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Social SecurityIs the program running out of money?

Social Security has guaranteed an income for retirees,

their survivors and people with disabilities for more

than 80 years. But the landmark New Deal program

is paying out more in benefits than it collects in pay-

roll taxes, and the problem is forecast to get worse. As millions of

Baby Boomers — born between 1946 and 1964 — retire, the in-

creasing demands on Social Security threaten to overwhelm the

system. Some experts say the $2.8 trillion Social Security trust fund

will run out of money within a generation without major changes.

Among the proposals: raise payroll taxes, reduce benefits or shift

some Social Security money into the stock market. But others reject

major reforms and contend that minor adjustments, such as in-

creasing payroll taxes on wealthier workers, would keep the system

solvent. Democratic and Republican presidential hopefuls differ

sharply over whether to drastically change the system, tweak it or

even expand it to cover more low-income Americans. Regardless

of who wins this year’s election, the Social Security debate is ex-

pected to persist.

Winnifred “Winnie” Murphy celebrates her 105thbirthday in Chelsea, Mass., in 2014. Many of the 49 million retirees and their survivors who receive

Social Security payments every month are living longer, financially straining the system.

CQ Researcher • June 3, 2016 • www.cqresearcher.comVolume 26, Number 21 • Pages 481-504

RECIPIENT Of SOCIETY Of PROfESSIONAL JOURNALISTS AwARD fOR

EXCELLENCE � AmERICAN BAR ASSOCIATION SILvER GAvEL AwARD

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N

S

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THE ISSUES ....................483

CHRONOLOGY ................491

BACKGROUND ................492

CURRENT SITUATION ........496

AT ISSUE........................497

OUTLOOK ......................499

BIBLIOGRAPHY ................502

THE NEXT STEP ..............503

THISREPORT

Published by CQ Press, an Imprint of SAGE Publications, Inc. www.cqresearcher.com

482 CQ Researcher

THE ISSUES

483 • Is the Social Security systemrunning out of money?• Should Congress cut SocialSecurity benefits to ensurethe program’s long-term sustainability?• Should Social Security beprivatized?

BACKGROUND

492 Depression RootsUrbanization and the GreatDepression left many elderlyAmericans destitute.

494 Social Security ActPresident franklin D. Rooseveltsigned the New Deal programinto law in 1935.

495 Amendments PassedLawmakers extended coverageto families, disabled workersand welfare recipients.

496 Privatization DebatePresident George w. Bushwanted to let younger work-ers set up private investmentaccounts.

CURRENT SITUATION

496 Presidential PoliticsParty frontrunners proposevarious plans for the program.

498 Savings Crisismost American householdslack adequate retirementsavings, studies find.

OUTLOOK

499 Kicking the CanDelaying funding reforms willrequire drastic policy changeslater, experts say.

SIDEBARS AND GRAPHICS

484 Aging Population Chal-lenges Social SecurityOne in four Americans willbe eligible for benefits by2060.

485 Majority Skeptical of Receiving BenefitsDoubts about the program’slong-term viability peaked in2010.

486 Fraud and Waste Sap Social Security Funds“Every dollar misallocated isa dollar lost for those whotruly need it.”

488 Social Security ConsumesGrowing Share of BudgetThe share of the federalbudget allocated to the program is approaching 25 percent.

491 ChronologyKey events since 1935.

492 Disability Program FacesFinancial ChallengesAs claims mount, policy ex-perts seek to get recipientsback to work.

497 At Issue:Should Congress raise thefull retirement age to 70?

FOR FURTHER RESEARCH

501 For More InformationOrganizations to contact.

502 BibliographySelected sources used.

503 The Next StepAdditional articles.

503 Citing CQ ResearcherSample bibliography formats.

SOCIAL SECURITY

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June 3, 2016 483www.cqresearcher.com

Social Security

THE ISSUESwilma Bogar, 77,

doesn’t know whatshe would do with-

out Social Security.Her house outside Boze-

man, mont., is paid off, butshe still has everyday expensessuch as food and utilities, aswell as trips to Denver to seeher daughters. Between a pairof small pensions and her$1,869 monthly payment fromSocial Security, she is able toenjoy a quiet retirement.

“It’s a very big help,” shesays of Social Security. “Onceyou pay your insurance andelectric bill, [expenses] mountup, that’s for sure. withoutthe Social Security, it wouldbe a tighter pinch.”

Bogar is one of more than60 million Americans, including49 million retirees and survivorsof former recipients, who relyon Social Security paymentsevery month. 1 The popularprogram, which turned 80 lastyear, is achieving what its cre-ators intended back in the De-pression: provide a modestmonthly payment to the na-tion’s seniors so they need notworry about becoming desti-tute. Social Security also issuescash payments to the perma-nently disabled and to minorchildren of deceased workers.

with most companies doing awaywith pensions and workers still recov-ering from the 2007-09 recession thatdevastated retirement savings, some ex-perts say Social Security is more im-portant than ever.

“Social Security is really the back-bone of our retirement system,” saysAlicia munnell, director of the Centerfor Retirement Research at Boston Col-

lege. “It’s shielded from market changes,it’s shielded from inflation, and it comesout as an annuity. It’s the major sourceof retirement income in our country,and it works.”

But policy experts warn that thevenerable system is in trouble, mostlydue to demographics: An aging pop-ulation means fewer workers are payinginto the system and more retirees de-

manding benefits. At thesame time increased life ex-pectancy means the averageretiree receives a monthlycheck for years longer thanwhen the program was es-tablished. The Social Securitytrust fund currently has a$2.8 trillion balance — orsurplus — which comes frompayroll taxes and interest onthe surplus. Earmarked forpaying current and future re-tirees, the fund will run outof money within a genera-tion, imperiling full retirementbenefits for tens of millionsof Americans, without con-gressional action. 2

“Unless we deal with thiscrisis, the young people ofthis country will get poorer,the disparity between youngand old, the working middleclass and the retired will groweven larger,” New Jersey Gov.Chris Christie, who brieflyran for the 2016 Republicanpresidential nomination, saidlast year. 3

The so-called silver tsuna-mi — the huge wave ofaging post-world war IIBaby Boomers born be-tween 1946 and 1964 thatbegan retiring in 2012 — isstraining the system, a stressthat will only grow. By 2035,the number of Americansover age 65 will jump fromtoday’s 48 million to 79 mil-

lion. 4 In addition, today’s seniors canexpect to live, for almost 21 years,on average, after retiring, comparedwith 14 years in 1940, when SocialSecurity began making regular monthlypayments. 5

Such demographic trends can bedevastating to Social Security, a pay-as-you-go system funded by a 12.4 percentpayroll tax, half paid by workers and

BY DAVID HOSANSKY

AP Pho

to/Ted

S. W

arren

Washington state logger Tom Edwards, who has hadtrouble finding steady work, worries about his eventualretirement benefits because Social Security payments arebased on work history. As millions of Baby Boomers likeEdwards retire, the demands on Social Security couldoverwhelm the system. Some experts recommend raisingthe retirement age, but manual laborers like Edwards may not be able to spend additional years on the job.

484 CQ Researcher

half by employers. 6 * As the nation’spopulation ages, the number of retireescollecting Social Security benefits is ris-ing far more quickly than the numberof workers paying taxes to support thesystem. In 1950, 16 workers paid intothe system for every retiree collectingbenefits. 7 In the last few years, thatratio is down to 2.8 workers per retiree— and shrinking. 8

In 2010, the Social Security trustfund for the first time began payingout more than it raised in taxes, drawingdown the trust fund surplus to coverthe shortfall. At the current rate, thesurplus will be depleted in 2034, andSocial Security will be able to makejust 79 percent of its payments, fundedby payroll tax revenues. 9

Policy experts say it is critical forlawmakers to put the program onsounder fiscal footing as soon as possible.But Congress appears hopelessly splitbetween those who would save moneyby cutting benefits and those who want

to raise taxes to shore up the program.furthermore, washington these days haslittle appetite to change the popular en-titlement, known as the “third rail” ofpolitics because any major change likelywould provoke furious resistance.

“It’s part of the fabric of the country,”says max Richtman, president and CEOof the National Committee to PreserveSocial Security and medicare. “There’sa disconnect somewhere between thesentiment of the people on Social Se-curity and members of Congress whowant to cut it.”

Indeed, polls consistently show broadpublic support among Republicans andDemocrats alike for the program. A 2014survey by the nonpartisan National Acad-emy of Social Insurance, for example,found that 85 percent of Americans be-lieve that Social Security is more importantthan ever to ensure that retirees have adependable income. most respondentssaid they were willing to pay highertaxes to keep the system strong. 10

The Social Security Administration(SSA) also provides benefits to 11 mil-

lion disabled workers and their de-pendents through a pair of disabilityprograms called Supplemental SecurityIncome (SSI) and Social Security Dis-ability Insurance (SSDI), which are fac-ing even greater fiscal pressure. 11 In2015, when the disability trust fundwas down had only about a year’sworth of cash, Congress took moneyfrom the Social Security retirement trustfund to cover the shortfall. But thedisability programs are still expectedto run out of money early in the nextdecade. 12 (See sidebar, p. 492.)

The two programs combined willhave spent about $877 billion in 2015,representing about 24 percent of thetotal federal budget. 13

On the presidential trail this year,the candidates have proposed varioussolutions for fixing Social Security: in-creasing benefits, raising the retirementage, increasing Social Security taxes onwealthier Americans and privatizing theprogram. Some have even proposedraising payroll taxes enough to increasebenefits for lower income retirees. But

SOCIAL SECURITY

Aging Population Challenges Social Security

Over the next 45 years, the proportion of Americans age 65 or older eligible for Social Security benefits will grow from about one in seven today to almost one in four. Meanwhile, the working-age share of the population able to pay into the system — those ages 18 to 64 — is projected to shrink, further straining Social Security’s finances.

Source: “Table 6. Percent Distribution of the Projected Population by Sex and Selected Age Groups for the United States: 2015 to 2060,” U.S. Census Bureau, December 2014, downloaded from http://tinyurl.com/nmncrml

Projected Makeup of U.S. Popula-tion, by Age Group, 2015, 2035 and 2060

Under 18

18-64

65 and older

206020352015

Age Groups

* The self-employed pay the full 12.4 percent.


they generally have not emphasizedthe type of all-encompassing approachpolicy experts say is needed to ensurethe long-term fiscal health of the system.(See p. 496.)

“we have more money going outthan we have” coming in, says munnell.“There is no silver bullet. we need toclose that gap. when the political crazi-ness calms down, I hope they do thesame thing as last time — name acommission and then Congress takesits recommendations.”

munell was referring to the NationalCommission on Social Security Reform,which in 1983 issued recommendationslater adopted by Congress that put theretirement program on a stronger fiscalfooting.

while liberals generally want to re-tain the Social Security program oreven increase benefits, the conservativesworry that it is inordinately expensive.

“Social Security is a major contributorto our current debt problem,” saysRomina Boccia, deputy director of theRoe Institute for Economic Policy Stud-ies at the conservative Heritage foun-dation in washington. “It’s the largestfederal program. Twenty-five cents ofevery dollar the federal governmentspends is on Social Security — and itis growing.”

