Just in time for Black History Month, the nation enters a dialogue
about race that could have important socioeconomic implications for
generations of African Americans. At issue is President Bush’s charge
that the Social Security system is unfair to African Americans because
they do not live as long as whites and cannot draw down on retirement
benefits and that they would do better financially if the nation embraced
a privatized system of individual accounts that can be invested in
the stock market.
Bush’s History with Blacks
While there is a stark need for a plan of action addressing race-based
income and health disparities, of surprise to many is that President
Bush and prominent members of the Republican Party have introduced
After all, these are the people who have spent the last four years
providing tax relief for the wealthiest Americans while laying the
groundwork for dismantling the very programs that have helped blacks
mitigate the effects of centuries of deprivation.
Among the health and wealth creation vehicles on the President’s chopping
block are Affirmative Action, Perkins loans, Community Development
Block Grants, empowerment and enterprise zones, Section 8 and Hope
VI federal housing subsidies, minority health disparities research,
and Medicaid. Each of these policies have been important for elevating
the socio-economic condition of African Americans in the post-Civil
Rights era, yet they have been challenged, seriously curtailed, or
eliminated under the Bush Administration.
Now, despite overwhelming evidence to the contrary, African Americans
are expected to take the GOP’s newfound interest in their socio-economic
security at face value. This exercise in suspended disbelief, however,
has been made extremely difficult because of the myopic nature of the
arguments being put forth.
Twisting Black History Facts
In a staged White House event in January, President Bush highlighted
the example of an African American man whose father passed away at
57 before he could access Social Security retirement benefits. The
President declared Social Security unfair and lamented that the structure
of the Social Security system prevented this man from leaving any money
for his adult children.
Indeed, African Americans, especially black men, do have shorter life
spans when compared to whites. Yet this is not an immutable fact of
life or a problem somehow generated by the Social Security system,
as the President would lead us to believe.
In reality, the shorter life expectancy of African Americans is due
to their poorer health status. According to a recent report by the
National Center for Health Statistics, the overall mortality for African
Americans was 31 percent higher than for whites in 2002. The report
highlights that the age-adjusted death rates for African Americans
exceeded those for whites by 41 percent for stroke, 30 percent for
heart disease, 25 percent for cancer, and more than 750 percent for
HIV/AIDS. Homicide was the leading cause of death among young black
men, which contributed to their lower life expectancy. These health
disparities are exacerbated by a lack of access to affordable, quality
health care. Census Bureau figures show that twenty percent of African
Americans were without health insurance in 2003 compared to only 11
percent of whites.
Ironically, President Bush could help close these health disparities
by leading the effort to change how health care is provided in this
country. Instead, his Administration’s attempts to gloss over the
existence of minority health disparities, inattention to policies that
expand affordable, quality health care to all Americans, and efforts
to slash funding for Medicaid – a health care program disproportionately
serving African Americans – have contributed to the negative health
indicators driving the black/white gap in life expectancy and will,
ultimately, contribute to the continued black/white gap in the number
of Social Security retirement beneficiaries.
A similar shortsightedness has been apparent in the rationale given
by privatization advocates for the black/white disparities in income
and wealth. According to the U.S. Census Bureau, African Americans
had a real median income of $29,600 in 2003 compared to $47,800 for
whites. Similarly, a report issued by a Federal Reserve Board economist
showed that whites had more than six times as much wealth as African
Americans in 2001.
Despite strong evidence to the contrary, Social Security privatization
advocates would have us believe that this situation is due to the regressive
6.2 percent Social Security payroll tax, which they claim reduces the
ability of African Americans to build wealth and save for retirement.
Sadly, many African American families do suffer from a lack of personal
assets that can supplement their income upon retirement. This lack
of private wealth, however, is not due to the Social Security payroll
tax but to the fact that many current African American retirees are
only the second and third generations away from their slave ancestors
(who were forbidden to own property or obtain an education that could
have improved their economic circumstances) and only zero to one generations
away from de-jure segregation which also systematically limited their
economic and educational opportunities.
