Insecure Net

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Social Security tops Americans' list of "very important" government programs: Three out of four people say society's promise of retirement benefits for the elderly should be kept. The majority also tell pollsters that the retirement system has "major problems" or is "in crisis," and that it will likely go bankrupt unless changes are made.

Not surprisingly then, in April, 80 percent of voters told Gallup that the presidential candidates' positions on Social Security will be an "extremely important" or "very important" influence on their vote in November. The issue is more important to people with less income and education, blacks, and Democrats - demographics which may explain why most Americans say Democratic leaders are more likely than Republicans to make the "right decisions" in stabilizing Social Security.

But long delays in addressing the problem have generated widespread skepticism that the system will ever be fixed. Most Americans say that special interests stand in the way of reform and that politicians just use the issue to gain political advantage. In a May CBS/New York Times poll, 45 percent of Americans said they don't expect Social Security to have enough money to pay their retirement benefits; 41 percent did expect to receive their benefits; the rest either "don't know" or were already receiving benefits.

Yet Americans - judging from the nation's low savings rate - aren't acting on their fears about Social Security going broke. A Public Agenda survey in 1997 found that about two-thirds of people in all age groups said they didn't want to sacrifice their current lifestyle to save for retirement. In 1999, Americans saved only 2.4 percent of disposable income, down from 8.8 percent in 1964. Still, three out of four Americans say they expect to retire before reaching 65.

Created in 1935 during the Great Depression, Social Security guarantees an income to retired and disabled workers, their spouses and children, and survivors of deceased workers. In 1999, the average benefit was $11,454, although it ranged from about $7,000 to $15,000. Social Security is the main source of income for almost 40 percent of people over 65, and it keeps about the same percentage of the elderly out of poverty. The government funds the system on a rolling basis, paying benefits with current payroll taxes from workers. Surplus revenues have gone into a trust fund that buys federal securities.

Most experts say financial clouds are forming on the horizon for two big reasons. First, people are living longer - and collecting benefits longer. Today's average life expectancy for both men and women is eight years more than it was in 1950. By 2025, it is expected to increase by another two years to 75.8 for men and 81.5 for women. Secondly, the proportion of workers to retirees is shrinking as the population ages. This year, there are an estimated 3.4 workers paying Social Security taxes for the benefit of each retiree. By 2030, that ratio will fall to an estimated 2.1 workers per retiree. As a result of these trends, the government projects that the system will begin running deficits by 2015 and will have exhausted the trust fund by 2037. Thereafter, payroll taxes would only cover about 70 percent of the projected benefits. While most experts consider the problem severe, others say the gloomy forecasts are based on overly conservative projections of economic growth.

For its part, the public sees a severe problem, but no need for painful adjustments. Perhaps that's because most Americans blame Social Security's problems on government waste and mismanagement, not changing demographics - a view that finds little support among experts.

Public opinion surveys give no hint of an emerging consensus on how to keep Social Security healthy. Americans are very clear about what they don't want: Reduced benefits or higher Social Security payroll taxes (unless, that is, the higher-income earners pay the extra tax). Responses to questions about some of the newer proposals vary considerably, especially when questions are reworded slightly or when the questions contain implications or tradeoffs. For example, the public gives mixed signals about proposals for retirement accounts that would allow individuals to invest some of their Social Security funds in the stock market. While the majority initially favors the idea, support declines when polling questions mention the higher risk involved in the stock market. And then only about one in four say they feel "very confident" that they would make the right investment decisions.

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