Treasurer of the United States Anna Escobedo Cabral addressed members of the Sebago Lakes Region Chamber of Commerce at a Chamber luncheon last Thursday. Cabral’s talk at the gathering, held at Montebello’s Ristorante in Raymond, focused mainly on the President Bush’s ideas for social security reform.
“About a year ago,” said Cabral to the crowd of 45, “the President laid out his very ambitious second term agenda, all of it involving a number of reforms. You’ll see him in February recommit himself to them. One of them that he’s firmly behind is social security reform.”
Now a 70-year-old program, Cabral said social security has served Americans very well but has not kept up with many changes to the economy through the years. In 1950, 16 people were working for every person collecting benefits. Today, 3.3 people are working for every person who collects benefits.
“And by the time our children get close to retirement,” Cabral said, “there will only be two people working for every person that collects benefits. And that’s a challenge.”
Projections reveal that by the year 2017, 12 years from now, the government will not be collecting enough through taxes to pay for those receiving social security. And even tapping into the Social Security Trust Funds, created from surplus payments, will only carry the country until 2042.
“If we do nothing at all,” Cabral said, “then in that year our kids will be faced with a couple of choices… To make up the difference they would have to tax at 20 percent just for Social Security or cut benefits by about 30 percent.”
With so many Americans counting on social security for their sole source of income after retirement, Cabral questioned how many people could absorb that kind of increase in taxes or cut to benefits.
But she added, the President wants to find an answer now, rather than later.
“As you know, Social Security has always been considered the third rail – untouchable, certain death – because you’re talking about people’s future benefits,” Cabral said. “But the President is saying, ‘I must do this to protect our children and our grandchildren.'”
According to Cabral, Bush welcomes ideas regarding the principles he has laid out for social security reform.
The first principle involves individuals 55 years of age or older. Because they will not have had enough time to adjust their retirement planning, this group would not see any change in their benefits.
The next principle is that the government must make the effort to reform social security permanently.
“This system has been in trouble time and again and each time we fix it – we tweak it, we put a Band-Aid on the problem,” Cabral said. “We need a little more money, let’s raise the tax rate. We still need a little more money, let’s raise the retirement age. We need a little more money, let’s tax the benefits. If we’re going to spend the time and energy, let’s find a permanent solution – one that doesn’t require our kids to come back and use another Band-Aid.”
Another principle in the plan involves those Americans who rely upon Social Security as their only source of retirement income. In his plan for a reformed system, the President would ensure that these low income workers would receive benefits that grow faster than inflation, allowing them to retire above the poverty line.
One question that still needs to be determined: what is an appropriate retirement age? In 1935, when the social security program was created, people began collecting benefits when they retired at age 60 until their death at an average age of 62.
“The good news is, we’re living longer; the bad news is, we’re living longer,” Cabral said. “The president is inviting comments. Every year we delay we actually add to the cost on the back end of this, which means your children inherit this problem. If you do it now it’s the most efficient, the most economical way of addressing the problem.”
Speaking for about 45 minutes, Cabral, who took several questions from the crowd at the conclusion of her speech, was well received by the Chamber’s members and guests.
“I thought she was very well spoken and knowledgeable on her subject,” said Peter Godsoe of Norway Savings Bank. “The suggestions are worth investigating. I’m quite impressed that they dare to take this on.”
Keith Luke, Windham economic development director, said that, while there are many unanswered questions, it makes sense to address the problem now rather than later to avoid additional impact on individuals and the country.
“Her appearance before the Chamber encouraged us to be active participants in how we remedy Social Security,” he said.
And Sheri Huff, general manager of Lee’s Family Trailer, said Cabral’s speech helped clear up some questions she had.
“I felt she was very informative,” she said. “I think we’ve been misled by the media to it being much different from what it is. It seems like it’s going in a positive direction. I know the three of us who attended from Lee’s got a lot out of it.”
Cabral encouraged everyone to stay informed and share his or her comments by visiting the Web site at www.treas.gov.
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