O HIGHER BENEFITS FOR OVER 26 MILLION PEOPLE (1 OUT OF 8 AMERICANS 19.7 MILLION RETIRED PEOPLE. AGE 62 AND OVER 4.6 MILLION CHILDREN & 1.8 MILLION DISABLED WIDOWED MOTHERS RETIRED WORKERS AND WIVES→ DISABLED WORKERS AND WIVES DISABLED WIDOWS AND WIDOWERS SPECIAL PAYMENTS TO PEOPLE AGE 72 AND OVER Mr. BALL. On this pie chart, the purple area represents older people. The largest group, of course, is retired workers and their wives, and then represented in this cut are widows and widowers, and then a small group of parents, and then those who receive the special payment that is paid at age 72 for individuals who aren't insured for regular social security benefits. Taking it all together, by January, when the benefit increase becomes effective, there will be almost 20 million people age 62 and older who are receiving social security benefits. The fact that social security pays most older people is very well known. Perhaps less well known is the fact that there are more than 41⁄2 million children and younger women-widowed mothers of those children-who will be receiving benefits. And then finally, under the latest part of the cash benefit program, 1.8 million disabled workers and their wives will be getting benefits in January. INCREASED SOCIAL SECURITY PROTECTION FOR NEARLY ALL WORKERS AND THEIR FAMILIES-- 94 MILLION WORKERS WILL CONTRIBUTE PERCENT 100 TO SOCIAL SECURITY IN 1970 Mr. BALL. This bill not only increases benefits for those currently receiving benefits, but increases protection for all the people who are now paying into the program. During 1970, 94 million peopleworkers and self-employed persons--will make contributions to social security. This program is very rapidly becoming, and has largely become, quite a mature program in terms of the protection it now gives. Looking at the measures of the people who will benefit from the changes in the bill, shown in the next chart: Right today, 93 out of every 100 of the people who are reaching 65 are eligible for social security benefits. They don't all get benefits right away, because of the retirement test-those who continue to work full-time at high earnings don't-but 93 out of 100 are eligible. If you look at the whole group of aged everybody over 65, and not just those becoming 65 this yearabout 90 out of 100 are eligible. The disability protection covers a somewhat smaller proportion. About 80 out of 100 between the ages of 21 and 64 have this protection. The reason the percentage is smaller is that the requirements on the amount of covered work under social security needed to be eligible for disability benefits are stricter than the requirements for retirement benefits. Fewer people have been able to meet the test of recency of work that is required for disability benefits, as well as being fully insured. As shown here, 95 out of 100 of young children and their mothers in the country would be eligible for monthly benefits in the event of the death of the breadwinner in the family. For all these people, this bill improves protection on into the future. AUTOMATIC ADJUSTMENT 1. WHEN THE CPI INCREASES AT LEAST 2. BUT NO MORE OFTEN THAN ONCE Mr. BALL. Mr. Chairman, as Secretary Black indicated, we believe the automatic adjustment of benefits to prices to be the most important cash-benefit proposal in the bill. The provision-as shown on this chart-is that whenever the Consumer Price Index increases at least 3 percent from the last benefit increase, the benefits would be automatically increased by the amount of the increase in the CPI. This would occur no oftener than once a year and the increase would be for the following January. This is not a matter of discretion, of course, with the Secretary; this is an automatic provision; he has to do it. The increase flows entirely from the provisions of the law. We feel this gives very important additional protection, Mr. Chairman, without really being a change from the fundamental policy the Congress has been following. This next chart indicates how from 1954-over the last 15 years and up until the present time-the Congress has been restoring the purchasing power of benefits through periodic changes in the benefit level. INDEX BENEFIT INCREASES HAVE RESTORED PURCHASING Mr. BALL. This chart is based on an index of 100 for the benefit level established in 1954. What happens, as the chart shows, is that the cost of living goes up for a while and the value of the benefits drops, and then the Congress increases the benefits, bringing them back approximately to where they were before. Then there is another period where the value of the benefits declines, and then Congress brings it back again, and then another decline, and then you bring it back, as shown here. This last increase of 15 percent, as you see, went above the index of a hundred somewhat. It is true that if I had on the chart the period 1950 to 1954 we would see for that period, too, some increase in the absolute benefit