In the News
Social Security Administration to Cut Disability Benefits
Social Security Privatization Makes its Way into the President’s 2007 Budget
Health Savings Accounts on the Horizon

New Research
The Effects of Negative Shocks on Retirement Security
New Data and Analysis on Private Pensions in the U.S.
A Look at the President’s 2007 Budget

Action Item
SAVE the Survey of Income and Program Participation!! MARCH 1 DEADLINE

Upcoming Events
The National Council on the Aging and the American Society on Aging hold their 2006 conference March 16-19 in Anaheim, CA.

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IN THE NEWS

Social Security Administration to Cut Disability Benefits

Behind-the-scenes administrative changes to Social Security would cut benefits for disabled workers and dependents. The Social Security Administration has proposed to raise the age at which eligibility requirements for disability benefits are loosened, eliminating some of the appeals opportunities for applicants, and imposing strict deadlines for providing proof of one’s need for coverage. These rule changes do not require congressional approval. For further discussion see Larry Eichel’s, “A new front in battle over Social Security: Updating rules for disability would save money, but critics say changes hurt eligible recipients” (February 6, 2006, Philadelphia Inquirer).

Social Security Privatization Makes its Way into the President’s 2007 Budget

Despite multiple failed attempts to sell Social Security privatization to the public, the Administration’s 2007 budget includes a renewed call for private accounts funded by the Social Security payroll tax. The President’s budget also proposes cutting survivor benefits to 16- and 17-year-olds not in school and the elimination of the lump-sum death benefit that was designed to help offset funeral and other costs faced by survivors. Senator Charles Grassley (R-IA), Senate Finance Committee chairman, has indicated that proposals for Social Security privatization and benefit cuts would not be considered this year. For more information see “Privatization Revived in 2007 Budget” (February 16, 2006, Alex Baker, The Century Foundation), “Capitol Hill Cool to Some Bush Budget Cuts” (February 8, 2006, Washington Post), and “Personal Social Security accounts to again be part of Bush's budget proposal” (January 30, 2006, Associate Press in SignOnSanDiego.com).

Health Savings Accounts on the Horizon

Last year, the U.S. rejected plans for Social Security privatization and avoided the dismantling of an effective and much depended upon social safety net. The President’s 2007 budget, however, includes both a renewed call to privatize Social Security and a plan that will further fragment the U.S. health care system—Health Savings Accounts. These accounts stand to eliminate tax incentives for employer-provided health insurance, undermine risk-pooling, and ultimately result in a net loss of insured Americans (see Center on Budget and Policy Priorities’ February 15, 2006 press release, “Administration’s Health Savings Accounts Proposals Would Cause Net Increase In Number Of Uninsured, Decline in Employer-Sponsored Coverage Would Offset Gain in Individual Coverage, New Study by Noted Economist Finds,”). According to Greg Anrig at The Century Foundation, opposition to these accounts will be harder to mount given the inadequacy of today’s health care system. He argues that a successful opposition will require learning from the experiences of countries with Health Savings Accounts and presenting an alternative plan to make the case that shared risk is less risky and less costly (see Greg Anrig, The Century Foundation, 1/25/2006 “HSAs vs. SS Privatization”).

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NEW RESEARCH

The Effects of Negative Shocks on Retirement Security

When the Nest Egg Cracks: Financial Consequences of Health Problems, Marital Status Changes, and Job Layoffs at Older Ages, a new Urban Institute report, provides a comprehensive look at the impact late-life risks have on economic well-being and retirement security. Using the Health Retirement Study, the authors examine the negative shocks experienced by people between the ages of 51 and 61 (those nearing retirement) and age 70 and older (those retired) and the impact on their household wealth and income. The report finds that over a period of 10 years, three-quarters of adults ages 51 to 61 experience negative shocks such as job layoffs, widowhood, divorce, new health problems, or health decline among parents or in-laws. Over a period of nine years, more than two-thirds of adults 70 and above experience at least one negative shock. The types of shocks older adults experience differ by gender, race, and education. For example, due to their higher likelihood of widowhood and their longer lifespan married women ages 51 to 61 and age 70 and older experience more individual negative shocks than married men. Black married couples of both age groups are more likely to develop medical conditions and have severe disabilities, and after 70, experience cognitive impairment than their white counterparts.

As for changes in wealth, job layoffs, divorce, widowhood and health-related work limitations resulted in sharp reductions in wealth. Adults age 70 and over who entered nursing homes also saw major reductions in their wealth. Nursing home care reduced wealth by 60 percent for unmarried women in this age group and by one-third for married women. Additionally, Black and Hispanic women of both age groups saw a much slower accumulation of wealth over the survey period than their white counterparts.

New Data and Analysis on Private Pensions in the U.S.