If the federal budget is ever to bereined in, conservatives say, governmentmust make changes to Social Securityand medicare, the other major federalentitlement program, which providesfederal health insurance for senior cit-izens. Together, Social Security andmedicare represent about 40 percentof the federal budget.

One of the most outspoken criticsof Social Security finances is LaurenceKotlikoff, an economics professor atBoston University who has writtenwidely about Social Security benefits.He worries the program is takingmoney from young workers with noguarantee that it will provide retire-ment income for them and future gen-erations.

“The system is broken. It’s a Ponzischeme,” says Kotlikoff, who would prefera system in which workers invest in thestock market. “The sooner we move awayfrom it, the better off our kids will be.”

As concern about Social Securitygrows, here are some questions policymakers and everyday Americans areasking:

Is the Social Security systemrunning out of money?

Ask younger Americans if they everexpect to receive Social Security benefitsand most are skeptical. In fact, a recentGallup Poll found that nearly two-thirds of those 29 and younger an-swered “no” when asked whether SocialSecurity would “be able to pay you abenefit when you retire?” 14

Demographic changes are costingSocial Security billions of dollars everymonth, leading political leaders to raisealarms about both Social Security andits impact on the federal budget.

“But anyone who tells you that SocialSecurity can stay the way it is is lying,”Sen. marco Rubio, R-fla., said during apresidential campaign debate earlier thisyear when he was a candidate. “SocialSecurity will go bankrupt, and it willbankrupt the country with it,” he said.

“So what it will require is people younger,like myself, people that are 30 yearsaway from retirement, to accept that ourSocial Security is going to work differentlythan it did for my parents.” 15

many experts, however, emphaticallyreject such dire predictions.

“Absolutely not,” says Richtman ofthe National Committee to PreserveSocial Security and medicare. “Theterms that are thrown around — crisis,bankrupt, there’s no money there —that’s part of the mythology that’s beingpushed by people who don’t care forthe program or want to see peopletake care of themselves. This programis sound. Everybody will get everypenny of their benefits.”

Both sides agree on the basic con-tours of the fiscal situation. The SocialSecurity trust fund last year paid outabout $84 billion more in benefits thanit raised in taxes, and that loss rate isexpected to grow as the Baby Boomerscontinue to retire. By about 2034, thetrust fund balance will decline to zero,at which point the payroll taxes collectedon workers every month will be enoughto pay only 79 percent of benefits toretirees. The exact date that the trustfund will be depleted depends on suchfactors as economic growth and the

Many Skeptical of Receiving BenefitsAbout half of nonretired Americans said in 2015 they did not expect to receive Social Security benefits when they stop working, down from 60 percent in 2010, when skepticism about the program’s long-term viability peaked, particularly among younger Americans.

Source: Frank Newport, “Many Americans Doubt They Will Get Social Security Benefits,” Gallup, Aug. 13, 2015, http://tinyurl.com/jc2xb6h; full results down-loaded from link at bottom of page

Poll: Do You Think Social Security WillPay You a Benefit When You Retire?

30

40

50

60%Pay You a Benefit When You Retire?

July-August2015

July2010

January2005

March2001

August2000

January1994

March1992

NoYes

Percentage Responding

486 CQ Researcher

life expectancy of retirees, according tothe Social Security trustees. 16

moreover, those trustees, who havebeen required since the early days ofthe program to issue an annual pro-jection of the trust fund’s solvency overthe next 75 years, estimate that thefund will face a deficit of $10.7 trillionin current dollars over the next three-quarters of a century. 17

But that may be a relatively optimisticscenario. The Congressional BudgetOffice says the trust fund most likelywill run out of money in 2029. 18 Orit could be depleted years earlier, warnsa team of political scientists and de-mographers at Harvard University andDartmouth College, partly because thetrustees may not be fully taking into

account longer life expectancies andother factors that could drain the fundearlier than estimated. 19

whatever the exact date, many fiscalexperts say the system as currentlyconfigured is headed toward insolvency.“It’s facing a pending crisis. we cannotpay the promised benefits with therevenues we have,” says michael Tanner,a senior fellow at the libertarian CatoInstitute. “It’s only going to get deeperand deeper in the red.”

But other experts, especially thoseon the left, say Social Security is gen-erally sound and needs only minoradjustments, such as increasing payrolltaxes on wealthier workers.

“No other program has to be per-petually fully funded 75 years into the

future that way,” says monique morrissey,an economist at the Economic PolicyInstitute, which focuses on the needsof low- and middle-income workers.“To always be in balance over 75 yearsis very difficult to do, and it doesn’tmean the program is a bust if it doesn’tattain it.”

morrissey and other Social Securityexperts also point out that, even inthe unlikely event that Congress wereto allow the trust fund balance to dwin-dle to nothing, companies and em-ployees would continue to fund it everymonth through payroll taxes. Underthat scenario, retirees would get about79 percent of their full benefits, ac-cording to estimates by the Social Se-curity trustees. 20

SOCIAL SECURITY

The Social Security system pays out hundreds of billionsof dollars each year in retirement and disability payments,and some of that money is winding up in the hands

of crooks and fraudsters.Examples abound:• millions of Social Security numbers belonging to deceased

Americans born more than a century ago remain available forpeople wanting to fraudulently collect monthly payments.

• Criminals are using fraudulent medical documents to obtainSocial Security disability benefits.

• Children are collecting benefits by using Social Securitynumbers of their deceased parents.

Underscoring the scope of the problem, a report last yearby the Social Security Administration’s Office of the InspectorGeneral identified about 6.5 million Social Security numberholders aged 112 or older — even though just 35 people world-wide were that old. In one case, an individual had recentlyopened bank accounts by using Social Security numbers forindividuals born in 1886 and 1893. 1

“It is incredible that the Social Security Administration in2015 does not have the technical sophistication to ensure thatpeople they know to be deceased are actually noted as dead,”said Sen. Ron Johnson, R-wis., who chairs the Senate committeethat oversees the Social Security Administration. “This problemhas serious consequences.” 2

The report urged the agency to better manage data for“number holders who exceeded maximum reasonable life ex-pectancies and were likely deceased.” 3

Politicians have raised concerns about the extent to whichfalse or stolen Social Security numbers may be costing the gov-ernment or putting Americans at risk of identity theft.

“Not only do these types of avoidable errors waste millionsof taxpayers’ dollars annually and expose our citizens to identifytheft, but they also undermine confidence in our government,”said Sen. Tom Carper, D-Del. 4

Businessman Donald Trump, the presumptive GOP presidentialnominee, has gone so far as to suggest that Social Security’sfiscal problems could be largely solved if it cut down on waste,fraud and abuse. 5 But fiscal experts say the notion that reducingthose problems would significantly change the finances of theSocial Security program is illusory.

“It’s absurd to pretend you can fix it by ending fraud,” saysmaya macGuineas, president of Committee for a Responsiblefederal Budget, a bipartisan think tank in washington. “Youcan get rid of every penny of fraud, waste and abuse andwould still have the same problems,” she adds.

Social Security’s disability system is viewed as more vulnerableto fraud than its retirement system because the determinationof whether someone qualifies for disability depends on complexfactors such as medical records. Earlier this year, a grand juryin Kentucky indicted three people, including a former judgeand a disability lawyer, on charges that they defrauded the gov-ernment of $600 million in disability benefits by submittingfalse medical documentation. 6

A report last year by the Social Security inspector generalconcluded that the Social Security Administration had made

fraud and waste Sap Social Security funds“Every dollar misallocated is a dollar lost for those who truly need it.”


“Absent a complete and total collapseof the U.S. economy so that no oneanywhere is working, Social Securitywill always have a revenue source ofsome sort in the future,” says KurtCzarnowski, a former Social Securityregional communications director whonow works as a consultant advisingworkers about Social Security benefits.“The question is: will that revenuesource cover 100 percent of thepromised benefits?

“with some reasonable changes toclose that 21 percent gap — increaseson the income side, slowdown on thebenefits side — it can remain thatsolid program that Americans havecounted on for 80-plus years,” saysCzarnowski.

Should Congress cut Social Secu-rity benefits to ensure the pro-gram’s long-term sustainability?

warren Adamsbaum has never for-gotten the day he received his firstSocial Security check: He had justturned 65 and was eligible for fullbenefits.

“when I first got it, I rememberthinking this is the greatest thing inthe world,” says the former public re-lations and advertising vice presidentfor weight watchers, who is now 91and living in Boca Raton, fla.

But the era of Americans receivingfull Social Security benefits at age 65is gone. Those wanting full benefitsnow must wait until they’re at least66 or, if born in 1960 or later, 67.

with Americans living longer andSocial Security beginning to run out ofmoney, experts wonder whether it istime to raise the full retirement ageeven further for younger and middle-aged workers. Boccia of the Heritagefoundation, for example, would like tosee the retirement age raised graduallyto 70 over the next couple of decades.

“You have people living increasinglylonger in retirement, which requiresincreasing taxes to pay for them” unlessthe retirement age is pushed back,she says.

But advocates for retirees fiercelyoppose any increase in the retirementage or cut in benefits. They prefer tobalance the trust fund and maintaincurrent benefits — or even increase

$16.8 billion in disability overpayments over the past 10 yearsending in 2014. much of the money went to people who wereno longer disabled or were earning too much to be eligiblefor the program. Some also went to people in prison or whohad died. 7 The agency was able to recover $8.1 billion, althoughit took several years. 8

Amid growing concerns about Social Security’s finances, Con-gress last year approved stiffer criminal and civil penalties andfines for Social Security fraud. The new law imposed penaltiesof up to 10 years in prison for individuals in trusted positions,such as doctors or former Social Security Administration employees,and also created a new felony classification, punishable by upto five years in prison and up to $250,000 in fines, for conspiracyto commit Social Security fraud. 9

But a study this year by the Government AccountabilityOffice warned that the Social Security Administration is failingto focus on cases that could generate more savings. “As a result,it may be missing opportunities to efficiently and effectivelyuse federal resources,” the report concluded. 10

Despite the large overpayments and other issues, Social SecurityAdministration officials maintained that the system has a highdegree of accuracy for both retirement and disability payments.“for fiscal year 2013 — the last year for which we have completedata — approximately 99.8 percent of all Social Security paymentswere free of overpayment, and nearly 99.9 percent were free ofunderpayment,” said Social Security spokesman mark Hinkle. 11

But critics said errors are making Social Security’s fiscal con-dition more precarious.

