DemDaily: The Status of Social Security
August 18, 2022
The Old-Age, Survivors, and Disability Insurance (OASDI) program, otherwise known as Social Security, turned 87 years old this week.
Our nation's largest social welfare and social insurance program was created as a part of President Franklin Roosevelt's New Deal in response to the economic depression of the 1930s. Enacted under the Social Security Act of 1935, the goal was to provide an economic safety net and source of income for elderly and disabled US citizens and their dependents.
| In signing the landmark act into law on August 14, 1935, Roosevelt said it “represents a cornerstone in a structure which is being built but is by no means complete.” |
How It Works
As amended over nearly nine decades, Social Security now encompasses several social welfare and insurance programs.
Since its inception, benefits are administered by the Social Security Administration (SSA), an independent agency of the US federal government.
Retirement Benefits: To qualify, legal residents working in the US are assigned a Social Security number and are taxed on their wages, based on their earnings.
The program is funded primarily through these payroll taxes, known as the Federal Insurance Contributions Act tax (FICA) or Self-Employed Contributions Act Tax (SECA).
Social Security payroll taxes are collected by the Internal Revenue Service (IRS) and are formally entrusted to the Federal Old-Age and Survivors Insurance (OASI) Trust Fund and the Federal Disability Insurance (DI) Trust Fund, the two Social Security Trust Funds.
An individual can collect the accrued benefits once they reach "retirement age," which is between 65 and 67 years old, depending on the year in which they were born.
Disabled Benefits: Social Security also provides a benefit called Supplemental Security Income (SSI), which provides additional income to disabled children or adults who have little or no income because of their disability.
Children's Benefits: The Children's Health Insurance Program (CHIP), enacted in 1997, provides matching funds to states for health insurance to cover uninsured children in families with incomes that are modest but too high to qualify for Medicaid. Social Security lifted 1.1 million children above the poverty line in 2020.
Survivors Benefits: Survivor benefits cover several categories including aged widow(er)s, aged surviving divorced spouses, disabled widow(er)s, disabled surviving divorced spouses, paternal and maternal orphans, and widow(er)s caring for minor or disabled children.
Health Care: For 57 years, Social Security has provided health insurance benefits to the most vulnerable of our citizens.
| The 1965 Social Security Amendments, signed by President Lyndon Johnson as a part of his Great Society domestic program, established Medicare, a health insurance program for the elderly and the disabled. It also created Medicaid, a health insurance program for people with limited income, that is jointly funded by the federal government and the states, and managed at the state level. |
Social Security Today
Over 65 million people, or more than 1 in every 6 US residents, collected Social Security benefits in January 2022. While older adults make up about 4 in 5 beneficiaries, another one-fifth of beneficiaries received Social Security Disability Insurance (SSDI) or were young survivors of deceased workers.
Its solvency and future funding, however, have been the subject of heated debate for several years.
Since the mid-1980s, Social Security has collected more in taxes and other income each year than it pays out in benefits and has amassed combined trust funds of about $2.9 trillion, with the excess income invested in interest-bearing Treasury securities. Social Security’s costs, however, will grow in the coming years as baby boomers retire.
If action is not taken to bring more revenue into the system, the Social Security and Medicare trustees project that the combined retirement and disability trust fund will be depleted by 2035. That does not mean Social Security will be "bankrupt” at that point as, based on current figures, Social Security could still pay three-fourths of scheduled benefits.
At the same time, current benefits and cost-of-living adjustments don't adequately take into account the rising cost of growing old in America, amplified by the impact of the coronavirus pandemic and recent inflation.
GOP proposals have suggested everything from privatization, which is met with great skepticism by economists, to reclassifying Social Security benefits as “discretionary spending” and subject to routine budget negotiations. Some Democratic proposals have included adjusting the payroll wage cap to include participation by higher income earners, which would help extend the life of the trust and secure revenue for expansion of benefits.
We cannot afford to lose the economic benefits that these programs provide to our communities and our citizens. Congress must act.
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Kimberly Scott
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Sources: The Hill, NCPSS, Center for Budget and Policy Priorities, SSA
