Is the Social Security crisis the most predictive crisis in History?
The Social Security program was originally started during the Great Depression by
President Franklin D. Roosevelt in an attempt to bring the millions of Americans out of the debt
they found themselves in after the stock market crash. Due to President Hoover’s belief that the
economy would right itself after a period of time passes, nothing was done until FDR was in
office. By then the situation has become dire, unemployment rates had hit an all time high of
25% in 1935; families were evicted from their homes and global trade collapsed by 60 percent.
By mid 1930’s the Great Depression no longer only affected only the US, Europe was beginning
to be affected as well so in an attempt to revive the government, President Franklin D. Roosevelt
enacted the New Deal. Under the New Deal, the Social Security Act was implemented.
Today, social Security is one of the most debated topics in the world; it’s not only
debated about in Washington D.C but also in one’s everyday conversations. Back in 1935, the
government initially “provided coverage for wage and salary workers under age 65 who were
employed in industry and commerce within the United States, Alaska, and Hawaii. Excluded
were agricultural laborers, domestic servants in private homes, those engaged in casual labor not
in the course of their trade or business, officers and crew members of ships, employees of the
Federal Government, employees of state and local governments, employees of nonprofit
organizations, and self-employed persons.” (Social Security Bulletin of April 1985, 33-34)
Today, this program covers unemployment, disabilities, and families where a spouse or parent
dies in combat. Some arguments that people have against this program are: whether or not
having the social security system is a “safety net” for people who are unemployed and have
given up looking for jobs, this system takes away an individual’s ability to plan financially for
themselves in the future and the most well known one being is this system being are people
taking advantage of this program or do they truly need the benefit this program brings.
Not only are American citizens paying taxes to Social Security for the elderly, they’re
also paying towards Social Security Disability Insurance. This program provides insurance to the
11 million beneficiaries and their dependent families in retirement in the accidental event of that
these workers face a serious, long-term disability as a result of their jobs. Through this program,
insured workers with severe disabilities may file for benefits only when they have proved that
they suffer from a medically determinable physical or mental impairment that is expected to last
at least a year or may result in death if they shall participate in “substantially gainful activities.
Applicants for the program must demonstrate that they are unable to engage in any meaningful
paid work given their education or lack thereof and/or possible job experience they might have
had prior to the beginning of their disability. In 2018, these benefits are financed by
approximately a 6.20% payroll tax on covered earnings levied by both employers and
employees individually. The payroll covers old age, survivors, and disabled people and the
income generated by these tax revenues are deposited into the DI trust fund and used to pay for
the benefits of these disabled citizens.
According to the SSA’s Trust Fund Data, in 2016 they received a total of $957,453,000
and spent $922,276,000 which is a little above 96% of all the funds they received. The Social
Security disability trust fund was expected to run out of money by the end of 2016. Currently,
policymakers decide to allow the disability fund to take money from the old-age funds, but
looking at the rate the whole Social Security program is going the whole program will become
insolvent by 2034 due to a rising number of retirees and a drop in the birthrate. According to
Social Security Administration’s reports, Social Security is faced with issues of long-term
solvency, with the DI trust fund facing exhaustion in 2027, 16 years before the insolvency of the
Old-Age and Survivors Insurance (OASI) trust fund. The Hospital Insurance (HI) Trust Fund,
which funds the Medicare program, will be exhausted even earlier, in 2020.
Due to a budget deal made in 2015, however, Congress repeated an adjustment it has
used in the past, temporarily shifting tax revenue from Social Security's retirement program to
keep the Disability program fully operational. By doing so, the disabled workers will still be able
to receive their benefits for the time being. In the years of 2016 to 2018, Social Security
Disability will be receiving a larger share of the overall Social Security tax: 2.37 percentage
points of payroll vs. 1.8 percentage points normally. However, with the soon impending
retirement of the largest generation in American history – the baby boomers – the amount of
money being paid into Social Security will be higher than the amount of funds being received.
There is no shortage of policy ideas on how to fix the Social Security funding, but as far as
government programs go, Social Security is a relatively simpler one. Most of the goals of reform
can be met by adjusting a few conditions such as — the initial benefit formula, the retirement
age, the cost-of-living adjustment, the payroll tax rate. Unfortunately, not many people are
educated about how and where their money goes when it’s taken out of their paycheck and into
the Social Security funds so when the government proposes another tax raise people
automatically fly off and start criticizing the government. According to surveys conducted by the
Financial Planners Association together with AARP, this study surveyed 1,279 CFP
professionals and 1,215 future Social Security beneficiaries ages 45-64. Overall the results of
these two surveys show that Social Security knowledge is lacking for Americans ages 45-64 in
ways that could severely impact their benefit and retirement decisions. This includes knowledge
around the impact of claiming age, spousal benefits, widow benefits, benefits for ex-spouses, and
working while collecting Social Security. Retirement planning and the gathering of information
related to Social Security benefits, whether done on one’s own or with the help of a professional,
is an important step in planning for one’s financial future. Therefore, if Americans are
uneducated about an important program like this the chances that those who are in need of help
aren’t receiving benefits.
But with an online program called T he Reformer: An Interactive Tool to Fix Social
Security people can see the aspects that can influence the amount of benefits that one can
receive. The program is great at showing what can happen if the retirement age is increased,
when initial benefit growth is slowed, and when the cost of living is influenced. By incorporating
the use of this program in a school project, teachers can help teach young adults what they can
do to extend the longevity of the program. This resource can also help educate the teenagers and
adults alike to see the misconceptions that they could possibly have about this program, see what
really goes on behind the taxes that they’re paying to the administration monthly.
All things considered, reforming Social Security isn’t a very difficult policy reform. Such
changes can be made in many different ways that can encourage people to work and get jobs,
exempting current retirees from benefit reductions, target those who the most vulnerable and
protect them and their benefits and keep future benefits at least as generous as today’s for almost
everyone else. Unfortunately, politics plays a very big role in how programs are funded and how
the funding gets distributed, and politics could very well be the program’s undoing. As discussed
in a previous paragraph, the estimated projection of the lifespan of the Social Security benefit is
only going to be around for the next 15 to 20 years. After this period of time nobody really
knows what is going to become of this program whether everybody’s social security checks will
be reduced, payrolls will be increased or having retirees being dropped from the rolls altogether.
Finally, no matter what the option is, it certainly isn’t playing out well for the middle
class and politicians know this- which is why they’re holding back on doing any changes to
reform this program for as long as they possibly can. If politicians proposed raising the
retirement age there are problems with people working low-income jobs that may already reduce
their life expectancy so this isn’t fair to them. If Congressmen proposed a higher tax rate on the
wealthy, they’re jeopardizing their own careers so there’s is very little chance of that happening
as well. Overall, I believe the problem lies with the people. We accuse the government of being
corrupt and not helping us but in reality we are the ones who are giving them the seats of
authority by voting for them. I actually wonder at this point if Congress will ever find a
compromise to this major public policy issue. There is no doubt that the longer we wait, the
worse the situation will become.
However, we have the opportunity to fix this program now, if we can find a way to
persuade politicians to act on this heavily debated topic today instead of having the majority
suffer in the future. Personally, one solution I believe we can definitely try to to implement is
finding the people who are abusing the system first and cut off the benefits they’re getting so
there will be a bit more of funds and to let workers have a say in which section of SSI or SSD
they want their taxes to go towards so they feel like they have a say thus make them feel good
about giving a portion of their paycheck away. Therefore, if the government can be a little bit
more encouraging and give little incentives for people to pay taxes or maintain a job for a certain
amount of years this would help encourage people to continue working and put less of a strain on
the system.