons with disabilities to ensure their dignity and worth, so that they can enjoy their God-given rights.4
- The Common Good: The human person is essentially a social being. On coming into this world, we are not equipped with everything we need for developing bodily and spiritual life. We need others. We live, work, and worship with others. Because our lives are lived with others, our human rights are realized in community, and we all must work together, across generational and economic lines, for the sake of the common good, for the general welfare of the entire human family.5 By working together, all our rights will be protected. Our differences—age, physical abilities, intellectual or moral aptitudes, and the distribution of wealth6—encourage and often oblige us to practice generosity, kindness, and sharing of goods.7
- Option for the Poor and Solidarity: We measure all policy choices first by how they touch the poor and vulnerable. When there is a question of allocating scarce resources, the poor and vulnerable have a compelling claim to first consideration. The Biblical mandate requires us, as a community and as individuals, to care for the widow, the orphan, and the stranger. Today, there are still widows and orphans needing assistance. There are also strangers to our community or to us, like persons with disabilities and older Americans, who need the support of their families and the community to continue to live productive lives of dignity. Through our individual and public decisions, we must stand in solidarity with those who are poor and vulnerable.
- Subsidiarity: The principle of subsidiarity defends the freedom of initiative of every member of society - and of the intermediate institutions that make up society - from excessive intervention by the state or other larger institutions. We vigorously defend the unique roles of families, community associations, and other intermediate institutions. However, these groups alone cannot protect human dignity and promote the common good without the assistance of the whole society, including governmental institutions.
The Role of the Individuals and the Private Sector: Workers and their families should be made secure against unemployment, sickness, accident, old age, and death. Individuals have the first—but not the sole—responsibility to secure their future. Personal savings and private pensions are two important elements in achieving that security. However, individuals, employers, and employees often cannot achieve this objective without relying on some form of social insurance. Some form of support offered by the entire nation is a necessary complement to achieving that security for average- and low-wage earning families.
Role of the Government: Government should participate in creating a comprehensive program for insurance against illness, disability, unemployment, and old age.8 In these cases, the role of government is to ensure that when a wage earner can no longer support his or her family because of old age, death, or disability, he or she should still be able to maintain a decent standard of living and not be forced to depend on welfare or charity. In the United States, the Social Security system provides this basic social insurance protection. Therefore, it is very important that all Americans support the system, have confidence in it, and work constructively to make it a fair and sound program.
III. Key Policy Priorities: Criteria for Examining Reform Proposals
As efforts are undertaken to examine the Social Security system and to ensure its financial soundness, special attention must be paid to the poor, persons with disabilities, and children. To do this, we need to evaluate reform proposals in light of our principles, which direct our policy priorities. These principles reflect those areas of particular concern to the Catholic community and the caution that should be exercised when considering change to a successful program.
Changes in Social Security should not put at risk those individuals and families whose resources are already very limited.
One of the most important issues in considering structural changes in Social Security is to determine how much of the risk and responsibility for retirement security to place on each individual worker. The Social Security program was established not as a "retirement investment program" but as a "social insurance program" in which society as a whole buffers the individual and collective risks that workers and their families face. Individual risks include how long a worker may be able to work, how long they will live, and how much they can earn and save over a lifetime. Collective risks include uncertainties about the performance of the economy and the extent of inflation over the worker's lifetime.
A retirement investment program does not guarantee an adequate or assured retirement income. The amount available to a worker and his or her family at retirement or upon death or disability will be subject to all the individual and collective risks but without the society's buffer. The retirement investment program's success or failure falls on the individual. A shift from social insurance to retirement investment puts at greatest risk those who have the least to invest and to cover the cost of investment, as well as the least access to investment information. A shift from social insurance to retirement investment also separates the retirement portion of Social Security from the Disability Insurance Program and the Survivors' Benefits.
Much of the current discussion focuses on proposals to privatize all or part of the Social Security system. While some advocates point to the potential for higher returns and other possible improvements, there are significant risks, especially for average- and low-wage workers who are the most vulnerable. There is much disagreement about the costs and advantages of moving to such a system, the complexities of administering it, and the risks and rewards involved for individuals. In a privatized Social Security system, there is a structural shift from a social insurance program to a retirement investment program.
Workers supporting families on average wages are often only a few paychecks away from poverty and can seldom count on either private pensions or savings. Only about 50 percent of workers have a job-related pension, and those pensions are increasingly in 401(k)-type individual investment plans, defined contribution rather than defined benefits plans. In these plans, the worker bears the full risk of gain or loss. The minority of workers who have private savings for retirement apart from their jobs also bear full risk in investing those savings. Average- and low-wage earning families need to be able to rely on predictable, inflation-protected benefits. Social Security may be the only source of assured lifetime retirement income.
Social Security in its current social insurance structure employs a progressive benefit formula that replaces a larger portion of lifetime earnings for people with low earnings than for people with high earnings. Since women tend to have lower lifetime taxable earnings than men, women generally benefit from this provision.
The disability and survivors' portions of the Social Security program should remain linked to the retirement portion to ensure continuity of commitment to workers and their families in cases of disability and death.
A shift from social insurance to retirement investment would separate the retirement portion of Social Security from the Disability Insurance Program and the Survivors' Benefits. Many low-wage and minority workers derive more benefits from the Disability Insurance Program than from the retirement component because of their more demanding labor and the earlier deaths often experienced by minorities. The linking of these components of the program also strengthens its universality.
