Hispanics urged to rethink approach to Social Security

May 23, 2002|By MATT YOUNG

Special to this newspaper

WASHINGTON (MNS) — As November elections near, Social Security is one of the usual suspects in the political lineup of major issues as President Bush pushes for partial privatization of the system.

While much of the political rhetoric will be aimed at senior citizens, there's another group that might want to scrutinize the issue as well: Hispanic-Americans.

"Social Security is not on (Hispanics') radar screen," although it should be, said Fernando Torres-Gil, director of UCLA's Center for Policy Research on Aging, at a panel discussion Tuesday sponsored by the Libertarian Cato Institute.


As one of the youngest demographic groups, Hispanics may reap few benefits from Social Security when they turn older, said Linda Chavez, president of the Center for Equal Opportunity, which says it promotes "colorblind" policies and opposes affirmative action.

She explained because Social Security benefits for current retirees are paid from the taxes of current workers, the large Baby Boom generation hitting retirement age in the next decade means more benefits will be paid than taxes collected. By 2041, Social Security will be unable to pay full benefits to retirees, according to the system's trustees.

That would affect Hispanics more than non-Hispanic white retirees because 36 percent of Hispanics were under 18 years old in 2000, according to the census, and only 5 percent were 65 and older. Twenty-four percent of non-Hispanic whites were under 18 while 14 percent were over 65.

Congress is debating Bush's proposal to allow workers to invest some of their Social Security savings in private retirement accounts, which supporters say would give those workers more retirement income.

Some Hispanic leaders support the concept of more individual control over Social Security savings, noting that Chile eliminated its government-run safety net for senior citizens in 1981.

"Since the Chilean system was implemented, labor force participation, pension fund assets and benefits have all grown," stated L. Jacobo Rodriguez, a financial services analyst at the Cato Institute.

Jose Pinera, a former Chilean labor minister of labor, said picking financial investments isn't all that difficult.

"The only thing you have to do is choose among mutual funds," he said.

Mutual funds are companies that professionally invest in other businesses on behalf of their clients. Because money is invested by experts and among different companies, mutual funds are believed to reduce risk.

"Hispanics … have taken risks in their lives and this is an incredibly small risk to take," Pinera said.

Personal accounts are also easily transferable from bank to bank.

"This will open the door for Hispanics that want to go back to their countries," Pinera said.

Chavez said she favors privatization because it would benefit undocumented workers, whose income is taxed for Social Security but who cannot collect when they retire. With private accounts, they could keep the money, she said.

"Illegal aliens actually help pay for the benefits of all Americans, but many have not ever been able to recoup their payments," Chavez said.

But Torres-Gil said privatization would be a gamble.

"If you don't do well, you're on your own" in the stock market, he said. "Hispanics don't have the financial level of sophistication to save and invest" because many are accustomed to "living paycheck to paycheck," he said.

At least Social Security is a partial safety net, he said. Torres-Gil also argued that if retirees' investments go sour, elected officials would feel compelled to bail out their constituents, costing taxpayers big sums.

While the termination of Social Security is highly controversial, the Bush administration supports "individually controlled, voluntary personal retirement accounts that will augment the Social Security safety net."

Democrats have proposed making moderate adjustments to the program and finding additional revenue elsewhere to keep the system solvent, said an official with the Democratic National Committee.

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