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SOCIAL SECURITY



I. Social Security In Five Minutes
II. FICA Contributions and Disbursements - Historical Data
III. Criticisms
♦ Sustainability
♦ Empty Trust Funds
IV. Trivia







The Civil War Pension
Some argue that the 1861 Civil War Pension program was, in fact, the country's first social insurance program. It was initially intended to provide protection for soldiers who were disabled as a direct physical consequence of active combat. The Civil War Pension program was expanded in 1873 to include benefits for widows and dependents, in cases of death. A new proviso was added to the program in 1890 in the form of the Dependent Pension Act, which expanded the coverage to old age (including for widows and children, in cases of death). At its peak in 1894, the program provided coverage to nearly 2.5 million Americans and accounted for 37% of the federal budget.
(i) Former Confederate soldiers were excluded from the program.
(ii) Two children of Civil War vets continue to receive benefits under the Civil War Pension program to this day, 147 years after the end of the Civil War.

I. Social Security In Five Minutes


President Franklin Delano Roosevelt signed the Social Security Act into law on August 14, 1935, and the Social Security Board (the precursor to the Social Security Administration) was officially established on October 14, 1936.

The Board, and subsequently, the Social Security Administration, operates under the terms outlined under Title 42 of the U.S.C.

Widely referred to as the Economic Security Bill during the drafting stages, the Social Security Act came into being in the wake of the Great Depression and the resulting economic turmoil, which saw more than half of the nation's 7.8 million senior citizens living below the poverty line. The bill was designed to prevent a similar recurrence through the creation of a federally mandated insurance program that would provide income to retirees age 65 and above.

The Act initially faced fierce resistance from Republican legislators, who felt that the program was inherently socialistic in nature. However, the proposal proved to be popular with Americans at large, leading to a swift passage through both the House (371-33) and Senate (77-6).

The Act was amended to expand its coverage in 1939 (spouses and children), 1956 (the disabled and their beneficiaries), 1965 (Medicare, for twelve years before it fell under the jurisdiction of the Centers for Medicare and Medicaid Services) and 1972 (Supplemental Security Income, but funded by federal tax revenues, not Social Security taxes).

Social Security is funded principally through the Federal Insurance Contributions Act (FICA), a compulsory form of employment tax legislated according to the stipulations contained within Title 26 of the U.S.Code (below, left). Deposits are managed by the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund, under the supervision of the Board of Trustees of the Trust Funds, as outlined in Title 42, Chapter 7, Subchapter II, Section 401 (c) of the U.S.Code.



The Board of Trustees "shall be composed of the Commissioner of Social Security, the Secretary of the Treasury, the Secretary of Labor, and the Secretary of Health and Human Services... and of two members of the public (both of whom may not be from the same political party), who shall be nominated by the President for a term of four years and subject to confirmation by the Senate."

The six-man board is mandated to present an annual report to the Congress no later than the first day of April each year.

As of 2009, 453.7 million Americans have been registered with the Social Security Administration.

Since 1937, the agency has received contributions amounting to $13.87 trillion and disbursed $11.33 trillion.

Today, more than 30 million retirees, five million disabled Americans and about ten million beneficiaries receive support from the Social Security Administration.




II. FICA Contributions and Disbursements - Historical Data



III. Criticisms


Sustainability

There are concerns that Social Security, in its current form, is unsustainable.

The imminent and ongoing retirement of the baby boomers' generation is expected to outpace the entry of young Americans into the workforce.

Further, the consistently rising life expectancy of average Americans entails a longer coverage period.

As it is now, there have been an almost 25% growth of Americans aged 60 years and above in the last decade alone.

Under these circumstances, it is feared that the Administrations' two and a half trillion dollars surplus will rapidly diminish.




Empty Trust Funds

In its 77 year history, the Social Security Administration has stashed away a surplus amounting to $2,540,348,000,000, a figure that easily ensures its solvency for at least two decades. The $2.5 trillion surplus is deposited into a trust fund held by, wait for it, the federal government - the very same federal government that is currently almost $16 trillion in debt.

Analysts have been speculating since the early 1990s that the federal government has been dipping their hands into the Old-Age and Survivors Insurance Trust Fund (OASI) and the Disability Insurance Trust Fund (DI), despite repeated denials from four consecutive American administrations.

Dr. Allen W. Smith's 2003 book, The Looting of Social Security: How the Government is Draining America's Retirement Account, accused the George H. W. Bush and Bill Clinton administrations of spending the entire trust fund on government programs. Dr. Allen also charged that the federal government's "$2.5 trillion debt to Social Security is the real reason that so many politicians want to cut benefits. They are trying to find a way to avoid having to repay the looted money."

The Associated Press also ran a critical piece on March 14, 2010, which accused Congress "of raiding the Social Security trust funds to pay for other programs, masking the size of the budget deficit."

Washington Post's Charles Krauthammer perhaps explained the situation best in an article last year.

"When your FICA tax is taken out of your paycheck, it does not get squirreled away in some lockbox in West Virginia where it's kept until you and your contemporaries retire. Most goes out immediately to pay current retirees, and the rest (say, $100) goes to the U.S. Treasury - and is spent. On roads, bridges, national defense, public television, whatever - spent, gone.