“Every dollar misallocated is a dollar lost for those who trulyneed it most,” said Senate finance Committee Chairman OrrinHatch, R-Utah. 12

— David Hosansky

1 “Numberholders Age 112 or Older who Did Not Have a Death Entry onthe Numident,” Office of the Inspector General, Social Security Administration,march 4, 2015, http://tinyurl.com/j6z9e2v.2 Josh Hicks, “millions over 112 have Social Security numbers, and it’s notbecause we’re living longer,” The Washington Post, march 10, 2015,http://tinyurl.com/zwl5f44.3 “Numberholders,” op. cit.4 Hicks, op. cit.5 michael Tanner, “Trump on ‘waste, fraud, and Abuse,’ ” National Review,feb. 17, 2016, http://tinyurl.com/h8ggnu7.6 “Retired Judge, Attorney, and Psychologist Indicted in $600 million SocialSecurity Disability fraud Scheme,” Office of the Inspector General, SocialSecurity Administration, April 5, 2016, http://tinyurl.com/jhz4dsx.7 “Overpayments in the Social Security Administration’s Disability Programs— A 10-Year Study,” June 2015, Office of the Inspector General, SocialSecurity Administration, http://tinyurl.com/jalxet6.8 Ibid.9 Eric Pianin, “why Social Security’s Crackdown on Disability fraud IsComing up Short,” The Fiscal Times, march 14, 2016, http://tinyurl.com/h8pc4je.10 “Social Security Disability: SSA Could Increase Savings by Refining ItsSelection of Cases for Disability Review,” U.S. Government AccountabilityOffice, feb. 11, 2016, http://tinyurl.com/jy5tzbg.11 Stephen Ohlemacher, “Report: Social Security Overpaid Disability Benefitsby $17 Billion,” Business Insider, June 5, 2015, http://tinyurl.com/zswbwmk.12 Ibid.

488 CQ Researcher

them — by raising payroll taxes, es-pecially on wealthier Americans, byraising the cap on how much incomeis taxed. Under current law, taxablewages are capped at $118,500, so in-come above that amount is exemptfrom payroll taxes, known as fICAtaxes for the federal Insurance Con-tributions Act of 1935. 21

“Social Security really needs a littlemore money,” says the Economic PolicyInstitute’s morrissey. “The vast majorityof people would be better off even ifthey were paying slightly more in con-tributions.”

Polls show Americans are more in-clined to preserve Social Security byraising taxes than by cutting benefits.for example, a 2014 survey by the Na-tional Academy of Social Insurancefound that 77 percent of respondentssaid it’s critical to preserve Social Security,even if that meant paying more in taxes.Presented with a range of options forraising taxes or cutting benefits, the re-spondents preferred to pay higher taxesthemselves and to impose higher taxeson the wealthy, rather than raise theretirement age or cut benefits. 22

Policymakers could adjust benefitformulas to help get Social Securityon a more solid fiscal footing. Currently,benefits are based on the highest 35

years of the recipient’s wages and arelinked to average U.S. wage growth. Ifthey were based on the highest 38 yearsof earnings (thereby incorporating threeyears of lower earnings) and linkedto inflation (which tends to rise moreslowly than wages), average benefitswould be lower. 23

But liberals say benefits are alreadystingy, especially for lower-income work-ers and those — especially women —who dropped out of the workplace fora period of time, usually to focus onfamily caretaking. And it is unfair toraise the retirement age, they say, becauselower-income workers are not livinglonger like wealthier workers and manuallaborers may be physically unable tospend additional years on the job.

“I have a feeling that most of thosepeople who are talking about it caneasily work for a few more years,”Richtman says. “I bet you don’t hearmany nurses or factory workers or peo-ple doing manual labor advocating ahigher retirement age.”

But other policy experts say the re-tirement age can be increased whilestill protecting workers in physicallydemanding jobs by, for instance, allow-ing such laborers to retire sooner orreceive disability payments to tide themover until retirement. “Raising the retire-

ment age doesn’t have to be regressive,”says maya macGuineas, president of thebipartisan Committee for a Responsiblefederal Budget.

Conservatives view a tax increase asa nonstarter, citing estimates by the SocialSecurity trustees that the payroll taxwould have to be raised by 20 percent— from 12.4 percent to about 15 percent— to balance the trust fund withoutbenefit cuts. “You’re really inflicting afair amount of pain at that point,” saysCato’s Tanner. “People are going to gethit with a substantial tax increase.”

As for raising the cap on payrolltaxes, that would affect more than justthe wealthy, because “$118,500 is reallymiddle class in cities like New York,”Tanner says.

Budget experts also questionedwhether raising Social Security taxesshould take priority over raising taxesfor other needs, such as increasing thegasoline tax to pay for infrastructureimprovements.

“If we’re talking about a tax increase,I think there are more important thingswe should be spending money on,”says Eugene Steuerle, a fellow and theRichard B. fischer chair at the UrbanInstitute. Steuerle and some other ex-perts say Social Security would be besthelped through a combination of policy

SOCIAL SECURITY

Social Security Consumes Growing Share of BudgetThe share of the federal budget spent on Social Security has grown from 15 percent in 1966 to about 24 percent today. It is projected to edge up to 25 percent in 2024. Medicare, the federal health insur-ance program for senior citizens, adds another 17 percent to the federal budget.

* Share of budget projected for 2016-2026

Source: “Historical Budget Data,” Congressional Budget Office, March 2016, downloaded from http://tinyurl.com/h6rgsgl; “10-Year Budget Projections,” Congressional Budget Office, March 2016, downloaded from http://tinyurl.com/h6rgsgl

Actual and Projected Percentage of Federal BudgetSpent on Social Security, Fiscal 1966-2026*

10

15

20

25

30%

2026202220182014201020062002199819941990198619821978197419701966

Projected

Spending on Social Security


changes, handled in such a way thatlower-income people are not adverselyaffected.

Should Social Security be priva-tized?

A person who invested $100 in thestock market in 1935, when Social Se-curity was created, would likely havemore than $200,000 today. 24 That sortof gain has experts wondering if Amer-icans would enjoy a more affluent re-tirement if they could invest the amountthey pay in fICA taxes instead of havingto pay that money into the Social Se-curity trust fund.

“There are much better ways forworkers to build toward retirement,”says the Heritage foundation’s Boccia.“for income replacement and to ensurea comfortable retirement, I think privateretirement savings are much better ataccomplishing that.”

for decades, conservatives havepressed to partially or completely pri-vatize Social Security by allowing workersto divert some or all of the 12.4 percentfICA tax into specially designed retire-ment accounts.

They could provide workers withbetter returns over time, privatizationadvocates say. The stock market hasdelivered average earnings of morethan 10 percent per year (compound-ed, including interest) over the last80 years. 25 The Treasury bonds thatthe Social Security trust fund investsin generally return much less thanhalf of that. 26

But experts who support the tradi-tional, conservative approach of SocialSecurity say the stock market is fartoo unstable to be the only source ofretirement income for workers.

“People don’t want their benefits todepend on whether wall Street has agood year or bad year,” says GaryBurtless, a senior fellow in economicstudies at the liberal Brookings Insti-tution think tank in washington. “It’svery hard for most people on theirown to make the calculations and in-

vestment choices in setting aside a cer-tain proportion of their current incomeinto a retirement savings account. AndSocial Security does that very well.”

The political debate over privatizingSocial Security has cooled since PresidentGeorge w. Bush made it a top prioritybut could not get Congress to vote onthe issue. His plan would have allowedyounger and middle-aged workers todirect a limited portion of the payrolltaxes that they and their employers

pay into certain stock funds administeredby the government.

The stock market crash of 2008, whichwreaked havoc on retirement accounts,further dampened interest in privatization.“we’ve all lived through the Great Re-cession,” says Boston College’s munnell.“That would have been even more ofa tragedy if everyone had all their retire-ment savings in the stock market.”

Some experts also argue that whileestablishing private savings accounts

As exercise and improved medical care help Americans live longer, some expertssay major changes must be made in Social Security, such as raising the

retirement age or reducing benefits. Others say minor adjustments, such asincreasing payroll taxes on wealthier workers, would largely keep the system solvent. Above, older Americans take a water aerobics class.

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might strengthen overall retirement sav-ings in the long run, it would worsenSocial Security’s financial condition inthe short term. The trust fund would

run out of money even more quicklyif a portion of the payroll tax werediverted to the market, they say.

“Creating private accounts made a

good deal of sense when we had SocialSecurity surpluses,” says the Committeefor a Responsible federal Budget’smacGuineas, who supported some pri-vatization proposals in the past. “But themoment for creating them has passednow that Social Security is running deficits.”

Still, the idea of putting money intoprivate accounts is enticing to some,such as the Cato Institute’s Tanner. Headvocates allowing workers younger than55 to divert up to 6.2 percent of theirfICA payroll taxes into their own privateretirement accounts, while agreeing toforgo future Social Security benefits. Theother 6.2 percent would go into financingthe trust fund during a transition periodaway from the traditional system.

“If we move to a system of personalaccounts, we would reduce the futureobligations of Social Security substantially,but we have to find a way to covercurrent retirees,” Tanner says. “There isno painless way to do it. But it makesthe system better in the long term.”

To some extent, the debate overprivatization comes down to whetherthe risk of investing in the market isworth the higher returns. Advocates ofSocial Security favor the reliability ofthe current system, which not onlyprovides a check every month but alsoincreases the amount based on inflation.They say this is particularly importantas pensions become less common.

“Social Security is that solid, founda-tion income protection that people cancount on being there,” says Czarnowski,the consultant. “The changes in the otherparts of the retirement world these days[such as the loss of pensions] makesthat especially important.”

Boccia, however, warns that SocialSecurity — like the market — shouldnot be viewed as a guaranteed sourceof income.

“There’s also risk in giving all yourmoney to the government and thenexpecting the government to take careof you,” she says. “There’s political risk,and there’s risk of fiscal crisis.”

Continued on p. 492

A 1935 poster introduces the newly enacted Social Security program to theAmerican public. “We can never insure 100 percent of the population against100 percent of the hazards and vicissitudes of life,” said President Franklin D.Roosevelt, who championed the landmark program. “But we have tried to

frame a law which will give some measure of protection to the average citizen and to his family against . . . poverty-ridden old age.”

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Chronology1930s Social Security iscreated to combat widespreadpoverty among the elderly duringthe Great Depression.

1935President franklin D. Rooseveltsigns the Social Security Act, thenation’s first major anti-poverty in-surance program providing bene-fits to older Americans.

1939Ida may fuller of Ludlow, vt., be-comes the first retiree to receive amonthly Social Security check. So-cial Security is expanded to providebenefits to workers’ survivors.

•

1940s-1960sPost-World War II populationboom sets the stage for Social Se-curity’s future funding shortfall.

1946The first year of the Baby Boomstarts a demographic bulge thatwill last for the next 18 years.

1950Cost-of-living adjustments are appliedto Social Security benefits to protectthem from inflation. There are 16workers for every retiree in the Unit-ed States, more than enough tocover Social Security benefits.

1954Congress expands Social Securityto cover disabled workers who are50 and older, and disabled adultdependents.

1961All workers are allowed to receivereduced, early-retirement benefitsat age 62.

1965medicare, the most far-reachingchange to the entitlement systemfor seniors, becomes law, provid-ing health insurance to millions ofAmericans age 65 or older.

•

1970s-1990sConcern mounts over SocialSecurity’s solvency as demogra-phers warn of a coming waveof Baby Boom retirements.

1972Social Security’s new SupplementSecurity Income program providesadditional benefits to low-incomeseniors and includes coverage forthe blind and disabled — groupspreviously served by states andlocalities with federal funding.

1977To restore the Social Security trustfunds’ financial soundness, Con-gress agrees to gradually raisepayroll taxes from 9.9 percent to10.8 percent and increases themaximum earnings subject tothose taxes.

1983Congress authorizes taxation of So-cial Security benefits, brings feder-al employees into the system, rais-es the payroll tax to 12.4 percentand sets in motion a gradual in-crease — from 65 to 67 — in theage at which retirees can claimfull benefits.

