PART SIX PUBLIC POLICY ISSUES AND THEIR IMPLICATIONS FOR IMPROVEMENTS IN SOCIAL SECURITY Before defining the issues that relate to improvements in the Social Security system itself, it is necessary to recognize that certain basic public policy questions cut across the broad issue of economic security in old age. • What is an adequate level of income for retired persons? Adequate in relation to the individual's level of living before retirement? Adequate to keep the average older person from want and dependency? Adequate to permit participation in the Nation's rising standard of living? • What part in attaining this level should be played by governmental programs, by voluntary group action and by individual effort? And of the public segment, what share should be financed through payroll taxes and what through general revenues? What level should be provided by governmental programs as a matter of right without a means test? Is the economic problem of aging a temporary problem that requires a different solution-or a different "mix" of solutions— for today's aged than for those reaching old age in the future? These are questions that have public policy implications far beyond the reach of this Task Force Report. The data assembled here, however, should be helpful in reaching decisions. The Task Force has not considered or recommended any specific policies or legislative proposals. However, the Task Force does support the following premises which it feels should serve as guidelines with respect to basic public policy determinations: (1) The facts clearly show that the basic problem of low income in old age is not a transitional problem that, given present trends, will solve itself in the foreseeable future. (2) To the extent that older people are to be "assured" of adequate income, the assurance must come through governmental action. Private pension plans and voluntary savings provide a promise of income, not a guarantee. (3) Since the income security of each generation of retirees derives basically from a claim on the current production of the working population, it would appear that the emphasis on alternative methods of financing this claim has been exaggerated. (48) (4) The accepted level of income adequacy should be flexible enough to permit older people to share in the growth of the economy. This is in part a question of equity: "Whose growth is it?" Increases in productivity of the currently employed result-not altogether from their own efforts but in large part because of the capital accumulations and advances in technology that derive from past efforts. (5) The existing social insurance system is a fast and effective way to deliver an income assurance that carries commitments for the future as well as for the current generation of the aged. Against these broad social policy issues, the specific issues related to the social insurance program would seem to be these: (1) By how much should the general level of cash social security benefits be increased to provide a basic floor of protection? (2) Should benefits be raised for special groups of beneficiaries, particularly for widows, for those now drawing the minimum benefit, and for those who will become entitled in the future who have had earnings significantly above the present maximum earning base that is credited for benefits? (3) Should the eligibility age for benefits be lowered? Should benefits payable before age 65 be computed without an actuarial reduction? (4) Should the test that results in the withholding of benefits because of earnings be liberalized? eliminated? (5) Should benefit adjustments be made automatically or through legislative amendments? And should adjustment be to a level that merely preserves or restores-purchasing power, or to a level that provides a share in the Nation's increased productivity? (6) How appropriate are the available indexes, including the Consumer Price Index, as measures of the need for adjustment and the amount of adjustment in retirement benefits? (7) What improvements are needed in Medicare benefits? Should the voluntary medical insurance portion (Part B) be financed-as is the hospital insurance portion (Part A)-through rising earnings of workers rather than through premiums paid by the aged? (8) What role should general revenues play in the financing of the Social Security system? PART SEVEN CONCLUSIONS The task force, although not attempting to enumerate and evaluate the many policy alternatives that have been recommended to deal with the economic problems of the aged, believes that the facts and projections assembled in this Report support the following important conclusions: Low income is the Number One problem of today's aged population. • Low income in old age is not a transitional problem that, given present trends, will solve itself. Unless action is taken now, most aged will not have sufficient income to provide in retirement "a healthful, self-respecting manner of living which allows normal participation in community life." • The Social Security system has failed to keep up with the rising income needs of the aged. To a large extent, social security benefit increases in the past have resulted, not from legislation with the purposeful intent of tapping a greater part of the rising national product for old people, but rather as a secondary result of attempts to deal with the severe and potentially explosive hardship