Any changes made in the tax structure should be weighted in favor of the poor. Those with lower incomes should bear less of the total Social Security tax burden than those who are more affluent.
The money that supports the Social Security program is raised through payroll taxes. The Social Security payroll tax is only applied to an individual's wages up to the "wage base," currently $72,600 per year. Workers do not pay Social Security payroll taxes on income above this amount.9 One of the proposals to raise more revenue would increase the wage base, shifting more of the tax burden upward. However, one of the strengths of this program—its universality—might be jeopardized if higher earners were asked to contribute more to the system without a commensurate increase in their benefits. Another proposal, increasing the payroll tax, would also raise revenues, but it would increase the burden on low- and average-wage workers and on the self-employed.
Benefit inadequacies with respect to the benefits received by some women should be remedied.
Although Social Security has helped reduce poverty rates for the elderly, some subgroups of the elderly population are at a greater risk of living in poverty than others. Unmarried women make up more than 70 percent of poor elderly households, although they constitute only 45 percent of all elderly households. Single, divorced, and widowed women aged 65 or older have a poverty rate of 22 percent, compared with 15 percent for unmarried men and 5 percent for married couples older than sixty-five. Researchers expect the current level of poverty among widows to persist over the next twenty years because there will still be a substantial number of women with a history of low earnings and intermittent labor force participation whose worker benefits will not be greater than their widows' benefit.
These realities emphasize the need to consider carefully the proposed changes in the Social Security system and their impact will be on people who, even under the current system, are still poor. They also reflect the need to continue efforts to improve the lives of the elderly, many of whom still live in poverty. Many of these efforts can be undertaken outside of reforming the Social Security system. Increasing the minimum wage and strengthening the Earned Income Tax Credit are among the most effective means of alleviating poverty during both the working years and retirement.
Principles of equity and concern for the common good support bringing employees from all sectors of the economy into the Social Security program. For most of its existence, the Social Security system has paid out in benefits the money that was collected in taxes. The problem that will face the Social Security system is a mismatch between workers contributing to the system and retired workers and their families needing the benefits. One way to address this mismatch is to increase the number of workers contributing to the system.
The Church's support for the Social Security program would suggest that all newly ordained priests should participate in the program and those who opted out should be offered an opportunity to opt back in. In addition, since only about 75 percent of state and local workers are now included in Social Security, the participation of the remaining 25 percent should also be considered. Any expansion in the number of workers participating in the Social Security program will broaden the base from which revenues are drawn. It will also expand the pool of beneficiaries to whom benefits will be paid. The financial costs of these expansions are not certain. Again, caution is important in considering even this change.
The current public discussion about Social Security is part of an ongoing discussion that we have been having since our republic was founded. Earlier in this century, we enacted national commitments to the most vulnerable within our society - children, persons with disabilities, the poor, the sick and the aged. In the last few years, we have seen the erosion of some of these commitments. Our failure to ensure access to health care for nearly forty-three million uninsured individuals and the withdrawal of our commitment to protect the welfare of children in poor families have left many uncertain, as individuals and as a nation, about our obligations to each other.
Social Security provides a basic "floor" of security for workers, their families, and persons with disabilities. We should examine how our Christian commitment to each other is expressed through our individual and common actions. There is a great deal of attention being paid to the partisan and political implications of the debate. Public commentary focuses on tactics, postures, and positioning. The key question for us is not which party gains or loses, but how our national solidarity, expressed through the Social Security program, is preserved and how all people's lives, but especially those of average- and low-wage workers and their families, are enhanced or diminished as a result of these proposed changes.
We call on policymakers and leaders to maintain our commitment to the basic security of working people and their families. We call on the Catholic community to learn more about Social Security, to examine it through the lens of Catholic social teaching principles. We call on individual Catholics to consider how our faith can shape the values we hold as employers, workers, contributors, and beneficiaries of this social insurance system. We ask Catholics to think about Social Security reform proposals not only from the perspective of their individual or family self-interest but also from the perspective of average- and low-wage workers and their families. We urge Catholics to join with others in legislative networks or other efforts so that their voices can be heard as critical decisions are being made. Finally, we call on people of good will to support a social contract that reflects our enduring commitment to those in our community and nation, as members of one human family.
(1) Administrative Board, United States Conference of Catholic Bishops, Statement on Social Security (Washington, D.C.: United States Conference of Catholic Bishops, March 1983), no. 1.
(2) Ibid., no. 5.
(3) Ibid., no. 5.
(4) United States Conference of Catholic Bishops, Society and the Aged: Toward Reconciliation (Washington, D.C.: United States Conference of Catholic Bishops, 1976), no. 10.
(5) Administrative Board, no. 6.
(6) Second Vatican Council, Gaudium et Spes (Pastoral Constitution on the Church in the Modern World) (Washington, D.C.: United States Conference of Catholic Bishops, 1965), nos. 29, 2.
(7) Catechism of the Catholic Church(Washington, D.C.: United States Conference of Catholic Bishops, 1994), no. 1937.
(8) Administrative Committee, National Catholic War Council, Program of Social Reconstruction (Washington, D.C.: National Catholic War Council, 1919), no. 25.
(9) Medicare is also funded in part by a payroll tax. About fifty-four percent of the Medicare program is paid for from a payroll tax of 2.9% on wages and salaries split equally between employer and employee. The cap on earnings subject to the Medicare tax was eliminated in 1994.