Statement of the Hon. Jennifer Dunn, a Representative in Congress from the State of Washington
Before the Subcommittee on Social Security,
House Committee on Ways and Means
Hearing on Social Security Improvements for Women, Seniors and Working Americans
March 6, 2002
Thank you Mr. Chairman and let me express my appreciation for your leadership on this issue.
Let me start by saying that there is no more important retirement program for women than Social Security. Since its inception, it has been a critical safety net that protects many older women from poverty. Any reform proposal needs to offer women the peace of mind they desperately need and deserve as they enter retirement.
Despite its past successes, Social Security faces an enormous challenge as we enter the 21st century. The program that worked so well in the past now short changes many women due to a combination of outdated societal assumptions and a coming demographic crunch.
Millions of working married women will contribute payroll taxes without seeing any value added to their benefit. The "spousal benefit" under Social Security entitles a spouse - usually the wife - to 50 percent of the other spouse’s benefit whether or not she worked outside the home. If a woman contributes payroll taxes throughout her working life and earns a benefit higher than the amount equal to 50 percent of her husband's benefit, she gets to keep her benefit. According to the Social Security actuaries, however, this only occurs 37 percent of the time.
So a married woman working as an occupational therapist who averages $27,000 a year in salary could pay roughly $70,000 in Social Security taxes throughout the course of her career. Yet, because of her husband’s high salary history she would receive the same benefit as if she hadn’t worked at all. Thus, the $70,000 is wasted money. Obviously, with 70 percent of mothers now working outside the home, the current system is not an accurate reflection of the time, money and effort women put into their careers.
Working women are also penalized by the benefits formula. Since Social Security benefits are based on an average of the individual’s highest earnings over 35 years, women who leave the work force temporarily to raise a family will have zeros factored into the calculation for those years. For example, a woman earning a good salary as a computer programmer who takes 8 years off to care for her children could lose thousands in future benefits. In my opinion, there is no more regressive public policy toward a working woman than a system that penalizes her for taking time out of her career to nurture a young child.
For women under 35 the problems with Social Security are magnified. They are trapped in an arrangement that is virtually guaranteed to give them less than what they put in. As they contribute more and more money to Social Security, their promised benefits continue to shrink.
In the short run, we can alleviate some of the inequity by revising the rules governing benefit calculations, particularly those that harm divorced women and widows. Small changes in these areas will go a long way in helping women.
In the long run, we need to convert a nation of beneficiaries into a nation of owners and savers through the use of personal accounts. Personal accounts, while not a panacea for all that ails the Social Security system, could be an important step in the right direction. Social Security in its present form does nothing to encourage savings and investment – the two pillars of a safe and secure retirement. And for women, personal accounts offer an opportunity to receive more from a system that has historically given them less. Personal accounts will enable them to build financial assets and cultivate a sense of proprietorship.
As former Senator Daniel Patrick Moynihan has recommended, these accounts could take the form of the Thrift Savings Plan that so many federal employees - including Members of Congress - enjoy. These plans are diversified in a broad range of bonds and equities to minimize risk for elder workers and retirees. In fact, during the last twelve months when the broader stock market has dipped, the two more conservative investment funds in the TSP have grown by 5.4 and 7.7 percent respectively. Not bad when you consider that the rate of return for the district I represent under the current Social Security system is a paltry 2.2 percent
Last year, President Bush’s bi-partisan commission on saving Social Security released a report containing several suggested reforms that would restore fiscal integrity to the program. The merits of the ideas can be debated. Honorable people can disagree about what is the best course of action. What cannot be disputed, however, is the need to act. If we fail to address these problems, our inaction will be tough to justify to the future generations who will ultimately bear the burden.