1999The Ticket to work and work In-centives Improvement Act providesvocational rehabilitation and employ-ment services to help disabilitybeneficiaries find work.

2000s Elected officialsfail to reach consensus on majorchanges to Social Security.

2005Republican President George w.Bush’s proposal to partially privatizeSocial Security fails to pick upsignificant support in Congress.

2008The first Baby Boomers reach age 62,making them eligible for reduced,early-retirement Social Security benefits.

2009The age at which retirees may re-ceive full Social Security benefitsrises to 66 for those born after 1943.

2010The Social Security trust fund be-gins to pay out more in benefitsthan it collects in revenues.

2015Congress agrees to put money fromthe Social Security trust fund into thenearly depleted Disability Insurancetrust fund, which was estimated torun out of money in 2022. . . . In asign of the potential scope of fraud,the Social Security Administration’sOffice of the Inspector General iden-tified about 6.5 million Social Securitynumber holders who were 112 orolder — even though just 35 peopleworldwide were that old.

2027The retirement age for full Social Se-curity benefits is scheduled to rise to67 for those born in 1960 or later.

2029-2034The Social Security trust fund will runout of money in 2029, according toprojections by the Congressional Bud-get Office; the Social Security Admin-istration says it will happen in 2034.

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BACKGROUNDDepression Roots

Social Security began during the De-pression, but the concept of a public

safety net to protect citizens from povertydates back to the earliest days of thecountry.

In his pamphlet “Agrarian Justice,”written shortly after the Revolutionarywar, American patriot Thomas Paineproposed creating a fund, financedthrough an inheritance tax, to providea single payment of 15 pounds sterlingto citizens reaching age 21 to helpthem get started in life, and annualpayments of 10 pounds sterling to every-one 50 and older to prevent povertyin old age. 27

Paine’s idea never made its way

into public policy. Before the IndustrialRevolution drew workers from the farmsinto urban factories, people who couldno longer work as a result of injuryor old age relied on family for supportand care. But the move to cities erodedthat safety net, as extended familiesbroke into smaller, “nuclear” householdscomposed of parents and their children.Charities and a patchwork of state wel-fare programs turned out to be a poorsubstitute for family-based support.

SOCIAL SECURITY

Continued from p. 490

Patty, 59 years old and taking powerful medication forback pain, has been receiving disability payments fromSocial Security for five years. But she says she can’t

make ends meet on her monthly check of slightly more than$1,100.

So, she says, she breaks the rules. Despite chronic pain andrules against earning an additional $1,130 a month or more,she regularly makes herself available to help elderly neighborswith light chores to keep up on her bills.

“I’m not supposed to be working, but I have to make endsmeet,” says the New York woman, who asked that her lastname not be used. “what they give you for disability is reallynot enough to live off with. . . . my rent is $1,374 so I’malready short, and then you’ve got your regular living to do.”

Some 11 million disabled workers and their dependents getmonthly checks under a pair of programs for the disabled calledSupplemental Security Income, or SSI (for those with the greatestfinancial need) and Social Security Disability Insurance (forthose who become disabled after having worked for a numberof years). The average monthly benefit is $1,165. 1 Even thoughthe programs are designed as a safety net for the permanentlydisabled, critics say they are instead trapping beneficiaries innear poverty by issuing small checks and prohibiting them fromearning much outside income.

“Being on disability might mean that a person has some sortof income but is still homeless or is struggling to afford medicationor food or transportation to medical appointments,” says ColleenRivecca, advocacy program lead at St. Anthony’s, a nonprofit thatprovides services to low-income people in San francisco.

The disability programs are controversial, both because therules make it difficult for Americans to get into or out of theprograms and because of mounting expenses. By some measures,disability programs have become the most important elementof the nation’s safety net. The federal government spends about$145 billion annually on these programs, more than food stamps($74 billion) and welfare ($17 billion) combined. 2

Last year, Congress had to transfer emergency funds intothe Disability Insurance trust fund to keep it from running outof money. It did so by increasing the portion of the 12.4 percentpayroll tax that goes into the disability trust fund from 1.8 to2.37 percent for a three-year period. 3 Even so, the fund is inmore precarious shape than Social Security’s program for theretired and is projected to run out of money by about 2022.

Concerned about beneficiaries remaining in the program in-definitely, Congress in 1999 created the Ticket to work programto help people with disabilities return to work. But the programhas had limited success. The last time it was evaluated in 2013,only about 60,000 people had received support through theprogram out of several million receiving disability benefits. 4

As more Americans say they are too disabled to work, criticsworry that disability is becoming a substitute for welfare. The numberof Americans receiving disability payments has quadrupled since1970, with more than 2 million additional recipients coming onthe rolls in the decade after Congress scaled back traditional welfarepayments in 1996. 5 whereas the leading cause of disability in theearly years of the program were heart disease and stroke, morethan half the beneficiaries have mental disorders or musculoskeletaldiseases, which can often be difficult to prove. 6

“Over half the people on disability are either anxious ortheir back hurts,” said Sen. Rand Paul, R-Ky. “Join the club.Everybody over 40 has a back pain.” 7

But advocates for the disabled say claims of program abuseare largely exaggerated.

“You will hear examples of someone who’s collecting disabilitybenefits and playing golf,” says max Richtman, president andCEO of the National Committee to Preserve Social Security andmedicare. “But the vast majority are not playing golf. They’reoften bedridden,”

Bipartisan consensus seems to be growing on the need tomake changes to the disability system. most important, policyexperts agree, is to provide more incentives to get disabledAmericans back into the workforce.

Disability Program faces financial ChallengesAs claims mount, policy experts seek to get recipients back to work.


Only one segment of American so-ciety — veterans — enjoyed govern-ment-provided income protection.workers for private companies did nothave guaranteed benefits, althoughsome paternalistic companies retainedolder workers in token jobs at reducedpay. In a few other cases, workers re-ceived some form of retirement stipend.more commonly, however, older work-ers were simply dismissed when theywere no longer productive.

In 1882, one of the first formal pen-sion plans for workers was introducedby the Alfred Dolge Co., a builder ofpianos and organs. Dolge placed 1 per-cent of each worker’s salary into a pen-sion fund and added 6 percent interesteach year. But the plan was largely un-successful because it required a workerto spend many years with the company,and the pension disappeared when thecompany went out of business. Othercompany pensions also failed to take

hold for varying reasons. By 1932, only5 percent of the elderly were receivingcompany pensions. 28

meanwhile, several factors were com-bining to undermine the living standardsof older Americans: urbanization, thebreakdown of the extended family, in-creasing reliance on wage income forsurvival and a rapid increase in life ex-pectancy due to improved sanitation andhealth care. By the 1920s, the countrywas older and significantly more indus-

“Right now we don’t allow partial disability,” says michaelTanner, a senior fellow at the libertarian Cato Institute. “It’s almostlike a light switch that’s on or off. The current system basicallyforces you out of the workforce. To the degree that Congresscan come together on mom and apple pie, I think we may seechanges. Even supporters of the system would like to see changes.”

Some experts favor an approach that would steer applicantsinto rehabilitation programs with the goal of eventually movingthem back into the workforce. Only if the rehabilitation wasunsuccessful — or if an applicant was so disabled that rehabilitationwas not worth trying to begin with — would the person becomeeligible for permanent disability benefits.

“The idea is to make sure that workers have access to the typesof support that we believe can help people stay in the labor forceeven when they have significant medical conditions,” says DavidStapleton of the Princeton, N.J.-based policy research organizationmathematica Policy Research, who has worked on this type of plan.

“Under the current process, the Social Security Administrationcan’t distinguish in many cases between people who can workwith the right support and medical treatment versus those whoreasonably cannot work,” adds Stapleton, director of mathematica’sCenter for Studying Disability Policy. “we should change therules so the process takes into account the technologies andother things that will allow a person to work despite havinga very significant medical problem.”

To enable recipients to start earning more income, Congresslast year directed the Social Security Administration to test a planthat would reduce monthly benefits by $1 for every $2 of outsideearnings that exceed the $1,130 threshold. In contrast, recipientscurrently lose their entire benefits if their outside earnings exceedthe threshold for more than nine months.

Rivecca says such changes could make a major difference forrecipients. “They can’t survive on the income they have,” she says.“Even to make an extra $50 a month can help to buy food.”

— David Hosansky

1 “Social Security Basic facts,” Social Security Administration, http://tinyurl.com/j7nwkff.2 The funding estimates come from various sources. for Social Securitydisability: “A Summary of the 2015 Annual Reports,” Social Security Admin-istration, http://tinyurl.com/goa7zg8; for the Supplemental Nutrition AssistanceProgram, or food stamps: “Supplemental Nutrition Assistance Program Par-ticipation and Costs,” U.S. Department of Agriculture, may 6, 2016,http://tinyurl.com/o28odbs; and for Temporary Assistance for Needy families:“Temporary Assistance for Needy families: Spending and Policy Options,”Congressional Budget Office, Jan. 21, 2015, http://tinyurl.com/hotwwl8.3 Philip moeller, “How the Budget Deal will Change medicare and Social Security,”Time, Oct. 30, 2015, http://tinyurl.com/pnjdyv9.4 Gina Livermore et al., “Executive Summary of the Seventh Ticket to workEvaluation Report,” Center for Studying Disability Policy, July 30, 2013, http://tinyurl.com/gr95yds.5 “Social Security Beneficiary Statistics: Number of beneficiaries receivingbenefits on Dec. 31, 1970-2015,” Social Security Administration, http://tinyurl.com/hgv5plg.6 Steve Contorno, “Rand Paul says most people receive disability for back pain,anxiety,” PolitiFact, Jan. 16, 2015, http://tinyurl.com/mgo8a8e.7 Stephen Ohlemacher, “Report: Social Security Overpaid Disability Benefits by$17 Billion,” Business Insider, June 5, 2015, http://tinyurl.com/zswbwmk.

Patrick McGarvey, 48, of Riegelsville, Pa., says he waitedseven years to get approved by the Social SecurityAdministration to receive disability benefits for his

debilitating back pain. “I’d much rather be working,” he said.

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trialized, with more people living in citiesthan on farms for the first time. withno one to care for them and no income,millions of former workers faced theprospect of dying in poverty.

The plight of America’s elderly pop-ulation worsened after the stock marketcrashed in 1929 and the Great Depres-sion began. Thousands of letters fromdestitute elderly people poured intowashington. “I’m 72 years old and have

no one to take care of me,” wrote awoman from South Carolina. A letterthat reached the white House from avirginia woman stated: “I’m a 60-year-old widow greatly in need of medicalaid, food and fuel, I pray that youwould have pity on me.” 29

President Herbert Hoover (1929-33)asked Americans to volunteer their ser-vices and charitable contributions to al-leviate the plight of the unemployedand the elderly. But with so manypeople facing financial hardship nation-wide, Hoover’s call went largely unan-swered, leaving much of the challengeto the states.

By the 1930s, most states had es-tablished limited old-age “pensions” forolder Americans who met financialneed standards. But these programswere implemented unevenly. By 1935,only 3 percent of the elderly were re-ceiving benefits — and the averagebenefit was just 65 cents per day. 30

Social Security Act

President franklin D. Roosevelt(1933-45) took office promising to

shift the model for federal economic se-curity policy from state-based welfare as-sistance programs to federal programssimilar to the “social insurance” plansprevalent in Europe. first adopted in1889 in Chancellor Otto von Bismarck’s

Germany, social insurance plans workedlike commercial insurance plans, collectingpremiums, or taxes, from a large poolof working-age citizens to pay benefitsto those who meet eligibility conditions,such as the disabled and the elderly.

