Eighty years ago today, President Franklin D. Roosevelt signed into
law The Social Security Act -- marking the beginning of the greatest
anti-poverty program in the history of the United States.
Before Social Security existed, more than half of American seniors
lived in poverty. Today, it’s less than ten percent. And while that
number is still too high, for 80 years Social Security has survived
despite extremist Republicans’ attempts to try and dismantle the program
at every opportunity they get.
Two years ago, instead of playing defense on cuts, progressives made
a decision to shift the debate to be about expanding benefits to keep
up with the true needs of our grandparents and veterans.
42 of 44 Senate
Democrats who voted on the Warren-Manchin resolution in March said yes
to expanding Social Security. So did a majority of House Democrats when
they voted for the Progressive Caucus Budget.
And Bernie Sanders and Martin O’Malley have endorsed this big, bold idea on the campaign trail.
We’ll hand-deliver your signature in one of the early primary states.
In addition to good policy, this is great politics. January polling
by the Progressive Change Institute showed expanding Social Security is
popular by 70% to 15% among likely 2016 voters.
Let's dare Republicans to oppose it and propose unpopular cuts. Oh wait, they have...
Just this week, John Kasich unveiled his own extreme plan to cut
benefits for baby boomers, while Chris Christie says he wants to cut
benefits and raise the retirement age.
Not just come out against privatization. Not just come out against cuts.
Together, we'll make this a central 2016 issue.
Thanks for being a bold progressive.
Senator Elizabeth Warren
says, "When PCCC members donate millions in small-dollardonations and
make millions of phone calls for progressive candidates, leaders in
Washington, they take notice."
President
Franklin D. Roosevelt signs the Social Security Act on Aug. 14, 1935,
with members of his Social Security Committee, members of Congress and
the president’s cabinet. Photo by FPG/Archive Photos/Getty Images
WASHINGTON — Social Security turns 80 on Friday, and the massive retirement and disability program is showing its age.
Social
Security’s disability fund is projected to run dry next year. The
retirement fund has enough money to pay full benefits until 2035. But
once the fund is depleted, the shortfalls are projected to be enormous.
The
stakes are huge: Nearly 60 million retirees, disabled workers, spouses
and children get monthly Social Security payments, and that number is
projected to grow to 90 million over the next two decades.
And the
timing is bad: Social Security faces these problems as fewer employers
are offering traditional pensions, forcing older workers to think hard
about how they will afford retirement.
“This is a program that’s
been immensely popular since it began,” said Nancy LeaMond, executive
vice president of AARP. “Increasingly, people recognize that saving for
retirement is becoming harder and harder, and Social Security is
becoming even more important.”
President Franklin Delano Roosevelt
signed the Social Security Act on Aug. 14, 1935. Things to know about
the federal government’s largest program on its 80th birthday:
Why is Social Security at Risk?
Social
Security’s long-term financial problems are largely a result of
demographic changes. Every day, about 10,000 people in the U.S. turn 65.
These are the baby boomers.
Typical boomers, however, didn’t have
as many children as their parents did. As a result, relatively fewer
workers are left to pay the payroll taxes that support Social Security.
In
1960, there were more than five workers for every person receiving
Social Security. Today there are fewer than three. In 20 years, there
will be about two workers for every person getting benefits.
Americans
are also living longer. In 1940, someone who was 65 could be expected
to live about 14 more years, on average. Today, they can expect to live
an additional 20 years, on average.
Benefits
Last
year, Social Security paid benefits of nearly $850 billion — about a
quarter of all federal spending. The average monthly payment is $1,221.
That comes to about $14,700 a year.
For most retirees, Social Security accounts for the majority of their income, according to the Social Security Administration.
What Happens in 2016?
The
trust fund that supports Social Security’s disability program is
projected to run dry in late 2016 — right in the middle of the
presidential election. If Congress allows that to happen, it will
trigger an automatic 19 percent cut in benefits to the 11 million people
who receive Social Security disability.
Lawmakers could redirect tax revenue from Social Security’s much bigger retirement program, as they have done in the past.
If
the tax revenue were redirected, the retirement fund would lose one
year of solvency, so both the retirement program and the disability
program would have enough money to pay full benefits until 2034. At that
point, Social Security would collect enough in taxes to pay 79 percent
of benefits.
