Income inequality breeds retirement inequality – a situation that Social Security was devised to address. Before Franklin D. Roosevelt created the system in 1935, seniors without money went to the poor farm, literally. Social Security has nearly eliminated that sort of abject poverty by providing a nearly universal modest pension. Last year the average monthly benefit for a retired worker was $1,260.
Yet there’s a huge gap in retirement nest eggs. Data from the Investment Company Institute shows that near-retirement households with annual incomes over $200,000 had saved an average of $885,000 in 2010, compared with just $49,600 for households with incomes ranging from $30,000 to $45,000. And 45 percent of working-age households own no retirement account assets whatever, according to the National Institute on Retirement Security (NIRS).
So, while conservatives worried about deficits argue for Social Security cuts, a group of progressive economists, policy experts, labor leaders and politicians is seeking the opposite outcome. On Wednesday they met in Washington to argue not only that Social Security can address retirement inequality – but that it is by far the most logical available platform for addressing the problem, due to its risk pooling and progressive approach to income distribution. Social Security replaces the highest percentage of pre-retirement income for workers at the low end of the wealth scale.
In short, these experts made the case that Social Security should be expanded – not cut.
Sponsored by an advocates’ coalition called Strengthen Social Security, the conference on “Social Security’s Role in Solving the Retirement Income Crisis” marks the start of a new strategy for progressives, who have mainly been playing defense. Over the past decade they’ve fended off assaults ranging from a new inflation formula, called the chained CPI, that would cut cost-of-living adjustments (COLAs) to reduced benefits for affluent seniors (means testing) and even the plan to transform the program into a system of private savings accounts floated during the George W. Bush years. This year the Obama administration has openly signaled its desire to throw Social Security benefit cuts into a “grand bargain” budget agreement this fall.
Now, progressives hope to go on the offense. Tom Harkin, the longtime Democratic senator for Iowa, summed it up Wednesday at the conference: “We need a completely new narrative on Social Security.”
I covered the conference in my column today at Reuters Money; video of much of the day is below.