On June 8, 1934, Roosevelt an-nounced his support for a similar ap-proach in the United States and createdthe Committee on Economic Securityto propose a plan. Seeking to placatecritics of such an expanded role forthe federal government, he said: “Thisseeking for a greater measure of welfareand happiness does not indicate achange in values. It is rather a returnto values lost in the course of our eco-nomic development and expansion.” 31

The following year, Congress begandebating legislation based on recommen-dations by the committee. Both chamberspassed the Social Security Act by over-whelming margins. On Aug. 14, 1935, Roo-sevelt signed the new program into law.

It created a social insurance programto pay retired workers a steady incomefor the rest of their lives. “we can neverinsure 100 percent of the populationagainst 100 percent of the hazards andvicissitudes of life,” Roosevelt said. “Butwe have tried to frame a law which willgive some measure of protection to theaverage citizen and to his family againstthe loss of a job and against poverty-ridden old age.” 32 The law also includedincentives for states to establish unem-ployment insurance programs, which allof the states had done by 1937. 33

Although the law had been passedwith significant Republican support, itbecame a major issue in the 1936 pres-idential election, facing withering attacksfrom GOP nominee Alf Landon, whodenounced it as “unjust, unworkable,stupidly drafted and wastefully financed.”He also said that, “to call it social security isa fraud on the working man.” 34

The law also withstood fierce legalchallenges from companies, with theSupreme Court in 1937 agreeing withthe administration that the new programwas constitutional. The landmark rulingwould permanently extend the reachof the federal government. 35

The law provided the basic structurefor today’s Social Security program, award-ing benefits only to covered workerswhen they retired at age 65. And, unlikethe state old-age pension plans, it wasfunded through a contributory system,in which future beneficiaries contributedto their own retirement though payrolldeductions made during their workinglives. On Jan. 1, 1937, workers began ac-quiring credits toward their old-age ben-efits, and they and their employers beganpaying fICA taxes. The revenues wereplaced in a dedicated Social Security trustfund to be used for paying benefits.

for the first three years Social Se-curity paid each beneficiary a small,single, lump-sum payment becauseearly recipients had not paid enoughinto the system to be vested for monthlybenefits. This changed as the trust fundaccumulated sufficient revenue. The

SOCIAL SECURITY

“I bet you don’t hear many nurses or factory workers or people doing manual labor advocating

a higher retirement age.”— Max Richtman,

President and CEO,

National Committee to Preserve Social Security and Medicare


first retiree to receive a monthly SocialSecurity check was legal secretary Idamay fuller of Ludlow, vt., who retiredin 1939 at age 65. Because of Social Se-curity’s pay-as-you-go financing arrange-ments, she got a great return. After con-tributing just $24.75 into the system overthree years, fuller collected $22,888.02in Social Security benefits before shedied in 1975 at the age of 100. 36

Amendments Passed

In 1939 Congress expanded SocialSecurity, transforming it from a re-

tirement system for workers into abroader family income-security system.The changes added so-called depen-dent’s benefits (payments to the spouseand children under 18 of a retiredworker who died) as well as survivors’benefits paid to the family if a coveredworker died prematurely. Lawmakerssubsequently adopted cost-of-living al-lowances (COLAs) to make sure benefitskept up with inflation. 37

President Dwight D. Eisenhower(1953-61) signed laws that graduallyexpanded the program to cover dis-abled workers and their dependents.In 1956, Congress reduced from 65 to62 the age at which women couldbegin receiving benefits. women whotook benefits earlier would receivesmaller monthly checks based on theactuarial notion that they would receivebenefits for a longer period of timethan if they waited until age 65. Thesame early-retirement option was ex-tended to men in 1961. 38

In 1965, building on Roosevelt’s visionof a strong governmental role in pro-tecting older Americans from poverty,President Lyndon B. Johnson (1963-69)signed legislation establishing medicare.By providing health insurance to nearlyall Americans age 65 and older,medicare would become one of themost far-reaching changes in the healthand financial security of older Ameri-cans. 39

By the late 1960s, there was growinginterest in reducing waste and redun-dancy by merging state and local welfareprograms with the federal Social Securitysystem. The 1972 Social Security Amend-ments brought three such “adult cate-gories” — the needy aged, blind anddisabled — under a single new SocialSecurity program called SupplementalSecurity Income (SSI). more than 3 millionpeople were shifted from the state welfarerolls to the new federal SSI program. 40

The 1972 amendments also increasedSocial Security benefits for elderly wid-ows and widowers, extended medicareto individuals receiving disability ben-efits and those with chronic renal dis-ease and increased Social Security ben-efits for workers who delayed retirementpast age 65. 41

Concerns about Social Security’ssoundness began to surface in the late1970s. An economy beset by “stagflation”— inflation and minimal economicgrowth — and the coming demographictime bomb posed by the Baby BoomGeneration fueled predictions that thetrust funds would soon be exhausted.To address the potential shortfall, Con-gress passed the 1977 Social SecurityAmendments, which gradually increasedthe payroll tax from 9.9 to its current12.4 percent rate, increased the maxi-mum earnings subject to Social Securitytaxes and adjusted the way COLAs andthe wage base were calculated. 42

But within a few years Social Securityagain faced a serious funding crisis dueto rapid growth in benefit expenditures.The crisis prompted President RonaldReagan (1981-89) to appoint a panelto recommend ways to fix the system,headed by economist Alan Greenspan(who would later become chairman ofthe federal Reserve). Based on thegroup’s recommendations, the 1983amendments made Social Security ben-efits taxable, brought federal employeesinto the system and gradually increasedthe official retirement age from 65 to66 in 2009, and 67 in 2027. It also raised,over time, the payroll tax for the self-

employed from 8.05 percent to its currentlevel of 12.4 percent. 43

The increased revenues, designedto prepare Social Security for the comingretirement of the Baby Boomers, gen-erated a large surplus that was investedin special, non-tradeable Treasurybonds, with interest credited to SocialSecurity. The surplus was available tothe Treasury for the funding of otherprograms, although it had to be repaidwhenever the Social Security commis-sioner wanted to redeem them.

The surplus has generated debatein recent decades, particularly after vicePresident Al Gore in his failed 2000presidential campaign proposed thecreation of a Social Security “lockbox”to protect the program’s annual surplus,which at the time amounted to about$150 billion or more. Part of the issue— which has dogged Social Securitysince it began racking up surpluses inthe 1930s — is that the governmentlacks a ready mechanism to sock awaysurplus funds to keep them from beingused by other programs. with surplusesgradually dwindling away, the issue hasfaded, although some economists saythe surplus indirectly enabled PresidentGeorge w. Bush (2001-09) to pay forsuch priorities as a 2001 tax cut. 44

Reagan also oversaw the beginningsof a shift in philosophy on social safetynet programs, calling for smaller gov-ernment and tighter eligibility standardsfor welfare programs. The Republican-led Congress in 1996 passed legislationthat disqualified applicants for SocialSecurity or SSI disability benefits if drugor alcohol addiction contributed to thedisability. Congress in 1996 also endedSSI eligibility for most legal, non-citizenimmigrants and tightened eligibilitystandards for disabled children. Afterpublic outcry, lawmakers later relaxedsome of the new restrictions on non-citizens and children. 45

President Bill Clinton (1993-2001)signed two other bills aimed at encour-aging Social Security beneficiaries towork. The 1999 Ticket to work and

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SOCIAL SECURITY

work Incentives Improvement Act es-tablished a new program providing vo-cational rehabilitation and employmentservices to help disability beneficiariesfind productive work. The 2000 SeniorCitizens’ freedom to work Act allowedworkers to receive benefits even if theycontinued to work past the normal re-tirement age. 46

Privatization Debate

mistrust of large government pro-grams, combined with high returns

on stock market investments in the 1990s,created interest in partially or entirelyprivatizing Social Security. At the be-ginning of his second term, PresidentBush proposed overhauling the pro-gram and allowing younger workersto voluntarily divert a portion of theirpayroll taxes into private accounts.

“Here’s why the personal accountsare a better deal,” said Bush in his Stateof the Union address on feb. 2, 2005.“Your money will grow, over time, ata greater rate than anything the currentsystem can deliver — and your accountwill provide money for retirement overand above the check you will receivefrom Social Security. In addition, you’llbe able to pass along the money thataccumulates in your personal account,if you wish, to your children and/orgrandchildren. And best of all, the moneyin the account is yours, and the gov-ernment can never take it away.” 47

At the time, Americans were be-coming increasingly dependent on tax-deferred 401(k) accounts invested inthe stock market. Congress createdsuch accounts in 1978, and they grad-ually became a cornerstone of the re-tirement system, especially as compa-nies cut costs by phasing out traditionalpensions or, in some cases, were unableto cover promised pension benefitsafter going bankrupt. 48

Bush then embarked on a nationalcampaign, traveling around the countryto promote the plan. But growing num-

bers of Americans expressed disquietwith privatization. In march 2005, asurvey by the Pew Research Centerfor the People and the Press showedthat only 29 percent of respondentsapproved of Bush’s handling of SocialSecurity. 49 The issue largely fadedaway without a vote in Congress, asthe administration was beset by otherissues, such as recovery efforts in NewOrleans and the Gulf Coast after Hur-ricane Katrina struck in August.

By 2008, talk of privatization of SocialSecurity had evaporated, along with publictrust in wall Street investments, in thewake of a mortgage crisis and subsequentstock market crash that cost U.S. house-holds almost $8 trillion in wealth. 50

Congress instead focused on minorchanges to the program. Last fall, withthe Disability Insurance trust fund justa year away from running out of money,lawmakers agreed to allow the reallo-cation of funds from the Social Securitytrust fund (officially called the Old-Age and Survivors Insurance trust fund).This temporary infusion of cash willkeep the disability trust fund solventuntil 2022. 51

Lawmakers also made other changes,including saving money by ending apopular practice known as “file-and-suspend,” under which a retiree couldfile for benefits and then suspend them,enabling them to grow for several moreyears while still being eligible to collecta spouse’s monthly payments.

CURRENTSITUATIONPresidential Politics

In this year’s tumultuous presidentialrace, Republicans and Democrats

have staked out vastly different positionson Social Security.

