March 19, 2003 | Executive Memorandum on Social Security
The Straight Talk About Social Security Act (H.R. 722 and S. 368), introduced by Representatives Jim DeMint (R-SC) and Karen McCarthy (D-MO) and by Senators John McCain (R-AZ) and Lindsay Graham (R-SC), would require the Social Security Administration (SSA) to provide far more useful information to working-age Americans through their personal benefit statements than it currently does. Similar legislation will be introduced by Senator Rick Santorum (R-PA).
Specifically, proposed changes in the SSA's "Your Social Security Statement" (YSSS) required by these bills would give Americans user-friendly access to information previously hidden in highly technical publications of the SSA, Office of Management and Budget (OMB), and U.S. General Accounting Office (GAO). This would provide an accurate and unbiased assessment of Social Security's future and the true nature of its trust funds--information that is essential for American workers to plan adequately for their retirements.
In addition, because they simply add existing information to a current product, the changes proposed in H.R. 722 and S. 368 would cost little. However, they would engender a more informed debate across America on the future of Social Security.
Americans' Lack of Knowledge About Social Security. Although Social Security is the government's most popular program, many Americans know little about how it operates and how its benefits compare with the returns from other retirement investments. For example:
Giving Americans the Facts. For most Americans, the YSSS, which goes to 123 million workers annually, is their sole source of official information on the benefits they should receive in retirement. Yet these statements downplay or omit important information about Social Security's future. The statements include an accounting of Social Security taxes the individual worker has paid to date, the worker's eligibility for benefits, and an estimate of the various types of benefits the worker and/or family could receive under different circumstances. However, while workers are told that a specific dollar amount from Social Security is due to them, they are not told that the money may not be there when they retire. Nor are they given any idea of what the rate of return on their taxes will be.
Provisions in H.R. 722 and S. 368 are designed to ensure that workers receive a more complete picture of Social Security's financial future in their benefit statements. The proposed changes in the YSSS would inform workers about:
These balances are available to finance future benefit payments...only in a bookkeeping sense. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.
Conclusion. Working Americans should be told the truth about Social Security's financial future and its impact on the retirement benefits they can expect to receive. As taxpayers, they have a right to this information, which the Social Security Administration can provide to them at little or no cost. The additional facts required by H.R. 722, S. 368, and similar bills would go a long way toward enhancing the quality of the Social Security debate and enabling Americans to plan more realistically for their retirement years.
David C. John is Research Fellow in Social Security and Financial Institutions in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.