Republicans are balking at the fix. They see the
funding crisis as an opportunity to improve a disability program that
they believe is plagued by waste and abuse.
“Social Security retirement funds have been raided far too many times for far too many years,” said Rep. Tom Reed, R-N.Y.
Reed
sponsored a rule adopted by House Republicans that would prevent the
House from redirecting the tax revenue without making changes to improve
the overall financial health of Social Security.
Democrats are
much more eager to defend the disability program, noting that its modest
benefits keep millions of disabled workers and their families out of
poverty.
“The issue is whether you’re going to cut services and
benefits to Americans who paid for them by saying that the Social
Security program doesn’t have the money, when in fact it has nearly $3
trillion,” said Rep. Xavier Becerra, D-Calif., who has introduced a bill
that would merge Social Security’s trust funds.
House Minority Leader Nancy Pelosi, D-Calif., said Friday, “We renew our vow to protect Social Security for every generation.”
How Big is the Long-term Problem?
The numbers are beyond comprehension.
Social
Security uses a 75-year window to forecast its finances, so the
projections cover the life expectancy of every worker paying into the
system. Over the next 75 years, Social Security is projected to pay out
$159 trillion more in benefits than it will collect in taxes, according
to agency data.
That’s not a typo.
Adjusted for inflation,
the shortfall comes to $35.3 trillion in 2015 dollars. That’s nearly
twice the national debt, which took the entire federal government 239
years to accumulate.
Did Congress Already Spend the Trust Funds?
Yes.
For much of the past three decades, Social Security produced big
surpluses, collecting more in taxes than it paid in benefits. Social
Security invested those surpluses in special U.S. Treasury bonds, which
are backed by the full faith and credit of the U.S. government.
They are now valued at $2.8 trillion.
But
as Social Security was generating surpluses, the rest of the federal
government was running deficits, for all but a few years around the turn
of the century.
To finance deficit spending, the Treasury borrowed from the public and from other federal programs, including Social Security.
Didn’t Congress Fix Social Security Under Reagan?
Yes.
Social Security was on the brink of insolvency in the early 1980s when
Congress and President Ronald Reagan agreed to gradually increase
payroll taxes and to reduce benefits, in part by gradually raising the
retirement age. Those changes didn’t permanently fix Social Security,
but they provided enough revenue to pay full benefits for about 50
years.
In today’s political climate, another feat like that would be historic.
Interactive: How would you fix Social Security?
An
American flag flutters in the wind next to the sign for a Social
Security Administration office in Burbank, California October 25, 2012.
As Social Security approaches its 80th birthday Friday, the benefit
program urgently needs reforms to remain solvent in the future. Photo by
Fred Prouser/Reuters
WASHINGTON — As
Social Security approaches its 80th birthday Friday, the federal
government’s largest benefit program stands at a pivotal point in its
history.
Relatively modest changes to taxes and
benefits could still save it for generations of Americans to come, but
Congress must act quickly, and even limited changes are politically
difficult.
The longer lawmakers wait, the
harder it will become to maintain Social Security as a program that pays
for itself, a key feature since President Franklin Roosevelt signed the
Social Security Act on Aug. 14, 1935.
“The
more time that they take, the less acceptable the changes will be
because there needs to be adequate time for the public to prepare and to
adjust to whatever changes Congress will make,” Carolyn Colvin, acting
commissioner of the Social Security Administration, said in an
interview.
Social Security’s long-term
financial problems are largely a result of demographic changes. As baby
boomers swell the ranks of retirees, relatively fewer workers are left
to pay taxes.
In 1960, there were more than
five workers for every person receiving Social Security. Today there are
fewer than three. In 20 years, there will be about two workers for
every person getting benefits.
“Remember, these
are our most vulnerable population,” Colvin said. “These are the
elderly who helped to build this country. These are the disabled who
certainly did not wish to become disabled.”
The options fall into broad categories: benefit cuts, tax increases or a combination of both.
None is popular.
Nearly
60 million retirees, disabled workers, spouses and children get monthly
Social Security payments, a number that is projected to grow to 90
million over the next two decades.
About 168 million workers pay Social Security taxes.
Adding
to the gridlock, policymakers are moving in opposite directions.