The income and wealth gap is complicated by the historic marginalization
of African Americans in a labor market where they have been disproportionately
unemployed, underemployed, and/or segmented into those jobs that do
not offer pension benefits. The result is their overrepresentation
among low and moderate income workers and their diminished capacity
to accumulate or “pass on” assets such as equity-rich homes, stocks,
land, businesses, or a cash inheritance. (See , “Bamboozled: Destruction
of Social Security Would Harm Black Communities,” December
In light of these circumstances, it is perhaps not surprising that
African Americans have yet to accumulate substantial personal wealth
that is inheritable across generations. Yet, the President and privatization
advocates have been unwilling to acknowledge these black history facts
in their efforts to pin the blame on Social Security.
How Does the Hype Square with Reality?
Now African Americans are being led to believe that they can overcome
centuries of disadvantage by buying into the President’s proposal to
create private individual accounts that can be invested on Wall Street. They
are being promised the possibility of earning great wealth that can
be passed on to their “heirs.” While this proposal sounds good on
its face, an understanding of the tradeoffs and likely outcomes paints
a sobering picture.
Currently Social Security helps offset the lower earnings and higher
unemployment rates of African Americans through a progressive benefit
formula that replaces a higher percentage of a low income person's
pre-retirement wages while factoring in only the highest 35 years of
dropping away those years of low or zero earnings).
In contrast, racial disparities in income
and unemployment would remain and even grow under a system of individual
accounts even if blacks and whites were earning the same rate
of return. This is because, unlike Social Security, these accounts
do nothing to offset periods when individuals make very small or
zero contributions to their accounts due to lower earnings or unemployment. Describing
this phenomenon, Congressman Charlie Rangel
aptly states, “You can’t get out
what you can’t put in.”
Combined with the high risk associated with
individual account investments, the outlook for African Americans,
especially those on a low or fixed income, is dire.
The inheritance argument is similarly misleading. Currently,
Social Security provides benefits for the surviving dependents of
a worker who passes away in the prime of his or her working years. Because
blacks have lower life expectancies, African American widow(er)s
and young surviving children have a higher reliance on these benefits
when compared to whites. Indeed, Social Security Administration
figures show that 48 percent of African Americans receiving survivor
benefits are children.
However, under a system of individual accounts,
an African American male dying at a young age is unlikely to have
enough funds accumulated in his account to offset the deep cuts in
Social Security benefits that are likely to accompany these accounts. As
a result, young child survivors, who are the least able to fend for
themselves, are likely to face the possibility of extreme poverty.
So if one does not have enough money accrued
in his or her individual account, how does one leave an inheritance? Proponents
typically cite the case of an older (say 57 years old) African American
male who dies before he is able to receive retirement benefits. In
this scenario, whatever funds this individual was able to accrue
in his individual account would likely go to adult surviving children – who
are better able than younger surviving children to take care of themselves
when a parent passes away.
Furthermore, individuals reaching the age of retirement who want to
leave an inheritance would likely be required to use their account
funds to purchase an annuity with a life insurance feature that could
be paid out to survivors upon death. This type of policy would be very
expensive and would expose the retiree to the risk of having very little
money to live on in retirement and his heirs with little or next to
And how do individual accounts address the problem of African Americans’ shorter
life expectancy? They don’t. For all of the hullabaloo being made
about their higher death rates, private individual accounts include
no structural features that make it easier for African American men
to access retirement benefits.
The President is right to focus the nation on the need to promote
ownership and wealth creation in the United States. Yet he is wrong
to attempt to execute his plan by undermining Social Security. If
the President really cares about the welfare of African Americans,
he would seek to close health disparities and give people an opportunity
earn extra money to put on top of Social Security’s guarantee.
Dr. Maya Rockeymoore is currently Vice President of Research and
Programs at the Congressional
Black Caucus Foundation. Previously serving on the Social Security
Subcommittee of the U.S. House of Representatives Committee on Ways
and Means, she is the co-editor of Strengthening
Communities: Social Insurance in a Diverse America and
author of The
Political Action Handbook: A How To Guide for the Hip Hop Generation.