In return for that $100, the Treasury sends the Social Security Administration a piece of paper that says: IOU $100. There are countless such pieces of paper in the lockbox. They are called "special issue" bonds. Special they are: They are worthless."


The ruse finally came into the open during the debt ceiling crisis in 2011. Speaking to CBS' Scott Pelley on July 12, 2011, President Obama indicated that failure to increase the federal debt ceiling may prevent the government from mailing out Social Security checks. The implication was obvious; the federal government could only meet its obligation (to Social Security, among others) if it was allowed to borrow.
Pelley: Can you tell the folks at home that no matter what happens, the Social Security checks are gonna go out on August the third? There are about $20 billion worth of Social Security checks that have to go out the day after the government is supposedly gonna go into default?

Mr. Obama: Well, this is not just a matter of Social Security checks. These are veterans' checks, these are folks on disability, and their checks. There are about 70 million checks that go out each month.

Pelley: Can you guarantee, as president, those checks will go out on August the third?

Mr. Obama: I cannot guarantee that those checks go out on August 3rd if we haven't resolved this issue. Because there may simply not be the money in the coffers to do it.


IV. Trivia


Trivia 1: The Social Security Board issued its first ever Social Security number to 23-year old John D. Sweeney, Jr., of New Rochelle, New York, on December 1, 1936 (SSN 055-09-0001)

Trivia 2: Ms. Grace D. Owen of Concord, New Hampshire, was the recipient of the lowest possible Social Security number (SSN 001-01-0001). However, owing to logistics and the geographic distribution of numbers, her registration was approved well after Mr. Sweeney.

Trivia 3: Ms. Ida May Fuller of Brattleboro, Vermont, became the first American to receive a monthly Social Security check. She was issued a check in the amount of $22.54 on January 31, 1940.





Current President of the United States

Barack Obama

Presidential Candidate Barack Obama
Obama Position on Social Security

President Obama is firmly against cutbacks on current or future social security benefits, although
there were reports that his administration agreed to put Social Security on the table during the
contentious debt ceiling negotiations with Republican legislators in 2011. Obama has also indicated
that he is not in favor of privatizing the agency.

“To put us on solid ground, we should also find a bipartisan solution to strengthen Social Security for future generations. We must do it without putting at risk current retirees, the most vulnerable, or people with disabilities; without slashing benefits for future generations; and without subjecting Americans’ guaranteed retirement income to the whims of the stock market.”
January 25, 2011: State of the Union address

President Obama believes that all seniors should be able to retire with dignity, not just a privileged few. And, he believes that all Americans deserve to know that, if they become disabled or if they lose the breadwinner in the family, Social Security will be there to protect them. Today, nearly 54 million Americans receive Social Security benefits, including 38 million retirees and their family members, 10 million Americans with disabilities and their dependents, and 6 million survivors of deceased workers.

For many of these Americans, Social Security is a key source of income. In fact, for more than half of Social Security recipients aged 65 or over, the program provides over 50 percent of their family income and, because of its lifetime income protection and survivors benefits, Social Security is particularly important for elderly women. . Moreover, the program is not just for seniors. Because of features like survivors benefits, Social Security is one of the largest antipoverty programs for children, and disability benefits also help younger workers and their families and are particularly important to minority communities.

The President is committed to protecting and strengthening Social Security—and securing the basic compact that hard work should be rewarded with dignity at retirement or in case of disability or early death. That’s why he has called on Congress to work on a bipartisan basis to preserve Social Security as a reliable source of income for American seniors and as a program that provides robust benefits to survivors and workers who develop disabilities. He believes that no current beneficiaries should see their basic benefits reduced and he will not accept an approach that slashes benefits for future generations. The President also stands firmly opposed to privatization and rejects the notion that the future of hard-working Americans should be left to the fluctuations of financial markets.
Whitehouse.gov
Seniors & Social Security, Guiding Principles: Protecting & Strengthening Social Security

Seventy-five years ago today, in the midst of the Great Depression, Franklin Roosevelt signed Social Security into law, laying a cornerstone in the foundation of America’s middle class, and assuring generations of America’s seniors that after a lifetime of hard work, they’d have a chance to retire with dignity. We have an obligation to keep that promise; to safeguard Social Security for our seniors, people with disabilities, and all Americans – today, tomorrow, and forever.

Now, we’ve been talking for a long time about how to do that; about how to make sure Social Security is healthy enough to cover the higher costs that are kicking in now that baby boomers are retiring. And I’m committed to working with anyone, Democrat or Republican, who wants to strengthen Social Security. I’m also encouraged by the reports of serious bipartisan work being done on this and other issues in the fiscal commission that I set up several months ago.

One thing we can’t afford to do though is privatize Social Security – an ill-conceived idea that would add trillions of dollars to our budget deficit while tying your benefits to the whims of Wall Street traders and the ups and downs of the stock market.

A few years ago, we had a debate about privatizing Social Security. And I’d have thought that debate would’ve been put to rest once and for all by the financial crisis we’ve just experienced. I’d have thought, after being reminded how quickly the stock market can tumble, after seeing the wealth people worked a lifetime to earn wiped out in a matter of days, that no one would want to place bets with Social Security on Wall Street; that everyone would understand why we need to be prudent about investing the retirement money of tens of millions of Americans.
August 14, 2010, White House: President Obama’s Weekly Address, Honoring Social Security, Not Privatizing It


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