problems facing many older people. In consequence, these past efforts have been aimed primarily at maintaining the economic status of the aged at some minimal standard or subsistence level in the face of rising prices. • Sufficient evidence now exists to spotlight certain special economic problems of the aged which compound the general problem of low income. Among the areas identified for immediate congressional attention are: (a) Income maintenance of widows-a particularly disadvantaged group. (b) Health needs and rising medical costs. (c) Problems associated with homeownership and taxation. (d) Employment opportunities in old age. (e) Implications of early retirement trends. Simultaneously, congressional attention should be directed to (1) the various techniques for measuring and projecting the income needs of the aged population and to their use in decision making and (2) the appropriateness of methods now used or proposed for use in the adjustment of retirement benefits to changing conditions. • A reasonable definition of adequacy demands that the aged population, both now and in the future, be assured a share in the growth of the economy. If old age is to be more than a period when people decline and die, some way must be found whereby the aged, who have helped in the past to provide the basis for rising living standards, are guaranteed a (45) share in some of the "harvested fruits." What this requires is a substantial transfer of income from the working to the retired population in order to improve the relative economic status of the aged. Such assurance can best be provided, or can only be provided, through governmental programs, particularly the social insurance system of OASDHI, which carry commitments for future older Americans-the workers of today-as well as for this generation of the aged. The financial soundness of the Social Security system depends, essentially, on the Government's taxing powers which, in a vigorously growing economy, permit great flexibility to meet changing retirement needs. And retirement needs are changing as expectations rise and as American families increasingly begin to evaluate the adequacy of their retirement income in relation to their standard of living prior to retirement. ● Private group pensions and personal savings-tailored as they are to individual needs, preferences, and financing ability-will continue to be essential supplements to basic social security benefits in the future. The Government should explore and lend support to various methods of promoting and encouraging such supplementary sources of retirement income. Submitted by: கO 46 DOROTHY MCCAMMAN, Consultant. JAMES H. SCHULZ, Ph. D. APPENDIX 2 SENATOR WILLIAMS' LETTER OF APRIL 24, AND LETTER OF REPLY BY SECRETARY ROBERT H. FINCH OF APRIL 25 (Secretary Finch's testimony appears in appendix 3, exhibit B, at the end of Commissioner Ball's response to questions.) APRIL 24, 1969. DEAR SECRETARY FINCH: The Senate Special Committee on Aging has been informed by telephone that you will be unable to testify on April 29 at a hearing on "Economics of Aging: Toward a Full Share in Abundance." I regret that you cannot reply affirmatively to my invitation of March 26 and my follow-up letter of April 14. I can well understand, however, the many demands upon your time, especially at this early period in your tenure. It is gratifying that Social Security Commissioner Ball can be with us on Tuesday; he is a renowned expert on many subjects related to the workings of a vital social insurance program. I know he will be able to discuss some essential aspects of matters to come under discussion at our hearings. The Committee, however, is conducting a far-ranging inquiry which includes, but is not limited to, the programs and policies of the Social Security Administration. If you will again turn to the Task Force Working Paper sent to you on March 26, you will see that we are concerned about many other subjects related to HEW activities including: 1. Questions related to the present Federal-State system of public assistance. 2. Questions related to many proposals for widely varying income maintenance programs. 3. Inroads made by rising health care costs on the budgets of the elderly. Obviously, discussion of such matters can best be made by the Secretary himself. For that reason I will ask, soon after next week's hearing, that arrangements be made to receive your testimony at a time more convenient for you. We will, however, be glad to hear from Commissioner Ball on certain matters which should fall well within his area of special competence. Sincerely, HARRISON A. WILLIAMS, Jr., Chairman. THE SECRETARY OF HEALTH, EDUCATION, AND WELFARE, DEAR MR. CHAIRMAN: This is in response to your letters of March 26 and April 14 concerning the hearings of your Committee on "The Economics of Aging: Toward a Full Share in Abundance." I had hoped that I would be able to appear, but it has been necessary to rearrange my schedule drastically because of extended testimony on the budget revisions we have submitted. I am therefore designating Mr. Robert M. Ball, Commissioner of the Social Security Administration, to represent the Department. He will be accompanied by appropriate officials. It is our understanding the hearings will be held in Room G-308 of the New Senate Office Building, at 10:00 a.m. on April 29. Sincerely, ROBERT H. FINCH, Secretary. |