Social Security Reform
Press Briefing Opening Statement by AARP CEO Bill Novelli
Speech
January 2005
Bill Novelli
AARP CEO
Press Briefing Opening Statement
January 5, 2005
Thank you, Marie. Good morning. With the beginning of the new year, the convening of the 109th Congress and the 2nd term inauguration of President Bush just weeks away, we want to talk this morning about our policy agenda for 2005.
This is an important year for retired Americans, those nearing retirement, and those who ever hope to retire. The huge boomer generation is graying, and the first boomers will be eligible for early Social Security benefits before we elect our next president.
Many are asking whether our nation can afford to grow older. Given an aging population, huge budget deficits and other challenges, there is a call for changes in Social Security, Medicare, Medicaid and other programs in order to ease the financial burden.
So, can America afford to grow older? We believe that—with the right policies and a strong partnership among government, corporate America, not-for-profits and individual citizens—the answer is yes. We can afford it, and benefit from it as well.
We can create a society where people 50+ will have independence, choice and control in ways that are beneficial and affordable for them and for society as a whole. This is our goal.
Achieving this goal does not depend solely on government action, but in some important areas government must take the lead.
As Marie said, our top priority this year is Social Security. Economic security for all generations requires strengthening Social Security. It has delivered much needed, guaranteed benefits to older Americans, people with disabilities, widows and other survivors for 70 years. For over half of all beneficiaries, Social Security provides more than half their annual income.
Social Security is not in danger of going broke, but the program needs reform so that it will always be able to pay full benefits, for all generations of Americans-today and tomorrow. These changes don't have to be drastic, but the sooner the better.
Let me give you three examples:
- Raising the total wage base taxed by Social Security to 90 % of nationwide earnings. This would move the cap from $ 90,000 in 2005 to $ 140,000 – perhaps phased in over a decade. This in itself would lower the projected shortfall by some 43 %.
- Diversifying Trust Fund investments to get a higher return, and
- Adding newly hired state and local government workers to the Social Security system.
These three steps could get us about two thirds of the way toward solvency, and there are other possible options to consider (chart). But the longer we wait, the more difficult and painful the steps we will have to take.
That's why we're pleased that the President has put Social Security reform high on his agenda. Our goal, like his, is long term solvency and fiscal soundness.
However, we believe that taking money from Social Security taxes for private investment accounts would worsen the solvency outlook rather than improve it. This approach is risky, hugely expensive and unnecessary.
Estimates are that a 2% private account carve-out would create a shortfall of over a trillion dollars. That amount eventually would have to be covered by raising taxes, cutting benefits, and/or taking on new debt.
In addition, private accounts introduce risk into essential retirement security. The essence of Social Security is to assure a predictable measure of retirement income. Private accounts in Social Security threaten that assurance. As we say in our ads, there are places in retirement planning for risk, but Social Security isn't one of them. Speaking of ads, I hope you saw the billboard out front on the truck.
And so we are strongly opposed to individual accounts taken out of Social Security. Opposing this approach—if it goes forward—is our top priority in 2005.
At the same time, we will continue to work with members of both parties on a range of options to reach the goal of a Social Security system that is financially strong for current retirees, their children and their grandchildren.
It should be understood, AARP is not against private accounts. We have long championed improvements in vehicles like 401(k) plans and IRAs. But we need these savings in addition to Social Security, and definitely not at the program's expense.
We can strengthen existing private plans by improving pension coverage, especially among small plans, and improving pension funding. We also need to encourage more savings by moderate income workers, for example, by expanding the savers tax credit.
A second priority for us in 2005 is Medicare. We were very pleased that Congress improved Medicare in 2003 by adding of a long-overdue drug benefit, as well as other provisions for disease prevention and chronic disease management.
We worked hard for this legislation. And last year we undertook a major grassroots effort to explain the new law and enroll people—especially those with low incomes—in the transition Medicare discount card.
In 2005, we are conducting a nationwide program to further educate Medicare beneficiaries on the new law and enroll them in the drug benefit that begins next January.
We also want to work with the new Congress to build on this foundation, for example, by eliminating the asset test that may penalize lower income seniors who need financial assistance and adjusting beneficiary cost sharing to better reflect changes in the cost of living.
Despite drug coverage in Medicare, prescription drugs are still too expensive for many Americans. And so we are continuing our vigorous Rx affordability program: with assistance to the states, attention to evidence based research, spotlighting drug price increases, working for importation legislation, educating about the wise use of prescription drugs, and where warranted, litigation.
This year Medicaid—the essential health care and nursing home care safety net for limited income people—is likely going to be an important focus. We fully recognize the budget pressures at the federal and state levels, and we will support changes to make Medicaid more efficient. But we strongly oppose "reform" efforts that would undermine the key role Medicaid plays in helping our most vulnerable citizens.
As the boomer generation ages, there is an even greater need for long-term care—especially home and community-based services—which can be less expensive than institutional care. We are working hard on long-term care, especially in our state offices. That's one reason why we have substantially increased our state office staffing levels.
I am serving on the newly formed National Commission on Quality Long-Term Care, We are continuing our commitment to ensure that Americans have access to the services and support they need.
Yes, the nation is growing older, but demography is not destiny, and not the big problem. Medicare, Medicaid and private and employer-provided coverage are all in jeopardy due to soaring medical costs. This is making health insurance unaffordable for individuals and inducing employers to terminate or reduce coverage for workers and retirees.
Over 45 million Americans—including many working men and women—currently lack health insurance, due in large part to the high cost of coverage. The entire health care system faces these pressures, and health care reform must be addressed as a whole. This is the big one. The most significant step we can take as a nation is to bring health care costs under control.
We don't have any silver bullets for how to do this, but we are working in the National Coalition on Health Care and via our own social impact agenda to help bring this about.
While some of the things I talked about will play out in 2005, others will not be achieved in a single year or a single Congress. But these are all large scale, urgent priorities to which we are committed. It is going to be a very challenging year. We look forward to working with the administration, with the House and Senate, with the states and with others to make progress and to create a society where all Americans can age with dignity and purpose.