Jewish World Review August 16, 2004 / 29 Menachem-Av 5764
Is social security racist?
http://www.jewishworldreview.com | After the passage of Civil Rights Act of 1964, the Voting Rights Act of 1965, and the Fair Housing Act of 1968, most Americans believed the federal government had removed all of the legal barriers that prevented African Americans from participating fully in the political and economic life of our country.
As strange as that may seem, the Social Security system, which will observe its 69th birthday on August 14, has done little to help African Americans. In fact, it has probably had the opposite effect - helping to keep poor people poor and helping to close the door to higher education, the surest way out of the low-income ghetto.
To realize why it has had this effect, you must understand how the Social Security system works and acknowledge a few facts about longevity among African Americans.
The latter is easy to explain because it's simple: longevity is comparatively rare in the African American community. Indeed, according to a recent U.S. Administration on Aging fact sheet, African American life expectancy is just over 70 years, compared to an average of 76.5 for the population in general. "The difference in life expectancy is even more striking among African American men, who have a life expectancy of only 66.1 years, compared to the national average of 73.6 years for all men," the fact sheet noted. What this will mean to the average African American working man who retires several years from now at age 66 is that he'll receive one or two Social Security checks and take them to his grave.
The picture isn't any better for his children. The National Center for Health Statistics estimated recently that half of all 20-year-old African American men who enter the work force will die before they receive three years of Social Security benefits. A disproportionate number of African American men will die before they even reach retirement age. So every dollar they "contribute" to Social Security will go to somebody else.
That's because of the way the Social Security system is structured. Unlike an individual retirement account (IRA) or 401(K) retirement plan, when money is deducted from your paycheck for Social Security it goes into the federal Treasury. What was yours yesterday is the government's today. There is no Social Security account in your name. You have no ownership rights to the thousands of dollars taken from your pay during your work years. All you have is a promise: In exchange for your Social Security taxes, the government promises to provide you with a monthly stipend - starting in your mid- to late 60s - to help finance your retirement.
But there's an important catch: to collect this stipend you have to live long enough.
Unfortunately, many African American men don't. Some don't live long enough to collect anything. Others don't live long enough to recover what they've paid into the system over the years, with or without interest. So the money is lost - to them, to their children and grandchildren, and to the community at large.
If the money had been set aside in private retirement accounts, the owners of those accounts could bequeath it to their children or grandchildren, to help them start small businesses, pay off the mortgage, or pay college tuition. Similarly, some of the money could be left to charity: to finance scholarships, for example.
But Social Security doesn't work that way. When you die, your Social Security benefits generally die with you.
That's why we are now finding consistent support among African Americans for changing the Social Security system to give people the "option" to invest some of their Social Security taxes.
Updating Social Security by adding a private pension option would give workers ownership of the money they pay into that part of the program, promote long-term wealth accumulation, and give low-income citizens the same opportunity to help the next generation that has long existed among the wealthy.
Interestingly, while many Democrats accuse those who favor personal accounts of wanting to destroy Social Security, the fact is, as David John of the respected Heritage Foundation has pointed out, that some 39 countries around the world have adopted pension reform that includes a private pension option - including Great Britain, Sweden, Australia, Mexico and Chile. And even Russia is now seriously considering such a move to save their pension program.
For many African Americans, Social Security is a stacked deck. They can only come out losers. It's time to change that.