Happy Birthday Social Security
Eighty years ago this month Congress enacted what would be regarded as the singularly most successful social insurance program in the history of our country: Social Security. For eight decades, Social Security has been an unbroken promise of financial security to millions of Americans. For seniors, there is a monthly check. Widows, children and the disabled are kept out of poverty, and America is kept whole.
In 2013, Social Security kept 22 million Americans of all ages out of poverty, including one million children under the age of 18, according to an AARP analysis. In California, an average of 1.9 million people are kept out of poverty every year because of Social Security.
But a recent AARP poll said a majority of U.S. adults are not confident about the future of the program. After 80 years of success, the American people deserve to know that Social Security will remain secure throughout their lifetime and for future generations.
So what reforms have been made and what more can be done to ensure the longevity of such a successful program?
A Look Back
Like any reliable pickup truck, Social Security has required maintenance. Any mechanic will tell you that your car needs oil and tire changes periodically. The same holds true for Social Security. For example, in 1972, the automatic cost-of-living-adjustments (COLAs), which index benefits to inflation, were introduced. In 1983, President Reagan signed into law legislation that extended the life of Social Security through a number of important program changes, including raising the full retirement age, the coverage of federal workers, and the taxation of Social Security benefits. And in 1993, the amount of taxable benefits for upper income retirees was increased. These reforms were made to bolster the Social Security Trust Fund in order for the program to serve future generations.
Social Security is an entirely self-funded program, meaning it does not add a single penny to the national debt. It is funded in two ways:
- Social Security is primarily funded through the payroll tax on workers’ wages. These monies are directly paid out to the beneficiaries of the program today.
- Social Security is also funded through the Social Security Trust Fund, a “savings account” for excess contributions paid into the Social Security system. This fund holds money not needed to pay benefits in the current year, as well as the administrative costs of the Social Security Administration.
It’s important to know how Social Security is funded because shifts in population and economic conditions impact its solvency. For example, Baby Boomers have now reached or surpassed retirement age. At the same time we do not have full employment for many Americans, so we two problems. We have fewer workers paying into Social Security, and we have more eligible beneficiaries. Thirty years ago there were approximately 120 million workers and 36 million beneficiaries, according to the Social Security Administration. Today, there are approximately 160 million workers and 57 million beneficiaries. This change in ratio does not favor the longevity of the program, which is why adjustments must be made to Social Security to ensure future generations can rely on it.
Many plans have been proposed by policymakers to reform Social Security, some of which I support. While I oppose privatization and cutting benefits to the hardworking Americans who have paid into the program, I do support other reforms. Increasing the payroll tax cap or payroll tax rate are options. So are indexing the Trust Fund for longevity and taxing other types of benefit plans, such as flexible spending accounts. You can learn more about these proposals here.
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President Franklin D. Roosevelt stated at the signing of the Social Security Act in 1935: “This law, too, represents a cornerstone in a structure which is being built, but is by no means complete. It is a law that will take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness.”
Today at 80 years old, Social Security continues to serve our nation exceedingly well. Millions of Americans have dignity in their senior years and will continue to as long as we remain committed to using it wisely and improving it through sensible and fair reforms for today’s beneficiaries and future generations.
Happy Birthday Social Security!
All my best,
Anna G. Eshoo
Member of Congress