Donald Trump, the GOP front-runner,has repeatedly vowed to protect SocialSecurity and other entitlements. “It’smy absolute intention to leave SocialSecurity the way it is,” he said duringa Republican debate in march. “I wantto make our country rich again so wecan afford it.” 52

After his opponents dropped outof the race and Trump became thepresumptive GOP nominee, however,his campaign seemed to signal anopenness to considering cuts to theprogram. A Trump policy adviser saidat a conservative conference in maythat “after the administration’s been inplace, then we will start to take a lookat all of the programs, including en-titlement programs like Social Securityand medicare.” 53

Several of Trump’s political opponentslaid out more traditionally conservativepositions before dropping out of therace, calling for various approaches toscaling back benefits and, in some cases,partially privatizing the system.

for instance, New Jersey Gov. Christiesuggested reducing benefits for thosewith more than $80,000 in other incomeand eliminating benefits for anyone mak-ing more than $200,000. He also wouldhave raised the age for early retirementfrom 62 to 64 and for full retirementfrom 67 to 69. former florida Gov. JebBush proposed gradually raising the re-tirement age to 70, reducing benefitsfor the wealthiest seniors and allowingrecipients who claim early Social Securitybenefits to earn more without losingbenefits. Sen. Ted Cruz of Texas backedpartial privatization, raising the eligibilityage and reducing benefits. 54

Perhaps not wanting to alienate thesizable senior voting bloc, all of the can-didates stressed that they would not touchbenefits for Americans already receivingbenefits or those about to retire.

On the Democratic side, the can-didates focused on shoring up the pro-gram and even expanding it, ratherthan reducing benefits. former Secretary

Continued on p. 498

no


At Issue:Should Congress raise the full retirement age to 70?yes

yes

ROMINA BOCCIARESEARCH FELLOW IN FEDERAL BUDGETARYAFFAIRS AND DEPUTY DIRECTOR, ROE INSTITUTE FOR ECONOMIC POLICYSTUDIES, THE HERITAGE FOUNDATION

WRITTEN FOR CQ RESEARCHER, JUNE 2016

i t makes sense to raise the age at which people can claimfull Social Security benefits to 70 in a gradual, predictablemanner. The change would treat retirees fairly, strengthen

Social Security for current and future generations and protectworkers from excessive payroll taxes.

Americans live much longer than they did when Social Secu-rity began in 1935, but the retirement age has not kept pacewith longer life expectancies. Since 1940, life expectancy at age65 has risen six years for men and seven for women. Longerlives translate into greater work capacity and potentially greaterearnings. Yet, largely because of the availability of Social Securityand other age-based retirement benefits, many individuals retirelong before they have to. A recent study concluded that averageAmericans could work 2.5 to 4.2 years longer than they do now.

As it is, more and more Americans are drawing benefits forlonger periods. This puts a tremendous — indeed, unsustain-able — financial strain on the Social Security system. It alsomakes our economy less dynamic, as experienced and pro-ductive workers leave the workforce prematurely.

Lawmakers should gradually increase the Social Security re-tirement age, to 70 over the next decade, and future risesshould be tied to improvements in life expectancy. The alterna-tive is ever-lengthening benefit payouts requiring ever-increasingtaxes to pay for them. Social Security already faces an annualcashflow deficit in the tens of billions. Its trust fund will becompletely depleted by 2034, if not sooner.

Social Security was never meant to be workers’ sole sourceof income in retirement. Individuals should continue to havethe choice to retire on their own schedule, using their privateretirement savings. Lawmakers can help by reducing the pro-gram’s size and scope to ensure workers don’t wind up depen-dent on government in their old age because excessive taxesleft them unable to save adequately during their working years.

Social Security was designed as a safety net to protect indi-viduals too old to work from poverty. forcing workers to sub-sidize decades-long retirements of able-bodied, well-to-do re-tirees is unfair and damaging to the workers. meanwhile,individuals unable to work until the higher retirement age canapply for Social Security disability.

Increasing the Social Security retirement age to 70 and in-dexing it to life expectancy can help ensure that benefits willbe there for those who truly need them, while protectingworkers from undue tax burdens.

GARY BURTLESSSENIOR FELLOW, ECONOMIC STUDIES, THE BROOKINGS INSTITUTION

WRITTEN FOR CQ RESEARCHER, JUNE 2016

s ocial Security faces a serious funding problem. The pro-gram takes in too little money to pay all that has beenpromised to future beneficiaries. Government forecasters

predict Social Security’s reserve fund will be depleted between2030 and 2034. There are two basic ways we can eliminate thefunding gap: cut benefits or increase contributions. A commonproposal is to increase the age at which workers can claim fullretirement benefits. for people nearing retirement today, the fullretirement age is 66. As a result of a 1983 law, that age willrise to 67 for workers born after 1959.

when policymakers urge us to raise the retirement age,they are proposing to increase the full retirement age beyond67, possibly to 70, for workers now in their 30s or 40s. Thissaves money, but it also cuts monthly retirement benefits bythe same percentage for every worker, unless workers delayclaiming benefits. The policy might seem fair if workers infuture generations could all expect to share in gains in lifeexpectancy. However, new research shows that gains in lifeexpectancy have been very unequal, with the biggest improve-ments among workers who earn top incomes. Life expectancygains for workers with the lowest incomes have been small ornegligible.

If the full retirement age were raised, future retirees withhigh lifetime earnings can expect to receive some compensa-tion when their monthly benefits are cut. Because they canexpect to live longer than today’s retirees, they will receivebenefits for a longer span of years after 65. for low-wageworkers, there is no compensation. Since they are not livinglonger, their lifetime benefits will fall by the same proportionas their monthly benefits. Thus, “raising the retirement age” isa policy that cuts the lifetime benefits of future low-wageworkers by a bigger percentage than it does of future high-wage workers.

The fact that low-wage workers have seen small or negli-gible gains in life expectancy signals that their health whenthey are past 60 is no better than that of low-wage workersborn 20 or 30 years ago. This suggests their capacity towork past 60 is no better than it was for past generations.A sensible policy for cutting future benefits should thereforepreserve current benefit levels for workers who have con-tributed to Social Security for many years but have earnedlow wages.

498 CQ Researcher

of State Hillary Clinton would raise thecap on payroll taxes, thereby taxinghigher-income workers. She would alsoincrease benefits for lower-incomeAmericans, especially women whowould otherwise qualify for lower ben-efits because they earned less thantheir male counterparts or took timeoff to care for their families.

“we have a lot of women on SocialSecurity, particularly widowed and singlewomen who didn’t make a lot of moneyduring their careers. They are impover-ished, and they need more help fromthe Social Security system,” she said duringa debate last year. “And I will focus —I will focus on helping those peoplewho need it the most.” 55

Sen. Bernie Sanders of vermont hasintroduced legislation that would in-crease benefits by about $65 a monthfor most recipients, with the greatestincrease going to lower-income retirees.Like Clinton, he would raise the payrolltax cap. 56

Despite the debate on the campaigntrail, Social Security has attracted rel-

atively little attention this year in Con-gress, which is split between thosewho propose cutting benefits and thosewho want to raise the payroll tax cap.

Long-term changes aside, liberals arepushing to increase benefits this year.Legislation proposed by Sen. Elizabethwarren, D-mass., would give recipientsof Social Security retirement and dis-ability benefits, as well as Americansreceiving veterans’ benefits, a one-timepayment of $581 to compensate forthe lack of a cost-of-living adjustmentin 2016. with inflation dropping in2015 due to declining oil and gasolineprices, this year marked just the thirdtime since 1975 that recipients did notreceive a cost-of-living increase. How-ever, seniors are disproportionately af-

fected by health care costs, which arerising faster than inflation.

“The 0 percent COLA was calculatedpartly by figuring in a lower price forgas, but I don’t drive very much,” saidSusan Taylor, a member of the maryland/DC Alliance for Retired Americans, whoattended a march rally to deliver a pe-tition with 800,000 signatures to Senate

majority Leader mitch mcConnell, R-Ky.,calling for a vote on the bill. “This one-time emergency payment would help mewith what I do spend money on: food,health care expenses, and housing.” 57

However, no legislation addressingSocial Security’s overall fiscal conditionhas been introduced this year. Thatconcerns fiscal experts, who say politicalleaders must start working on the issuewell before the trust funds run out ofmoney. They also want to see morebalanced proposals that address bothmajor aspects of the issue: how SocialSecurity can better serve retirees andhow its long-term finances can bestrengthened.

“This is an election where peopleare talking about a lot of easy thingsand not grappling with the choices wehave to make,” says macGuineas of theCommittee for a Responsible federalBudget. “It’s not the policies that haveme concerned. It’s the politics.”

Savings Crisis

Amid growing concerns that Amer-ican workers are not setting aside

enough money to supplement theirfuture Social Security checks, policyexperts wonder if there are better waysto encourage retirement savings.

One widely quoted guideline sug-gests workers should start saving forretirement by age 25, aiming to savethree times their annual salary by age45 and five times their annual salaryby age 55. 58 But most Americans fallwell short.

A report last year by the U.S. Gov-ernment Accountability Office foundthat 52 percent of American households55 and older have saved nothing forretirement, although half of thosehouseholds have a pension. Of theolder workers with retirement savings,the median amount is just $104,000per household. 59 And, the medianretirement balance in tax-deferred ac-counts, such as 401(k) plans, is just

SOCIAL SECURITY

Continued from p. 496

Sen. Elizabeth Warren, D-Mass., and other liberals are pushing to increaseSocial Security benefits this year. Legislation proposed by Warren

would give Social Security recipients and veterans receiving pensions and other benefits a one-time payment of $581 to compensate

for the lack of a cost-of-living adjustment in 2016.

Getty Im

ages

/And

rew Burton


$3,000 for all working-age households,according to a survey by the NationalInstitute on Retirement Security. 60

“The magnitude of this crisis is con-siderably worse than many realize,”concluded the National Institute on Re-tirement Security report.

Some economists worry that manyretirees in coming generations will beimpoverished, further widening the gapin the United States between rich andpoor. 61

“In America, when we had dis-ability and defined benefit plans, youactually had an equality of retirementperiod,” said Teresa Ghilarducci, alabor economist at the New Schoolfor Social Research. “Now the richcan retire, and workers have to workuntil they die.” 62

The lack of savings in retirementaccounts, combined with the fact thatfewer American workers have pensions,will make retirees even more dependenton Social Security. But because the pro-gram is not designed to cover 100 per-cent of a retiree’s income, retirementexperts are discussing ways to encour-age workers to save more.

munnell of Boston College favorsthe establishment of universal retirementaccounts with contributions from bothworkers and their employers. The cur-rent tax deductions on 401(k) accountswould be redirected to help lower-income earners.

“It’s fruitless to lecture people thatthey should put more aside,” she says.“The only way people will save is withautomatic savings mechanisms. Auto-matically enroll them into a 401(k), startwith 3 percent of their salaries in fundswith low fees, and automatically increasetheir contributions over time.”

ways to encourage workers to savemore have also been floated in Con-gress. Sen. Jeff merkley, D-Ore., hasproposed creating personal savings ac-counts for all workers without accessto a retirement savings plan throughtheir employer. modeled on the savingsplans used by federal workers and

members of Congress, it would requireemployers to set aside 3 percent of aworker’s paycheck into an account un-less the worker chose to opt out.

“It shouldn’t matter whether you workpart time or full time, as an employeeor as a contractor, or for a huge corpo-ration or a tiny business: Every Americanworker deserves access to a financiallysecure retirement,” said merkley. 63

The plan, however, is opposed bythe federal Retirement Thrift SavingsBoard, which said it lacks the staff andresources to open and manage millionsof accounts by private workers. Themeasure has failed to get a hearing inthe Senate.

Congress appears unlikely to takeany significant action on retirement be-fore the November elections, and thereis little discussion of sweeping changeseven afterward. Conservatives are leeryof creating major retirement policiesthat would impose new requirementson companies to direct salary moneyinto investment accounts or require ad-ditional government administration.They say the failure of many workersto invest in private accounts is evidencethat the payroll tax should be scaledback or eliminated, with the moneybeing directed into personal market ac-counts instead of the Social Securitytrust fund.

