Latinos and Social Security: What’s At Stake?
By Gabriela D. Lemus, Ph.D.
LULAC National Office

The buzz around Washington D.C. these days alternates sharply between the “Bush Doctrine” and the war in Iraq, and whether or not Social Security is really in need of drastic reform. The newly re-elected Bush Administration has determined that its number one priority for domestic policy these next few months will be the overhaul of Social Security. Pundits and politicians would have us believe that the nation’s retirement plan established in 1935 as a response to the economic ravages of the “Depression” is bankrupt – financially, morally and socially.  The arguments in favor and against re-examining the value of what many argue is America’s economic security program covering retirees, dependents and pay survivors, and disabled workers are sometimes overstated and most often confusing.  At the very least, the question of Social Security is a complicated issue in part because of its intergenerational equity aspects and financial formulas seeking balance between future social security benefit commitments and payroll taxes, and total projected federal expenditures and taxes.  At its most simplistic the debate entails the question, who should have to pay for what?  But, life and politics in Washington are never simple. 

In addition to the overall economic arguments for reform, promoters of the plan for a massive overhaul of the Social Security system, such as Michael Tanner of the Cato Institute, have as an underlying philosophical goal “changing fundamentally the relationship of people to their government.” More bluntly, according to White House aide Peter H. Wehner, Director of Strategic Initiatives states that Social Security reform is “a moral goal and a moral good,” as it “will rank as one of the most significant conservative governing achievements ever.”  In other words, government does not need to play a role in planning for retirement, irrespective of historical lessons. The agenda is therefore not only economic, but political.  Individuals need to care for themselves, and anything more is tantamount to government welfare. Add to this argument more recent commentary by Representative Bill Thomas (R-CA) that linking Social Security benefits to race and gender should also be a consideration and we have a potentially explosive situation that downgrades a serious examination of the Social Security question from one of what do Americans need to do to save enough money for retirement, to one of political race and gender warfare. 

So, what is at stake for the Latino community?  Where do we fit in with all of these equations, both economic and political?  Well, let us examine some of the data.  According to information from the U.S. Census Bureau, Latinos are disproportionately represented among low-wage and moderate wage workers.  More than 75 percent of Latinos aged 65 or older receive income from Social Security, but only 15 percent have income from pensions or annuities and 28 percent have income from assets.  Over three-quarters of these individuals are reliant on Social Security for half or more of their total income. Almost half rely on Social Security for 90 percent or more of their total income.  The overall numbers increase even more for non-married Hispanic men and women, particularly unmarried Latinas: 83 percent rely on Social Security for 50 percent or more of their total income.  The numbers are clear, the Latino population over 65 years of age is heavily reliant on Social Security and according to the U.S. Bureau of Census, without it, 33 percent of older Hispanics would fall into poverty.  As it stands, approximately 22 percent of older Latinos are living in poverty.  Without Social Security, the numbers would definitely increase placing additional burdens on their families and diminishing their sense of independence. 

Clearly, the Latino community needs to watch closely the decisions made in Washington regarding any changes to Social Security.  This is not the first time that the issue of the fund’s solvency has been discussed given the aging “baby boom generation” that is rapidly approaching retirement and the decrease of the number of overall workers contributing to the pool. In 1998, Bill Clinton stated that there was an impending crisis with the Social Security fund and that the program needed to be saved.  The Clinton Administration proposed that what required examination was how to increase individual savings rates to maintain a global competitive edge, not the dismantling of the Social Security Administration which provides a guaranteed monthly check for the neediest of families.  Judging from the current rates of Latino retirees dependent on Social Security and the rate of poverty among our older Latinos, a plan is needed to increase our retirement funds, not an elimination of our safety-net which is part of the social contract that we have with the nation. 

If indeed the issue of Social Security reform is going to be discussed, our focus should be on improving it, not eliminating it.  One plan suggested by Laura D’Andrea Tyson, dean of the London Business School and a Business Week columnist would be to create private accounts as an “add-on” whereby households of modest means could build adequate retirement savings through tax incentives and federal matching contributions with limited choices.  This would keep the plan simple as well as keep the costs in check, instead of diverting funds from the overall Social Security pool. President Bush is right to be concerned about our younger generations and it is clear that increasing savings rates throughout the country only improves the overall economic health of the nation.  The president’s plan has yet to be spelled out in detail, but if current economists such as Gregory Mankiw, chairman of the Council of Economic Advisers are to be believed, privatization will have to include major cuts in guaranteed benefits as well.  Lastly, every dollar diverted to private accounts will add a dollar to public borrowing.  Current estimates state that the government would have to borrow anywhere from $1 trillion to $2 trillion to create private accounts.  Unfortunately, it will be young Latinos and Latinas, among other young people, who will have to foot the bill.