level. But from 1954 to 1969 benefits were just about kept up to date, with a lag. There is no quarrel with the fact that the Congress has acted. I think it is really a settled policy by now that the benefits will at least be kept up to date with changes in the purchasing power of the dollar. The problem is, though, that this is accomplished with a time lag. As you see on this chart, there was quite a substantial period, 1959 to 1965, where there was no change in the benefit level. What we have shown on this next chart, below the line here, is the actual time at which congressional action resulted in benefit increases. From 1954, when there was a new absolute benefit level established, up to the present time, there have been four changes. During periods when there are rising prices but the Congress has not yet acted, there is a decline in the purchasing power of the benefits, and for the people who live during that time the loss can never be made up. Mr. BALL. An older person who has had his purchasing power reduced does not have that hardship made up for by a later action restoring the purchasing power of the benefit. The main point of this automatic provision is to put what I believe is settled congressional policy of keeping the benefits up to date right in the law so that there would be automatic action keeping the benefits up to date. In the chart, above the line, we have indicated what would have happened under such a provision by taking the price situations of the past and showing when the automatic provisions would have resulted in a benefit increase. Instead of the four changes that we actually have had, with these lags, we would have had seven changes during this period. People would then not have had the long years in which they had declining purchasing power. Even an automatic provision doesn't keep the purchasing power all the way up to date-there is always some lag even in an automatic provision-but it comes much closer to maintaining purchasing power than relying on ad hoc legislative action. Mr. Chairman, accompanying the benefit changes we have proposed, and the House has adopted, an increase in the earnings base from the present $7,800 a year to $9,000, effective in 1971. This next chart indicates what I believe has come to be a settled policy of the Congress, reaching back to 1951, of keeping the earnings base up to date. Periodically the maximum amount of earnings covered under Social Security has been raised as earnings have risen so as to cover approximately the same proportion of covered wages that the previous earnings base covered. Thus the financial base of the social security program has been maintained, and also, as a result, the benefit protection that people are earning is related to approximately the same portion of their earnings as was contemplated in 1951 even though earnings levels have greatly increased. $9000 CONTRIBUTION AND BENEFIT BASE IN 1971 MAINTAINS RELATIONSHIP OF BASE TO EARNINGS LEVELS Mr. BALL. We have two measures here on this chart. The darker one indicates the percent of all covered workers whose total annual earnings were covered by the earnings base that was in effect at a particular time, and the lighter one indicates the percent of covered payrolls that was covered by the base. You see that starting in 1951 roughly a little over 75 percent of all workers under the program had their total earnings covered, and a little over 80 percent of total payrolls in covered industry were included. What has happened is that as wages rise, these percentages decline, and then are restored by an action of the Congress. In 1955 you come approximately back to the 1951 relationships. By 1968 we were just slightly ahead by these tests, and the 1971 recommendation for a $9,000 base in 1971 retains the 1968 situation. But, by and large, the point is that the Congress has maintained the same relationship by ad hoc action since 1951. The proposal in this bill, in addition to going to $9,000 next year— which restores the previous situation immediately-is that as a companion piece to the automatic adjustment of benefits to prices, the Congress would write into the law a specific formula-without any discretion allowed on the part of the administrator-that will continue automatically what I believe, from this history, is shown to be a settled policy of the Congress, a policy of keeping the base up to date. Under the proposal, as shown in this next chart, maximum earnings base would rise, in rounded amounts of $600, no oftener than every 2 years on the basis of comparing the level of average wages reported under Social Security in future years with the level base year of 1971. Any change in the base would be an automatic result without any discretion whatsoever on the part of the Administrator. The reports, of course, are employer reports. The wages are recorded and the average is compared with that for the base year. The result is nondiscretionary. |