“People who would benefit the mostfrom personal accounts are those onthe lower end of the scale becausethey don’t have the opportunity toinvest in higher-earning accounts,” saysthe Cato Institute’s Tanner. “This is away of getting lower-earning peopleinto those accounts.”

But that is a nonstarter for liberals.They say the failure of 401(k) plans toprovide retirement security is exactly whythe payroll tax should, if anything, beincreased and the focus placed on SocialSecurity instead of the stock market.

“401(k)’s have been a disaster,” saysmorrissey of the Economic Policy In-stitute. “I don’t see why we wouldwant to expand on a disastrous pro-

gram. we should expand Social Securityand be done with it.”

with opinions so divided and littleimpetus for change in Congress, expertswarn that many older workers couldbe facing a lean retirement.

“Americans today face a retirementsavings crisis,” Ghilarducci and a col-league said this year. “If we don’t act,millions will face poverty.” 64

OUTLOOKKicking the Can

Policy experts expect little action onSocial Security for at least several years.

“I don’t think we’ll see much hap-pening in the near term,” says Bocciaof The Heritage foundation. “The nextadministration is most likely to tacklethe issue in its second term. Social Se-curity is politically very difficult. when-ever anyone suggests any changes toSocial Security, no matter how small,special interest groups will work toscare seniors.”

“we’re waiting until there’s a senseof urgency about entitlement reform,and then we’ll talk about it again,”agrees Tanner of the Cato Institute.“The public right now is not in themood to change.”

However, the longer lawmakersdelay, the more limited their optionswill be and the larger the benefit cutswill have to be to bring the trust fundinto balance, experts say.

“The policy options are well-known,”says macGuineas of the Committee fora Responsible federal Budget. “Everyyear we wait, it becomes more expen-sive and it becomes more burdensome,and it jeopardizes people who reallyrely on the program.”

Plus, major policy changes take timeto implement, so if lawmakers are upagainst a tight deadline they will need

500 CQ Researcher

SOCIAL SECURITY

to opt for a straightforward fix, suchas raising the payroll tax rate or in-creasing the cap on taxable income.

“If you wait until you have to act,then I get my way,” says Boston Col-lege’s munnell. “Because the only thingyou can do fast is raise taxes. Youcan’t suddenly cut benefits.”

Indeed, the Social Security disabilityprogram may provide an example ofthis. Last year, when that trust fund wasabout a year from running out of money,Congress agreed to move around fundsto keep it solvent into the 2020s. Butlawmakers made no major changes tothe program, even though it has facedbipartisan criticism for discouraging re-cipients from returning to the workforce.

If Congress moves slowly on theretirement trust fund, it may likewisefind itself unable to change it. “Thecloser we come to 2030 or 2034, themore pressure there’s going to be onCongress in the short run to protectthe benefit level,” says Burtless of theBrookings Institution.

Looking further down the road, thelong-term demographic trends indicatethat the system eventually will becomemore fiscally stable, because the ratioof workers to retirees should begin toexpand again as the Baby BoomerGeneration recedes.

“The Baby Boomer Generation isan anomaly,” says macGuineas. “It’s avery large problem but once we getthrough the Baby Boomers, we won’thave that structural problem. Social Se-curity is a model that can continueand will continue to be successful.”

“One of the strengths of the programfor its 80-plus years is its ability toadapt and change as society changes,”

agrees Czarnowski, the consultant. “Ithink it will always be there for Amer-icans in some form.”

Notes

1 “Social Security Beneficiary Statistics” (as ofDec. 31, 2015), Social Security Administration,http://tinyurl.com/hgv5plg.2 “2015 OASDI [Old Age, Survivor, and DisabilityInsurance] Trustees Report, Overview,” Social Se-curity Administration, http://tinyurl.com/hlyz5mf.3 matt Arco, “Christie urging Social Securityreform with an eye to 2016,” NJ.com, April 15,2015, http://tinyurl.com/zjltdo7.4 “Social Security Beneficiary Statistics,” op. cit.5 “Social Security Basic facts,” Social SecurityAdministration, http://tinyurl.com/j7nwkff.6 The Center on Budget and Policy Prioritiesmaintains a helpful explainer about the com-plex financing of the Social Security trust athttp://tinyurl.com/nj4htja.7 “Ratio of Covered workers to Beneficiaries,”Social Security Administration, http://tinyurl.com/jynbvmo.8 “2015 OASDI Trustees Report, Long-RangeEstimates,” Social Security Administration,http://tinyurl.com/jmkxusc.9 “Status of the Social Security and medicarePrograms: A Summary of the 2015 AnnualReports,” Social Security Administration,http://tinyurl.com/goa7zg8. more detail aboutSocial Security’s financial situation can befound at the “2015 OASDI Trustees Report,”op. cit.10 “Public Opinions on Social Security,” NationalAcademy of Social Insurance, 2014, http://tinyurl.com/q5sehmp.11 “Social Security Beneficiary Statistics,” SocialSecurity Administration, http://tinyurl.com/hgv5plg.12 Philip moeller, “How the Budget Deal willChange medicare and Social Security,” Time,Oct. 30, 2015, http://tinyurl.com/pnjdyv9.13 The Social Security expenditures can be

found at “CBO’s 2015 Long-Term Projectionsfor Social Security: Additional Information,”http://tinyurl.com/gpjwhsq. The overall figurefor the government’s budget office comes fromthe main budget page of the CongressionalBudget Office, http://tinyurl.com/zvsl2eh.14 frank Newport, “many Americans doubtthey will get Social Security benefits,” Gallup,Aug. 13, 2015, http://tinyurl.com/jc2xb6h.15 “Transcript of Republican debate in miami,full Text,” CNN, march 15, 2016, http://tinyurl.com/hsaorpq.16 “2015 OASDI Trustees Report, Overview,”op. cit.17 Ibid.18 “CBO’s 2015 Long-Term Projections forSocial Security: Additional Information,” Con-gressional Budget Office, Dec. 16, 2015,http://tinyurl.com/gpjwhsq.19 Bill Alpert, “Social Security’s Predictions:Off by a $1 Trillion,” Barron’s, may 9, 2015,http://tinyurl.com/ztv6hr3.20 “2015 OASDI Trustees Report, Overview,”op. cit.21 for chart of taxable wages cap over time,see “Benefits Planner: maximum Taxable Earn-ings (1937-2016),” Social Security Administration,http://tinyurl.com/zmxstw2.22 Elisa A. walker, virginia P. Reno and ThomasN. Bethell, “Americans make Hard Choices onSocial Security: Survey Highlights,” NationalAcademy of Social Insurance, October 2014,http://tinyurl.com/zzgsotu.23 The Congressional Budget Office summarizesthese and other options for reducing SocialSecurity costs at http://tinyurl.com/htvhu6y.24 Robert Lenzner, “$1 million in stocks investedin 1935 is worth $240 billion today (if youheld on),” Forbes, feb. 14, 2013, http://tinyurl.com/z5ozbnw.25 Ibid.26 “Annual Returns on Stock, T. Bonds andT. Bills: 1928 — Current,” New York UniversityStern School of Business, updated Jan. 5,2016, http://tinyurl.com/5jhm7. (Note that geo-metric average, not arithmetic average, deter-mines returns over time.)27 “Historical Background and Developmentof Social Security,” Social Security Administration,http://tinyurl.com/h2m7wps.28 Ibid.29 Ibid.30 Ibid.31 Ibid.32 Ibid.33 “Unemployment Insurance,” Social SecurityAdministration, http://tinyurl.com/zdpw95t.

About the AuthorDavid Hosansky is a freelance writer in the Denver area.He previously was a senior writer at CQ Weekly and theFlorida Times-Union in Jacksonville, where he was twicenominated for a Pulitzer Prize. His previous CQ Researcherreports include “Wind Power” and “Distracted Driving.”


34 T. J. Hamilton Jr., “The Social Security Con-troversy,” Editorial Research Reports, Oct. 2,1936, available at CQ Researcher Archives.35 See “Constitutionality of Social Security Act,”Social Security Administration, http://tinyurl.com/zxlnw4y.36 “Historical Background and Developmentof Social Security,” op. cit.37 Ibid.38 Ibid.39 Ibid.40 Ibid.41 Ibid.42 Ibid.43 Ibid.44 The complex question of whether presidentshave used the Social Security surplus to fundother priorities is addressed in several articles,including: Linda Qiu, “Did George w. Bush‘borrow’ from Social Security to fund the warin Iraq and tax cuts?” PolitiFact, Aug. 3, 2015,http://tinyurl.com/og2dg37; and michael Hilzik,“Disproving the Notion of a Social Security trustfund ‘lockbox,’ ” Los Angeles Times, march 8,2011; http://tinyurl.com/hcw4dwl.45 “Historical Background and Developmentof Social Security,” op. cit.46 Ibid.47 “Text of President Bush’s 2005 State of theUnion Address,” The Washington Post, feb. 2,2005, http://tinyurl.com/yz99rlc.48 “History of 401(k) Plans: An Update,” “factsfrom EPRI,” Employee Benefit Research In-stitute, updated february 2005, http://tinyurl.com/gmplp5h.49 “Bush failing in Social Security Push,” PewResearch Center, march 2, 2005, http://tinyurl.com/h37h6po.50 for background, see the following CQ Re-searchers: marcia Clemmitt, “mortgage Crisis,”Nov. 2, 2007, pp. 913-936, and Kenneth Jost,“financial Crisis,” may 9, 2008, pp. 409-432;and Henry C. K. Liu, “The Crisis of wealthDestruction,” Roosevelt Institute, April 7, 2010,http://tinyurl.com/hd8sclw.51 moeller, op. cit.52 Emily Stephenson, “Trump open to SocialSecurity changes if elected: advisor,” Reuters,may 11, 2016, http://tinyurl.com/hxoywvq.53 Ibid.54 Russ wiles, “How presidential candidates wouldchange Social Security,” The Arizona Republic,march 15, 2016, http://tinyurl.com/hwutnaw.55 michael Hilzik, “Hillary Clinton got onething very right about Social Security — butnot everything,” Los Angeles Times, Oct. 14,2015, http://tinyurl.com/jdr5vs8. “CNN Demo-

cratic Debate — full Transcript,” Oct. 13, 2015,http://tinyurl.com/o7zboab.56 “Strengthen and Expand Social Security,”Bernie Sanders website, http://tinyurl.com/hng5y5z.57 Nik DeCosta-Klipa, “Petitioners deliver800,000 signatures to mitch mcConnell in sup-port of Elizabeth warren’s Social Security bill,”The Boston Globe, march 9, 2016, http://tinyurl.com/z52a69h.58 Dan Kadlec, “what You Should Save By 35,45, 55 To Be On Target,” Time, Sept. 21, 2012,http://tinyurl.com/hvhstkl.59 “Retirement Security: most Households Ap-proaching Retirement Have Low Savings,” U.S.General Accountability Office, may 12, 2015,http://tinyurl.com/zdp339s.