A new brief by the Center for Retirement Research at Boston College, “The State of Private Pensions: Current 5500 Data,” uses raw pension sponsor data from the Department of Labor (DOL) to extend existing DOL tabulations on pension plans from 2000 to 2003. Analysis of pension sponsor data from 2000 to 2003 showed a continuing shift from defined benefit plans to defined contribution plans (i.e., 401 (k)) as in earlier years. In 1981, defined benefit pensions covered just under 60 percent of workers whereas defined contribution pensions covered just under 20 percent of workers. In 2003, this trend had reversed itself, with defined contribution plans covering over 60 percent of workers, and defined benefit plans covering only around 10 percent of workers (about 30 percent are covered by both in 2003, compared with about 25 percent in 1981). In addition to the shift in pension type, the brief finds a tremendous spike in defined benefit contributions in the year 2000, after a long period of little to no contribution by employers. The increase was brought about by the stock market troubles and dropping interest rates, which decreased pension fund assets and increased fund liabilities. While the increase in contributions brought asset values back to reach their pre-2000 level on the whole, assets for defined benefit plans did not fully recover and were surpassed by defined contribution plans.

A Look at the President’s 2007 Budget

On February 7, 2006, the President released his budget for fiscal year 2007. The extensive budget and tax cuts outlined in this budget are analyzed in two new papers by the Center on Budget and Policy Priorities (CBPP): The President’s Budget: A Preliminary Analysis and The Hidden Cuts in Domestic Appropriations: OMB Data Reveal Deep Funding Cuts After 2007. CBPP’s analysis finds that the President’s budget pairs $187 billion worth of deep cuts and eliminations to domestic discretionary and entitlement programs over five years with $285 billion in tax cuts over the same time period. These cuts and eliminations would do great harm to low- and moderate-income families in need of support, while giving tax cuts that primarily benefit the top echelons in our society and simultaneously increasing our national deficit. Social Security made the list of programs to be cut in the President’s budget, which proposed cutting dependent benefits for 16- and 17-year olds who are not in school and an elimination of the lump sum death benefit.

CBPP analysis also shows that the proposed cuts to child care funding for low- and moderate-income families would result in 400,000 fewer children receiving child care assistance in 2007, and legislative changes to Medicaid would reduce federal funding for the program by shifting costs to the states. A number of domestic discretionary programs to be eliminated under this budget include the Commodity Supplemental Food Program (which serves low-income seniors, post-partum women, infants, and children up to the age of six). Additionally, the President proposes eliminating the Preventive Care Block Grant (which funds preventive health services for underserved populations), and the Community Service Block Grant (which provides a range of services to low-income families, the elderly, and the disabled), among others.

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ACTION ITEM

Save the Survey of Income and Program Participation!!

Social scientists who use the Survey of Income and Program Participation (SIPP), a Census Bureau data set, in their own research, or who rely on research by others or have students who use it, are encouraged to sign a letter that will be delivered to the U.S. Congress in March.  The purpose of the letter, being circulated by the Center for Economic and Policy Research is to save the SIPP, since President Bush's proposed budget for Fiscal 2007 eliminates it.  At IWPR, we have used the SIPP for many years for research on poverty, welfare, food stamps, Medicaid, Medicare and other health insurance, child support, unemployment insurance, the low wage labor market, savings and assets such as home ownership, the movement of women in and out of the labor market across their life times, the type of child care families used and what they pay for it, access to pension plans and uses of pension benefits, and so on. The new panel of the SIPP, which began in 2004, is a very detailed longitudinal data set, consisting of interviews of the same families three times each year, usually for about three years. IWPR relies on this data set for its research on women and families and we urge you to work with your professional associations and others to save this important national resource. 

If you are a social-science researcher and would like to sign on to the letter, please e-mail your contact information and academic affiliation to the Center for Economic and Policy Research (CEPR) at openletter@ceprdata.org. If you would be willing to be a media spokesperson in your state on this issue, please also indicate that in your email. We encourage you to pass information about the sign-on letter along to your colleagues who also might be interested in signing. Advocacy organizations, especially those concerned with poverty, retirement, and work and family issues, are also urged to participate in the campaign. If you have questions, please contact Heather Boushey. HURRY!!! CEPR will be closing the sign-on letter on March 1, 2006.

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UPCOMING EVENTS

The National Council on the Aging and the American Society on Aging hold their 2006 conference March 16-19 in Anaheim, CA

The National Council on the Aging (NCOA) and the American Society on Aging (ASA) will hold an educational and networking conference, Invest in Aging: Strengthening Families, Communities, and Ourselves for professionals in the field of aging from March 16-19, 2006 in Anaheim, CA. This conference will feature more than 800 sessions on innovative programs, policy and advocacy around aging, and new research. Over 4,000 NCOA and ASA members and others are expected to attend. For registration information, please visit the Invest in Aging website.

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