Cover Story

Social Insecurity

It has been known as the third rail of politics: Touch it and die. Democrats and organized labor drew some Republican blood last November by frightening the elderly electorate about GOP intentions for Social Security--but the Republican Congress held, and the political axiom changed: Don't touch it and it will die. Social Security is in trouble, and Washington may actually be ready to reform the system. There may be no other choice.

Issue: "Social Security," Jan. 11, 1997

Bill Stephens is willing to talk about Social Security, but not first thing in the morning. He has to wait until the nurse, who has come over to check his glucose, heads off to another house. In the wake of a stroke, a cancer scare, and a double hip replacement, medical worries are never far from his mind. And with medical worries come financial ones-bills that stretch Mr. Stephens's $602 monthly Social Security check to the limit.

"I tell you it's not much with all these bills and insurance expenses," he says, taking his accustomed seat in a brown vinyl recliner. "A lot of people get a whole lot more than we do because we always had small churches and small salaries," adds his wife, Mildred, from her blue vinyl recliner on the other side of the fireplace. It's not a complaint, just a fact offered with the same cheerful tone she uses when she reveals their ages: 79 for him, a year older for her.

Mr. Stephens pastored his first little church outside Birmingham, Ala., in 1942, the year after he and Mildred were married. With the church too small to support him, he made ends meet by working a shift in one of the city's steel mills during the wartime boom. Thanks to an act of Congress passed just seven years before, in the darkest days of the Depression, Mr. Stephens was forced to pay into a new system known as Social Security. It was massive. It was untried. It was socialistic. But for the Stephenses, it was a lifesaver.

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"Without Social Security, we still would be having to work in some way, or go on welfare," he says. "We're supposed to go live with our kids here in town one day, when we physically have to. Without Social Security, it would just hasten that."

Not that life is easy, even with their monthly government check. The nurse who has just left the house is a neighbor, not someone sent over from the hospital. When Mr. Stephens officially retired 17 years ago, he still had to work part-time as seniors pastor at Greenville's Southside Baptist Church to make ends meet. Only prostate cancer and generally failing health finally precipitated his full retirement from the ministry.

There were a few investments in their younger years, but small congregations and four daughters made it impossible to accumulate a significant nest egg. Thus, their Social Security income helps the couple meet the expenses of old age, such as the $320 they pay monthly for health insurance to supplement Medicare.

And if tomorrow they got a letter saying that the system they depend on had gone bankrupt? "We'd just have to cash in our savings," Mrs. Stephens says.

"Well, that wouldn't go very far," her husband counters, rubbing the top of his head.

"I guess it would be pretty devastating in our case," she finally admits in her slow southern drawl.

But that "devastating" scenario is exactly where the system is headed. Government planners claim that monthly checks will flow until 2030, but experts in the private sector predict the crisis will hit just 15 years from now.

And some crisis it will be. Of the $1.53 trillion the federal government spent last year, nearly one quarter-$334 billion-went to Social Security. The Congressional Budget Office predicts that by 2005, that figure will grow to $556 billion-and that's before most members of the Baby Boom generation start to collect their gold watches.

Then things really get interesting. The problem is that from the beginning, Social Security was designed as a pay-as-you-go system, not a true funded pension plan. In other words, today's workers are writing the checks for people like the Stephenses, rather than saving for their own retirement. That wasn't a problem in the past, because workers outnumbered retirees by healthy margins. In 1950, there were 16 wage earners for every recipient of Social Security. Today, just 3.3 workers underwrite the retirement of each recipient. By 2030, when the last of the baby boomers hit today's retirement age, the ratio will be less than 2 to 1.

The last major effort at reform, which passed Congress in 1983, anticipated the problem of retiring boomers by increasing payroll taxes on that generation (and all generations following). The plan was to beef up the so-called trust fund so that boomers wouldn't bust the system. According to the actuaries, millions of middle-aged workers annually paying thousands of dollars each into the system would result in a surplus of more than $20 trillion by 2045.


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