Tuesday, April 19, 2005

Blacks Need Private SS Accounts

Alphonso Jackson, Secretary of the Department of Housing and Urban Development, has an op-ed in the Wall Street Journal arguing that minorities in general, and blacks in particular, will be the biggest gainers from President Bush's ownership society. Link. (Subscription required)
The National Urban League has issued its annual report on the state of black America. Sadly, but not surprisingly, the report concluded that economic and societal disparities continue to separate black and white Americans. Today, the typical black household has a net worth of only $6,100, while a typical white household has $67,000. In recent years, the wealth gap between blacks and whites has been intensifying. Blacks are more likely to be unemployed, living in poverty, and in need of government assistance.

We can begin reversing these trends and erasing today's racial inequities by encouraging black participation in what President Bush calls America's "ownership society." Through ownership, more Americans will accumulate wealth, become financially independent, and take a more active role in their futures, their children's futures, and the future of our country. [...]

An individual who owns his retirement security -- a concept central to the president's plan for reforming Social Security -- would enjoy many of the same benefits homeownership provides. And under the plan, even the lowest-income workers would have the opportunity to build equity.

Black Americans have the most to gain from the proposals. As it stands today, black seniors are disproportionately more dependent on Social Security, but they receive less benefit from the system. While approximately 20% of white Americans depend entirely on Social Security for their retirement income, the figure doubles for blacks.

But blacks receive far less in return for their Social Security contributions. One in three will get no benefit at all because he will die before he is eligible to collect benefits. After a lifetime of paying into Social Security, nearly 30% of black seniors are left in poverty, compared to 7% of white seniors. And while the average black male lives to age 67.8 -- after collecting less than one year of Social Security -- the average white male will collect seven years of benefits. In effect, black workers are subsidizing the retirement of whites. The inevitable results of not reforming Social Security -- raising payroll taxes or reducing benefits -- would only worsen the situation for blacks.

It should be a no-brainer to see that, under the current system, groups who live shorter lives are being robbed to pay benefits to groups who live longer. It also should be a no-brainer to see that the poor, among whom blacks are over-represented, have less ability to accumulate assets after paying payroll taxes for a retirement plan very few will even get their contributions out of.

President Roosevelt needed the votes of the segregationist Southern Democrats to get Social Security passed, and it helped to have a plan where blacks would subsidize whites. The Dixiecrats would never have voted for a plan that allowed blacks to accumulate enough wealth to stop being their servants. It is about time that we switch to such a plan.


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