“The lifespan of any civilization can be measured by the respect and care that is given to its elderly citizens, and those societies which treat their elderly with contempt have the seeds of their own destruction within them.”

—Arnold J. Toynbee

The astounding, and potentially tragic, aspect of Washington’s three-plus-decade Social Security debate is that it carries on with little regard to the challenges facing the program’s participants. Politicians on the right and center-right feel free to decry resistance to even “modest cuts” in Social Security benefits while ignoring the vulnerability of seniors who are living the effects of reductions already mandated in the program’s last major overhaul, in 1983.

But the situation for seniors – and future retirees – is becoming alarming. A new, supplemental poverty measure introduced by the Census Bureau last November nearly doubled the official estimate of Americans over 65 living in poverty, to 15.9%, mainly due to medical costs not counted in the official numbers. More than 34% were either poor or near-poor—defined as having family income less than twice the poverty line. Half of all retirement-age persons who were no longer working—that is, who were receiving Social Security—had total yearly income of less than $16,140—only a fraction more than the federal minimum wage.

Even small reductions in benefits, or slower growth over a period of years, could tip many of these people into poverty. Countless others, who once believed their personal savings, 401(k)s, employer-sponsored pensions, or the equity in their homes made their retirements secure, are finding out that this isn’t the case either. Meanwhile, the White House, Republicans, and centrist Democrats are reportedly negotiating a Grand Bargain built on the deficit-cutting Bowles-Simpson proposals, which would include deep reductions to Social Security. And state and local governments are scrounging for ways to cut back the rest of the safety net for seniors—targeting Medicaid funds for nursing homes and home health care, housing subsidies, and other benefits.

A true retirement crisis is looming in the U.S., but politicians, obsessed with Social Security projections decades into the future, are disinclined to address it. Financially vulnerable older workers will be affected almost as soon as they retire; workers in their 20s, 30s, and 40s today will be hit much harder.

The Social Security “deficit”—the amount by which annual old-age and Disability Insurance benefits are expected to exceed revenues—was projected in 2011 to total about $6.5 trillion over the next 75 years. But for all the political attention focused on it, the economic impact of that shortfall will be quite moderate, equaling just .7% of GDP. Even the Baby Boom retirement wave wouldn’t make a very big dent in the economy, according to the Social Security trustees, whose 2011 Annual Report estimated that the annual cost of benefits will rise gradually to 6.2% of GDP by 2035, decline to about 6% by 2050, then stabilize at about that level.

By contrast, the U.S. faces a “retirement income deficit” of $6.6 trillion—larger than Social Security’s projected 75-year shortfall and five times the size of the current-year federal deficit. The Retirement Income Deficit is a new measure unveiled in fall 2010 by the Center for Retirement Research at Boston College. It lumps together all the resources that Americans in their peak earning years will have to retire on: Social Security and pension benefits, retirement savings, home equity, and other assets. It calculates the income people will need in retirement, based on tax scenarios as well as the income replacement targets that Americans at different income levels will likely need to meet.

Social Security and Medicare are perhaps the only ingredients in the Retirement Income Deficit calculation that the elderly can still rely upon. Nearly two-thirds depend on Social Security for more than half their income, and roughly one in five for all of it. Without Social Security, nearly half of Americans over 65 would be living in poverty. If anything, dependence on Social Security has increasing since the latest economic slump, thanks to the collapsed housing market, the recession, decades of stagnating wages, and the disintegration of other elements of the social safety net, among other factors.

Not that it’s a lot to lean on. Social Security only replaces 37% of the average worker’s pre-retirement income at 65. More than 95% of recipients get less than $2,000 a month from the program. Women average less than $12,000 a year in benefits, compared to $14,000 for retirees overall, thanks to the gender pay gap—partially explaining why 75% of old people living in poverty in the U.S. are women. While this seems to merit little discussion in deficit-obsessed Washington or on Wall Street, it draws an alarming picture for anyone familiar with what’s happening in the rest of the country, where a Gallup poll found 90% of people aged 44 to 75 agreeing that the country faces a retirement crisis.

Even before the economic slump, however, there were reasons to worry about the erosion of Social Security.

The Real Retirement Crisis » Counterpunch: Tells the Facts, Names the Names

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