Republicans are pushing to cut benefits while a growing number of
Democrats is pulling to expand them. The debate is playing out in
Congress and the presidential campaign, increasing the likelihood that
Washington will deal with Social Security the same way it has so many
other issues – not until it becomes a crisis.
Some
72 members of Congress signed a letter to President Barack Obama in
July, calling for Social Security benefits to be enhanced.
“In
my view, given the fact that poverty among seniors is going up, that
seniors are struggling, that people with disabilities are struggling, we
have got to expand benefits, not cut them,” said Sen. Bernie Sanders,
I-Vt., who is running for the Democratic nomination for president.
The
poverty rate among those 65 and older has inched up in recent years.
But it still is significantly lower than the poverty rate for younger
age groups, in large part because of Social Security.
Sanders
has proposed increasing Social Security’s annual cost-of-living
adjustment, or COLA, and increasing minimum benefits for low-wage
workers.
The average monthly payment is $1,221. That comes to about $14,700 a year.
Sen. Orrin Hatch, R-Utah, scoffs at the idea of expanding benefits.
“Where
are they going to get the money?” asked Hatch, chairman of the Senate
Finance Committee, which has jurisdiction over Social Security. “They
don’t ever seem to give any consideration to how deeply in debt our
country is and how difficult it’s going to be to get out of it.”
For
much of the past three decades, Social Security produced big surpluses,
collecting more in taxes than it paid in benefits. Social Security’s
combined trust funds are now valued at $2.8 trillion.
The
retirement trust fund has enough money to pay full benefits until 2035.
At that point, the program would collect enough payroll taxes to pay
about 79 percent of benefits, triggering an automatic 21 percent cut.
The
disability trust fund is projected to run out of reserves much sooner,
in late 2016. If that happens, it would trigger an automatic 19 percent
cut in benefits.
Obama and other Democrats want
to redirect tax revenue from the much bigger retirement fund to the
disability fund, as Congress has done in the past. But Republicans say
that would be like robbing seniors to pay the disabled.
If
the two funds were combined, they would have enough money to pay full
benefits for both programs until 2034, according to the trustees.
But
long before then, Social Security’s long-term financial problems could
become too big to solve without painful remedies or excessive borrowing.
Once
the surplus is gone, the gap between scheduled benefits and projected
tax revenues starts off big and quickly becomes huge. In the first year,
the gap would be $571 billion, according agency data. Over the first
decade, the deficit would total more than $7 trillion.
Social
Security uses a 75-year window to forecast its finances, so the
projections cover the life expectancy of every worker paying into the
system.
Options to address Social Security’s finances, along with the share of the 75-year shortfall that each one would eliminate:
TAXES
Social
Security is financed by a 12.4 percent tax on wages. Workers pay half
and their employers pay the other half. The tax is applied to the first
$118,500 of a worker’s wages, a level that increases each year with
inflation.
Options:
-apply the payroll tax to all wages, including those above $118,500. This option would wipe out 66 percent of the shortfall.
-increase
the combined payroll tax rate by 0.1 percentage point a year, until it
reaches 14.4 percent in 20 years. This option would eliminate 49 percent
of the shortfall.
RETIREMENT AGE
Workers
qualify for full retirement benefits at age 66, a threshold that
gradually rises to 67 for people born in 1960 or later. Workers are
eligible for early retirement at 62, though monthly benefits are
reduced.
Options:
-gradually
increase the full retirement age until it reaches 68 in 2033. This
option would eliminate 15 percent of the shortfall.
-raise
the early retirement age to 64 in 2023, and the full retirement age to
69 in 2027. This option would wipe out 29 percent of the shortfall.
COLAs
Each
year, if consumer prices increase, Social Security benefits go up as
well. By law, the increases are pegged to an inflation index. This year,
benefits went up by 1.7 percent.
Options:
-adopt
a new inflation index called the Chained CPI, which assumes that people
change their buying habits when prices increase to reduce the impact on
their pocketbooks. The Chained CPI would reduce the annual COLA by 0.3
percentage point, on average.
This option would eliminate 19 percent of the shortfall.
-adopt
a new measure of inflation that takes into account the higher costs
that older people have to pay for health care. This measure, called the
CPI for the Elderly, would increase the annual COLA by about 0.2
percentage point, on average.
This option would increase the shortfall by 13 percent.