60 Nari Rhee, “The Retirement Savings Crisis:Is It worse Than we Think,” National Instituteon Retirement Security, June 2013, http://tinyurl.com/hk2el3m.61 for background, see the following CQ Re-searchers: Peter Katel, “future of the middle Class,”April 8, 2016, pp. 313-336; and marcia Clemmitt,“Income Inequality,” Dec. 3, 2010, pp. 989-1012.62 Kelley Holland, “Retirement Crisis: The Great401(k) Experiment Has failed for many Amer-icans,” CNBC, march 23, 2015, http://tinyurl.com/kew9c9m.63 “merkley introduces retirement savings plan,”KTvZ, Jan. 28, 2016, http://tinyurl.com/zokksxl.64 Tony James and Teresa Ghilarducci, “America’slooming retirement savings crisis,” CNBC,march 15, 2016, http://tinyurl.com/hw4m38n.

FOR MORE INFORMATIONBrookings Institution, 1775 massachusetts Ave., N.w., washington, DC 20036;202-797-6000; www.brookings.edu. Think tank that analyzes issues from a centristperspective; opposes raising the retirement age or cutting Social Security benefits.

Cato Institute, 1000 massachusetts Ave., N.w., washington DC 20001; 202-842-0200;www.cato.org. Libertarian think tank that supports allowing workers to divert somepayroll taxes into private retirement accounts.

Center for Retirement Research, Boston College, Hovey House, 258 Hammond St.,Chestnut Hill, mA 02467; 617-552-1762; www.bc.edu. Research center that studiesissues related to Social Security and other sources of retirement income.

Committee for a Responsible Federal Budget, 1900 m St., N.w., Suite 850,washington, DC 20036; 202-596-3597; www.crfb.org. Nonpartisan think tank thatadvocates policies to strengthen Social Security finances.

Economic Policy Institute, 1225 I St., N.w., Suite 600, washington, DC 20005;202-775-8810; www.epi.org. Liberal think tank that focuses on the economic needsof low- and middle-income workers and opposes privatizing Social Security.

The Heritage Foundation, 214 massachusetts Ave., N.E., washington, DC 20002;202-546-4400. Conservative think tank that favors raising the retirement age to helpreduce Social Security costs and advocates transitioning to a system of privateretirement accounts.

Mathematica Policy Research, 600 Alexander Park, Princeton, NJ 08453; 609-799-3535; www.mathematica-mpr.com. Research organization formulating proposals tochange the Social Security disability program and provide stronger incentives tokeep disabled workers employed.

National Committee to Preserve Social Security and Medicare, 10 G St., N.E.,Suite 600, washington, DC 20002; 202-216-0420; www.ncpssm.org. Advocacy groupopposing any reduction in Social Security benefits and supporting increased pay-ments to retirees by raising taxes.

Social Security Administration, 6401 Security Blvd., Baltimore, mD 21235; 410-965-3120; www.ssa.gov. federal agency that administers Social Security.

FOR MORE INFORMATION

502 CQ Researcher

Selected Sources

BibliographyBooks

Altman, Nancy J., and Eric Kingson, Social Security Works!The New Press, 2015.The co-directors of a Social Security advocacy organization

and former staffers for the 1982 National Commission onSocial Security Reform contend that the program is vital andshould be expanded.

Eberstadt, Nicholas, A Nation of Takers: America’s En-titlement Epidemic, Templeton Press, 2012.An economist and demographer with the conservative Amer-

ican Enterprise Institute traces the growth of entitlementspending over the past half-century and contends it has hurtthe nation’s economy and culture. A rebuttal by williamGalston of the liberal Brookings Institution is included.

Kotlikoff, Laurence, Philip Moeller and Paul Solman,Get What’s Yours, Simon and Schuster, 2015.An economist (Laurence), an expert on retirement, aging

and health (moeller) and a business and economics journalist(Solman) explain the Social Security retirement system andoffer ways to maximize benefits. The book finishes with aspirited debate among the authors about whether SocialSecurity can be sustained over the long term.

Articles

Alpert, Bill, “Social Security’s Predictions: Off by a $1 Trillion,”Barron’s, May 9, 2015, http://tinyurl.com/ztv6hr3.Quoting economists and other policy experts, a journalist

warns that predictions that the Social Security trust fund willrun out of money in 2034 may be overly optimistic.

Holland, Kelley, “Retirement Crisis: The Great 401(k)Experiment Has Failed for Many Americans,” CNBC,March 23, 2015, http://tinyurl.com/kew9c9m.A business journalist explores the history of 401(k) plans

and why the tax-deferred accounts have failed to spur manyAmericans to set aside enough for retirement.

Joffe-Walt, Chana, “Unfit for Work: The Startling Rise ofDisability in America,” NPR, 2013, http://tinyurl.com/d7u7n8f.The broadcast series explores why a fast-growing number

of Americans are receiving disability insurance and the im-plications for the nation.

Pianin, Eric, “Harsh New Penalties for Social SecurityFraud Are Coming,”The Fiscal Times, Oct. 27, 2015, http://tinyurl.com/hemwv69.A journalist summarizes some of the biggest recent Social

Security fraud cases and Congress’ response of tougher criminaland civil penalties.

Turkewitz, Julie, and Juliet Linderman, “The DisabilityTrap,” The New York Times, Oct. 20, 2012, http://tinyurl.com/8hn47ga.The authors show how the Social Security system keeps

millions of disabled Americans in poverty even as it issupposed to help them.

Wiles, Russ, “How presidential candidates would changeSocial Security,” The Arizona Republic, March 15, 2016,http://tinyurl.com/hwutnaw.In a summary of leading presidential candidates’ Social

Security proposals, Democrats defend the program or favorexpansion, while Republicans generally focus on cutting costs.

Reports and Studies

“2015 OASDI Trustees Report,” Social Security Admin-istration, 2015, http://tinyurl.com/jx6to4b.The annual report on Social Security Old Age, Survivor,

and Disability Insurance summarizes the programs’ financesand warns payments are exceeding revenues.

“Retirement Security: Most Households Approaching Re-tirement Have Low Savings,” U.S. General AccountabilityOffice, May 12, 2015, http://tinyurl.com/ojz8gqf.The government watchdog agency finds that more than half

of American households headed by an adult 55 or older haveput away nothing for retirement and the remaining ones havemedian retirement savings of only $104,000 per household.

“Social Security Policy Options, 2015,” CongressionalBudget Office, Dec. 15, 2015, http://tinyurl.com/zu3v6hq.The CBO, which provides Congress with nonpartisan budget

analysis, warns of Social Security’s negative cash flow andexamines 36 policy options that would help its financial con-dition, though not all would significantly improve its long-term outlook.

“Numberholders Age 112 or Older Who Did Not Havea Death Entry on the Numident,” Office of the InspectorGeneral, Social Security Administration, March 4, 2015,http://tinyurl.com/j6z9e2v.The much-publicized study shows that some 6.5 million

Social Security numbers remain active for Americans age 112or older, highlighting the extent to which such numbers canbe used for fraud.

Walker, Elisa A., Virginia P. Reno and Thomas N. Bethell,“Americans Make Hard Choices on Social Security: ReportHighlights,” National Academy of Social Insurance, Oc-tober 2014, http://tinyurl.com/zzgsotu.The authors detail national survey findings that Americans

would prefer to pay more in taxes than face cuts in SocialSecurity benefits.


Disability

Grant, Kelli B., “Steps to successfully apply for Social Securitydisability,” CNBC, Feb. 1, 2016, http://tinyurl.com/jar5agu.Applicants for federal disability benefits should compile

complete medical records, ensure their records are sent tothe correct Social Security office and avoid collecting unem-ployment benefits before filing their application, say disabilitylaw experts.

Rein, Lisa, “The biggest government backlog is gettingworse, watchdog says, but Social Security has a plan,”The Washington Post, Oct. 19, 2015, http://tinyurl.com/hyc5q24.The head of the Social Security Administration’s (SSA) appeals

office said the agency plans to redirect more disability ap-plications from judges to attorneys and claims examiners andhire more judges, to reduce application wait times.

Van Berkel, Jessie, “Social Security disability is a lifelinefor many in northern Minnesota,” The Star Tribune,March 13, 2016, http://tinyurl.com/zcx29ag.About one in 12 residents of some northern minnesota

counties receive federal disability benefits, due in part to ahigh regional concentration of physically demanding jobsand an aging population.

Fraud

“Woman who cashed dead man’s checks for decadesfaces prison,”The Associated Press, May 6, 2016, http://tinyurl.com/hbv9eop.A 78-year-old Louisiana woman pleaded guilty to theft of gov-

ernment property and faces up to 10 years in prison for collectingmore than $200,000 in disability benefits sent to a dead personwhose post office box she shared for nearly 30 years.

Dinan, Stephen, “Social Security still paying potentiallybogus disability claims 3 years after fraud exposed,”The Washington Times, April 11, 2016, http://tinyurl.com/hq6b9m8.The SSA, which three years ago discovered a scam involving

2,200 potentially fraudulent disability cases, has stopped pay-ments in only 300 cases because many may rest upon validclaims, attorneys say.

Jarvis, Rebecca, Michelle Kessel and Lauren Effron, “ ‘Blind’NY Man Caught Driving, Reading, Committing DisabilityFraud,” ABC News, May 13, 2016, http://tinyurl.com/goc2cv2.A federal judge sentenced a 49-year-old New York man to

almost five years in prison for committing mail fraud andstealing government property after he was discovered pretendingto be blind to collect up to $1.3 million in disability benefits.

Funding

Bernard, Tara Siegel, “Retirees’ Futures Hinge on Can-didates’ Plans for Social Security,” The New York Times,Oct. 16, 2015, http://tinyurl.com/jqbpvul.while some Democratic presidential candidates propose raising

payroll taxes for high-income workers to boost Social Securityfunding, Republican candidates support cutting benefits.

Wiles, Russ, “Sorting out Social Security myths, miscon-ceptions,”The Arizona Republic, May 7, 2016, http://tinyurl.com/z5fqlfv.The claim that funding for Social Security benefits will dis-

appear for younger generations is false and unproductivewhen debating Social Security policy reform, says a policydirector at a nonpartisan budget-focused think tank.

Privatization

Gibson, Ginger, “Jeb Bush: Next President Should PrivatizeSocial Security,” International Business Times, June 16,2015, http://tinyurl.com/qbvr3vt.former Republican presidential candidate Jeb Bush said the

next president should “try again” to privatize Social Security,which his brother, President George w. Bush, tried to do.

Leys, Tony, “Clinton: Don’t let GOP privatize Social Se-curity,”The Des Moines Register, Nov. 3, 2015, http://tinyurl.com/jzr2peq.Democratic presidential frontrunner Hillary Clinton warned

voters that converting Social Security into a private, investment-based system would hinder Americans’ ability to plan their re-tirements because they would be uncertain about the size oftheir benefits.

The Next Step:Additional Articles from Current Periodicals

CITING CQ RESEARCHER

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mLA STYLEJost, Kenneth. “Remembering 9/11.” CQ Researcher 2 Sept.

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Jost, K. (2011, September 2). Remembering 9/11. CQ Researcher,

9, 701-732.

CHICAGO STYLE

Jost, Kenneth. “Remembering 9/11.” CQ Researcher, September

2, 2011, 701-32.

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