American businesses have substantial stakes in the outcome of the debate over Social Security, not least as sellers of goods and services to 43.5 million benefit recipients.
Although frequently overlooked as an economic player, the system's $320 billion annual benefit payout contributes significantly to the consumer demand that helps power our surging economy.Because most recipients are on tight and modest budgets, Social Security benefits tend to be spent quickly, thus constituting more immediate income to businesses than a like number of earned dollars.
The system further boosts the economy by reducing the poverty rate.
With Social Security, some 12 percent of people 65 and older are considered in poverty. Without Social Security, over half would be counted as poor. Poor people don't make good customers.
Moreover, without Social Security, the federal budget would not be approaching balance, indeed surplus.
Since 1983, the system has collected more in payroll taxes than it has paid out in benefits, and the difference gets counted in the consolidated budget.
In addition, those annual surpluses, between $50 billion and $70 billion in recent years, reduce what the Treasury borrows, thereby reducing interest rates paid by both government and businesses. That promotes greater private investment, creating both new wealth and jobs. Those investments would not be made if businesses didn't expect consumers to buy their products.
President Clinton's recommendation in his State of the Union address that Social Security receive first claim on the expected budget surpluses would make it easier for the system to provide promised benefits to baby boomers, their children and their grandchildren.
These funds could be used to pay off U.S. Treasury bonds as they become due, rather than, as now, to refinance those bonds. This would reduce the national debt and reduce interest payments on that debt, thereby enhancing future budget surpluses. The surpluses also could be privately invested to increase income to the Social Security trust fund.
Either scenario would reduce future burdens on taxpayers if we must increase taxes to enable the system to meet its obligations. Those who believe, however, Social Security will run out of money when baby boomers retire, because fewer people will be contributing per each person drawing benefits, ignore the fact that technological improvements will likely enable a smaller group of working people to supply the needs of a relatively larger group.
Some economists decry the low savings rate of U.S. households. But the Social Security surpluses boost national savings. They relieve the U.S. Treasury of needing to sell an equal amount in bonds. That forces would-be purchasers to invest in state or local bonds for expanding infrastructure or in private investment. In effect, the surpluses produce an equivalent amount of investment - just what we want savings to do.
Indeed, while many commentators compare our private savings rate unfavorably with those of Germany, Japan, Britain and France, we clearly have the better economy.
Social Security strengthens business across the board. Retailers sell more to seniors than they would without Social Security. The program also bolsters the incomes of disabled adults and their dependent children.
Further, electric and gas utilities face the dilemma of cutting off vital service to those who can't pay their bills. Without Social Security's payout, that dilemma would be more widespread.
As both sellers and taxpayers, large and small businesses have many stakes in a sound, unreduced Social Security program.
Businesspeople should join the debate on Social Security, advocating policies that protect it while resisting proposals to lower benefits.