PoliticalFailures.Com - Social Security Effects

Social Security -- Effects

1. Social Security will begin running a deficit by 2018.

Source: 2003 Social Security Board of Trustees Report, Table VI.F2, p.168

2. The average worker can expect a rate-of-return of less than 2% on his or her Social Security taxes.

Source: Social Security Administration Office of the Chief Actuary, Table 4

3. The Social Security payroll tax rate has grown from just 2 percent in 1949 to 12.4 percent today.

4. Social Security faces an unfunded liability of more than $12.8 trillion.

Source: 2003 Social Security Board of Trustees Report. For explanation, see "Social Security Deficit Increases by Trillions," Cato Daily Commentary.

5. "Saving" Social Security without individual accounts could require a 50% increase in Social Security taxes or a 27% cut in benefits.

Source: 2003 Social Security Board of Trustees Report

6. The Supreme Court ruled in Flemming v. Nestor that there is no legal right to Social Security benefits.

Source: Flemming V. Nestor, 363 U.S. 603, 610–11 (1960)

7. Social Security taxes have been raised more than 40 times since the program began.

Source: See legislation affecting Social Security and Medicare programs available on the Social Security Administration website.

8. The maximum original Social Security tax was just $60. Today it is $11,000.

Source: Social Security Administration

9. In 1950, there were 16 workers paying Social Security taxes for every retired person receiving benefits. Today there are 3.3. By 2030, there will be only 2.

Source: 2003 Social Security Board of Trustees Report, Table IV.B2, p. 51

10. 46 million Americans receive Social Security benefits, including 32 million retirees, 7 million survivors, and 7 million disabled workers.

Source: 2003 Social Security Board of Trustees Report, p. 2

11. Social Security pays more than $450 billion in benefits each year. If nothing is done, by 2060, the combination of Social Security and Medicare will account for more than 71 percent of the federal budget.

Source: Public Trustee of the Social Security Board of Trustees before the Senate Special Committee on Aging, July 29, 2003.

12. 18-to-34 year olds are more likely to believe in the existence of UFOs than in the future existence of Social Security.

Source: “Social Security: The Credibility Gap,” Third Millennium survey, conducted Sept. 1994.

13. According to Gallup, reforming Social Security is a top priority for 33% of investors.

Source: The Gallup Organization, “Investor Optimism Increases for the Fourth Consecutive Month,” report released January 28, 2004.

14. Nearly 80% of Americans pay more in Social Security taxes than they do in federal income tax.

15. Every two-year election cycle that we wait to reform Social Security costs an additional $320 billion.

16. The full retirement age today is 65 years and four months. It rises by two months every year, gradually increasing to age 67 for people born after 1959.

Source: Social Security Administration

17. By 2030, there will be 70 million Americans of retirement age--twice as many as today.

Source: Social Security Administration

18. The average monthly retirement benefit in 2003 was $879.70.

Source: Social Security Administration

(The above information from the "CATO Institute"

Signs of Crisis Are Clear

By Michael Tanner

Michael Tanner is director of health and welfare studies at the Cato Institute.

We can become embroiled in semantic quibbles over what constitutes a "crisis." However, the facts have a certain heft.

Social Security will begin running a deficit in less than 15 years — that is, it will begin to spend more money on benefits than it brings in by taxes. At that point, to continue to pay promised benefits, the program will have to draw on the Social Security Trust Fund.

Crisis deniers have made much of the trust fund recently, suggesting that it guarantees Social Security's solvency until 2042, or even 2052, according to some projections. However, it was President Clinton — not President Bush — who pointed out that: "These trust fund balances are available to finance future benefit payments … but only in a bookkeeping sense."

Clinton's fiscal year 2000 budget explained that trust fund assets are not "real economic assets that can be drawn down in the future to fund benefits." Rather, these funds are "claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures."

Thus, in less than 15 years, the federal government will have to begin finding billions of dollars to continue paying benefits — by cutting benefits, raising taxes or borrowing even more money. Overall, Social Security's unfunded liabilities total nearly $12 trillion, and the longer we wait, the worse it gets. Estimates suggest that each year that we wait to reform Social Security costs between $150 billion and $600 billion more.

That sure looks like a crisis to me.

But the larger crisis is not about the system's finances. It is about workers forced to pay 12.4% of their wages into a system that cannot pay them the promised level of benefits. It is about a system where workers have no real ownership of their benefits, and where low- and middle-income workers cannot accumulate wealth that they can use in retirement and pass along to their heirs.

We have an unfair system that is slowly going broke. Some commentators say this is acceptable and is not a crisis because they might be dead by the time the bill comes due. The mind boggles.