President Bush has decided there's a crisis within the Social Security system. Among the many ways in which his supporters justify the need for immediate action, there's this one: Social Security is a bad deal for African Americans.
It's hard to miss the irony here. The same conservative coalition that has promoted racist federal judges, resisted affirmative action on college campuses, and otherwise advanced a social and economic agenda that affronts American minorities now seeks to champion the cause of black Social Security recipients. A “privatized” system, they claim, would better serve millions of African Americans.
The logic of the conservative groups is that blacks have shorter life expectancies than whites, and thus, a federal retirement program is nothing more than a massive redistribution of assets from working-age African Americans to older, more affluent white seniors.
A quick review of the facts should help us understand why much of the conservative argument is wrong and explain why most African Americans are right to oppose privatization.
First, it is true that blacks have shorter life expectancies than whites. But white men and black women live virtually the same number of years, so this is a discussion about the shorter life expectancies of African American men only. (Incidentally, African Americans might note that those so concerned about their longevity in the context of Social Security aren't worried enough to push for universal health care or minimal sick leave so low-wage workers can go to the doctor.)
Most Americans associate Social Security only with retirement beneﬁts, but the program does much more. Today's Social Security -- the Old-Age, Survivors, and Disability Insurance (OASDI) program -- builds on Franklin Delano Roosevelt's cornerstone initiative to address those fears that can undermine a democracy, namely “the right to adequate protection from the economic fears of old age, sickness, accident, and unemployment.”
Currently, about 70 percent of Social Security beneﬁts go to retirees; the other 30 percent goes to disabled workers and survivors (15 percent each). That creates the view, mainly, of a retirement program. But viewed another way -- through awards granted at a point in time -- the program shapes up quite differently. In November 2004, for example, fewer than half of the 424,000 awards by the Social Security Administration were to retirees. Combined, fully half went to survivors (84,000) and the disabled (131,000). The risks of dying prematurely and leaving dependents in poverty, or of becoming disabled -- risks that social insurance helps to cushion -- are every bit as real as the risks of poverty in old age or outliving your other ﬁnancial assets.
The result of the shorter life expectancy and poorer health of African Americans is that a disproportionate share of Social Security disability and survivor beneﬁts goes to them. While blacks make up about 12 percent of the U.S. population, 23 percent of children getting Social Security beneﬁts are African American, as are 17 percent of disabled beneﬁciaries. More than one in 10 black children are either directly getting a Social Security beneﬁt or are helped by a beneﬁciary. For poor families generally, the National Urban League Institute for Opportunity and Equality ﬁnds, the program lifts a million children out of poverty yearly.
The “social” in Social Security comes from having a universal pool of workers to share the costs and beneﬁts of insurance against old age, disability, and death. Reﬂecting that mission, the program relies on a single formula to calculate beneﬁts across three risk pools. President Bush's reform commission, unable to disentangle the programs when considering how to privatize the retirement account, concluded that disability and survivor beneﬁts would have to be cut, too.
These are exactly the beneﬁts, so valuable to African Americans, that could be jeopardized by privatization. Individual accounts provide nothing in the way of disability beneﬁts, and no redistribution for old-age pensioners. At his recent economic summit, President Bush vowed not to cut beneﬁts for current retirees or anyone “near” retirement. While those near retirement are left to contemplate their fate, the president was implying that those who might become disabled, or children who might get survivors' beneﬁts in the near future, should expect cuts. That would be disastrous for African Americans, further raising black child-poverty rates beyond the increase they have already suffered on Bush's watch.
While the program does substantially help African American children who would otherwise ﬁnd themselves poor because of a parent's death, it can't solve black childhood poverty. Gaps in earnings between men and women, and between black and white men in a labor market rife with gender and race discrimination, must be addressed, too.
As for Social Security's success in mitigating poverty for elderly African Americans -- for whom Social Security coverage is nearly universal -- the record is even stronger. In 2003, 24 percent of black seniors were poor, compared with 34 percent of black children. Equally striking is the effect of Social Security beneﬁts on the relative position of black seniors to whites. In 2003, the gap in household incomes for African Americans aged 45 to 54 was 60 cents on the dollar to white households. But among those 65 and over, blacks received 68 cents per dollar to whites. This is surprising given that 40 percent of black seniors rely solely on Social Security.
In part, the relative well-being of older blacks reﬂects the narrowing gap in life expectancies between older black and white men. (By age 65, black men average another 14 years of life, versus 16 years for white men.) It also reﬂects that about half of that gap is explained by differences in education, a good proxy for earnings' potential; blacks and whites who reach retirement are socioeconomically more alike than the young. But, clearly, it also reﬂects Social Security's success in softening differences in lifetime earnings, as blacks and whites of similar education still have sizeable earnings gaps.
Today's privatization proposals greatly complicate Social Security and represent a radical reformulation of a universally accepted social contract. Social Security is the only federal program that explicitly models the nuclear family as the beneﬁciary. Roosevelt's vision was that the new program would insure the family—the basic building block of communities and the basic economic unit -- against economic fears. Rewriting the program around individual workers and individual risks would split America along the fault lines of risk pools -- those more likely to retire versus those more likely to become ill, and disabled versus surviving children. Is it any wonder that no African American organization wants to play the race card and pit the survivors' beneﬁts of black children against the retirement beneﬁts of senior white women?
Privatization should trouble the African American community for other reasons, too. As was clear during the last election, black voters lean conservative on family matters. Shifting the beneﬁt formula away from being a certainty for family members to the whims of individual workers would not be acceptable. Similarly, risking the reliability of the family beneﬁt by investing in the stock market is gambling to most African Americans -- with odds made worse by the higher risk of early death among black men and disability among blacks generally. The time horizon over which the investment may be drawn upon is shorter, making it harder to smooth short-term market ﬂuctuations.
Another Texan, a southern white Democrat, did much to help Social Security live up to its promise. Lyndon Johnson's extension of Social Security to include basic health beneﬁts -- under Medicare, in 1965 -- also effectively destroyed segregated medical facilities in the South, directly addressing issues of racial health disparities. And other program changes in the 1950s and '60s expanded coverage to millions of African American seniors. Now, President Bush threatens to undo that important progress and split the program into components that would push black beneﬁciaries into a separate pool. There's a reason he got only about 10 percent of the African American vote last November.
William E. Spriggs is a senior fellow with the Economic Policy Institute and former executive director of the National Urban League Institute for Opportunity and Equality.