• Privatization exacerbates the effects of the wage gap. Women's wages continue to lag significantly behind men's. The most recent wage gap statistics reveal that women are earning only 77percent of what their male counterparts earn. With less to contribute to a privatized account, women will face severe financial shortfalls in their older age. And since women also live – on average – six years longer than men, this means that women could literally outlive their accounts.

• Social Security privatization weakens the program and makes its financial problems worse for future generations. Social Security privatization balloons an already large deficit, and increases the debt future generations will have to pay: $2 trillion in transition costs over 10 years and $6 trillion over the next 20 years, most of which the U.S. would have to borrow. This is essentially a tax on our children and grandchildren.

• Social Security is not simply a retirement program – it is a disability and life insurance program that protects all Americans that would be rendered nearly powerless with privatization. For a young family, Social Security provides the equivalent of a $400,000 life insurance policy and a $350,000 disability insurance policy. Social Security also supports more children than the Temporary Assistance for Needy Families (TANF) program. This integral safety net would be cut off by the privatization plan. As proposed, when working lives are cut short by death or disability, private accounts will be too small to make up for the difference, sending families into debt and poverty. 

• Privatization wastes much-needed money on administrative costs. Administrative costs for the Social Security program, which has always run smoothly and efficiently, are only about one percent of benefits. Administrative fees for private accounts, according to estimates, would cost anywhere from 15-20 percent more, putting less money into people’s security and more money into administrative red tape.

The privatization plan would wipe out other beneficial features of the existing Social Security system that are key to women’s financial stability and independence:

• Lifetime benefits that cannot be outlived
• Guaranteed, predictable benefits that don’t fluctuate with the stock market
• Annual cost-of-living adjustments (COLAs) that are especially important to those with long life spans
• A progressive benefit formula that provides a higher percentage of pre-retirement income to low earners

  “This is an issue for everyone, regardless of age. For older Americans, the income that they receive from Social Security allows them to retire with dignity, often keeping them out of poverty. For younger generations, this issue is just as critical. The benefits Social Security provides to their parents ease the financial burden on adult children who are trying to save for their own families, homes, education, and retirement, as well as being a safety net for them in case of disability or death. Making these reckless changes to such a crucial staple of our society would be a disaster for them,” Maatz concluded.

Lisa Maatz is available for comment on the proposed Social Security privatization
plan and other initiatives outlined in tonight’s State of the Union Address.
To arrange an interview, contact Jean-Marie Navetta at 202/785-7738 or e-mail navettaj@aauw.org. (Maatz will also be available after the speech at 202/365-3432.)