An antisocial move by the Social Security Administration
“You know you can’t count on Social Security.”
For years, that’s been the scare-tactic pitch of unscrupulous investment brokers, annuities hawkers and their friends in Congress as they tried to peddle retirement deals to people reluctant to part with their money. The phrase has been repeated so often that it’s become an article of faith for many who are still years away from collecting their checks.
But it’s not true, and for more than a decade a powerful rebuttal has appeared in the mailboxes of some 150 million Americans once a year, in the form of a statement saying how much their monthly check would be when they retire.
For the investment pitchman, the mark’s ignorance is bliss. So the whole industry must be feeling pretty euphoric these days.
That’s because last March the Social Security Administration suspended the mailing for everyone except near-retirees 60 and older. The agency says it was responding to a “bleak” budget projection, but it looks more as if it turned up its nose at a bargain: The mailings cost $70 million a year. That’s 44 cents per recipient, including postage — or a bit more than one half of 1% of the agency’s $11.7-billion administrative budget.
The agency says it’s working to restore the mailings, which were specifically mandated by Congress in 1989. The money has been requested in the president’s 2012-13 budget, but Social Security Commissioner Michael J. Astrue says he thinks it’s “unlikely” that the agency will get all it asked for. Meanwhile, the agency promises to replace the paper statements with an online version, but that may yet be several months off in any case.
Could there be a worse time for this informational vacuum to occur? Social Security labors under political attack as never before, and the public’s understanding of how it works, what it costs and what it provides has reached a low ebb — not least because of misinformation wholesaled by its enemies and would-be “reformers” on both sides of the political aisle. The change signifies how little effort the federal government puts into communicating what it achieves for Americans, in an era when our public discourse focuses almost exclusively on the cost of government and not at all on its benefits.
Indeed, as the Government Accountability Office observed in 1996 shortly after the mailings began, “public confidence in Social Security has been low for a number of years, in part because the public has lacked an understanding of Social Security programs.”
People who deal regularly with the Social Security Administration say the suspension of mailings is only one way its delivery of personalized service, for which it once was renowned, has withered. The agency is closing field offices across the nation “at a rapid rate,” Astrue says. It’s also cutting the hours of those still open and understaffing its toll-free phone lines.
Advocates for the disadvantaged say that shifting services online is no substitute. “People are not always temperamentally, culturally or psychologically able to go online, especially to get problems resolved,” says Kevin McVeigh, who works with clients in rural Greenfield, Mass. — which is facing the shutdown of its Social Security field office. “They’re not used to using computers or don’t have access.”
The lack of an annual statement is “a big issue,” says Sharon Lacy, a certified financial planner in Los Altos, Calif., who frequently speaks about retirement planning. “The annual statement was a reminder to people of what their annual benefits would be.”
Especially important was the year-by-year earnings record on the statement, which enabled enrollees to catch errors. Lacy says that when she recently tried to get that information for a client on the agency’s 800 line, “it took about an hour waiting on hold.”
The annual statements were the brainchild of the late Sen. Daniel Patrick Moynihan, who was deeply concerned about the program during his years in politics (not that his reform proposals always pleased Social Security advocates). Moynihan’s 1989 bill required the agency to send out annual statements beginning in 1993 to all eligible recipients 60 and older, expanding in 2000 to all recipients.
The idea, recalls Webster Phillips, a former associate Social Security commissioner who worked with Moynihan at the time, was to strengthen the bond between American workers and the Social Security program by attesting that the money they paid in, week in and out, would yield tangible benefits — chiefly a monthly retirement check, which averages about $1,200 today. And if Congress tried to take them away or cut them back, the consequences would show up in black and white in every worker’s mailbox.
From the inception, the statements were lucid and admirably informative, reminding recipients that “Social Security protection offers more than retirement benefits,” including disability insurance and protection for survivors and dependents. The statements delivered a year-by-year accounting of every dollar paid in taxes, along with estimated retirement, disability and survivor benefits presenting a valuable corrective to the common canard that the average American is somehow cheated by the program; the sample statement published by the GAO in 1996 showed that a worker who had paid $60,600 in taxes (including the employer’s share) would get it all back within about 41/2 years of retirement, and effectively would have been covered by life and disability insurance in the meantime.
The statements weren’t flawless. Some language was obscure because some aspects of Social Security are very complicated. After 2001 the statement acquired a nakedly political slant via misleading language warning that “unless action is taken soon ... by 2042 the Social Security Trust fund will be exhausted.” That this paralleled the pitch of the Bush administration’s campaign to privatize the program was surely no coincidence. But the statements also undermined the popular notion that you can’t count on Social Security. Even if the most dire predictions of its fiscal state come true decades from now — which is by no means certain — the program will still have enough money to pay some 80% of currently scheduled benefits.
Astrue says the mailings were suspended only after what sounds like intense budgetary soul-searching at the Social Security Administration. Looming budget cuts threatened a wide range of functions. “I think we made the right choice in terms of continuing to provide service to the American people.”
In this respect, the real blame belongs to budget-cutters in Congress, who so seldom devote any thought to the real consequences of their cheeseparing ways.
For now, Social Security’s old paper statements have been replaced by a bare-bones retirement estimator on the agency’s website. The online estimator does a decent job of calculating one’s prospective retirement benefit, based on Social Security’s records of the user’s earnings. But as Astrue acknowledges, it’s an inadequate substitute for the old paper statements. For one thing, to use it at all you have to know it’s there, and the agency has hardly been proactive in letting people know it exists. For another, the information is just too skimpy, lacking the old paper statements’ calculations of potential disability, spousal, survivor and family benefits and its year-by-year accounting of taxes paid.
Astrue says that those deficiencies will be corrected once the agency rolls out its full-featured online statement. “What you will see initially will look hauntingly like the old paper statement,” he says, right down to the layout and the typeface. “We did that deliberately to reassure people they were really getting what they used to get.”
Even if it’s true, as Astrue argues, that few Americans will be discommoded by having to find their statements on the Web, there is a fundamental distinction between hunting down information about your benefits online and getting it in the mail, and it goes to the heart of what was so terrific about Moynihan’s mandate. It’s that the statement came without your asking. It came whether you knew you wanted it or needed it. The paper statement was a marvel of proactive government action, and it was unique (unless you consider receiving blank 1040s in the mail from the IRS every year a marvel of proactive government).
The annual statement was our government’s single most important act of public outreach. Eric Kingson, co-director of the Washington group Social Security Works, even contends it didn’t go far enough — why couldn’t Social Security send a statement to every parent upon the birth of a child, identifying the survivor and dependent benefits the parents had already earned through their work?
“It would be very important to let people know that every child born in this country since 1940 essentially is covered by life insurance,” he says.
It’s hard to imagine a service that would bind people more closely to Social Security, and it’s sad that a program that serves so many Americans so well is moving in the opposite direction.
Michael Hiltzik’s column appears Sundays and Wednesdays. Reach him at email@example.com, read past columns at latimes.com/hiltzik, check out facebook.com/hiltzik and follow @latimeshiltzik on Twitter.
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