MEET ALISON ACOSTA FRASER:
For Our Grandchildren?s Lea Abdnor recently visited with Alison Acosta Fraser, an expert on Social Security and a single mom. Read Alison?s description of how the Social Security system treats single women and married women very differently.
Alison Acosta Fraser, Director of the Roe Institute for Economic Policy Studies, oversees Heritage Foundation research on a wide range of domestic economic issues including federal spending, taxes, energy and environment, retirement savings and regulation.
Fraser is a member of the Fiscal Wake-Up Tour, designed to educate Americans about the nation's true long-term financial condition and large and growing fiscal imbalance and to encourage Americans to demand action. Unless Congress fundamentally recasts Medicaid, Medicare and Social Security, Americans within two generations will be saddled with European levels of taxation and economic stagnation.
Before joining Heritage in 2003, Fraser was Deputy Director of the Oklahoma Office of State Finance where she directed economic research and developed tax and fiscal policy recommendations for then-Gov. Frank Keating. Prior to that, she was a budget manager for Orange County, Calif., where she developed recommendations for bankruptcy recovery.
Interview
Abdnor: Social Security was created to protect our most vulnerable from poverty. How well do you think it is doing, seventy years after it was created?
Alison Acosta Fraser: Social Security was intended as only one leg of a three legged retirement footstool: Social Security, savings and pensions. Undoubtedly, many of our most vulnerable Americans, usually women, are sustained by Social Security, and they should continue to be protected. But the system also pays benefits to people who don't have those same needs, and it even pays benefits to some people who have never paid into the system.
Abdnor: What do you mean?
Alison Acosta Fraser: Married women who have never worked are entitled to receive a spousal benefit equal to 50 percent of their husband?s benefit when they reach retirement age. That?s on top of their husband?s benefit. Under this rule, one-earner couples often get more in Social Security than couples where both wife and husband work-even though both couples made the same total income! This type of couple-where one spouse earns income and the other stays home-was the norm 70 years ago when Social Security was created. Now, it's not. Today, only twenty six percent of couples are single earner couples. This means the system is paying out benefits to some people who never paid in, which puts added strain on Social Security?s precarious finances.
Abdnor: Who pays for this extra spousal benefit?
Alison Acosta Fraser: Every single worker who hasn?t been married for at least ten years, including fourteen million women who are heads of households and all young Americans. I worry that my son and daughters will be stuck paying the tab for my generation at a time when they will be starting their own families - not to mention saving for their own retirement. And my children can?t rely on Social Security-it will not have the money to pay them their promised benefits when they are ready to retire.
Abdnor: What will happen when we don't have enough money to pay benefits?
Alison Acosta Fraser: Starting in 2017, the Social Security surpluses will decline. That means there will be less money for Congress to spend on other things so either programs are going to have to be cut or Social Security benefits will need to be reduced. Congress could raise taxes, but that would cost jobs and hurt wages. For example, raising the wage cap, as some have proposed, would increase taxes for three million small business-the engine of job growth. My worry is that the people who are most in need of jobs and retirement assistance will be hurt the most by higher taxes and lower benefits.
Abdnor: What do you think would help the situation?
Alison Acosta Fraser: As future retirees, we baby boomers should think about leaving things better off for the next generation, not worse. It might mean we have to make do with a little less in terms of benefits. Women who are in or approaching retirement will need continued protection under the Social Security system because they will have no time to accumulate other savings. But it is time to modernize the system so that younger women don?t suffer the same unfairness and are not saddled with more debt or higher taxes. Benefits should grow more slowly-at pace with inflation instead of wages-and be targeted to those who need them most. Personal retirement accounts should also be an integral part of retirement. Remember that three legged stool? Fewer people are saving for retirement than ever and private pensions have changed dramatically. Building a retirement account into this footstool will help strengthen Social Security for everyone, particularly the women and today?s young Americans.
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