Social Security at 75: what will it look like in another 75 years?
By Mark Pattison, Catholic News Service
WASHINGTON (CNS)—It seems like it has been around forever, but Social Security is only 75 years old.
Granted, few Americans who were born before Social Security started have never deposited a Social Security check, although it is an open question whether Social Security will be in a form today’s workers would recognize 75 years from now.
When President Franklin D. Roosevelt signed the Social Security Act into law in 1935, it was seen as a bold social experiment. But it put money into the hands of the nation’s retirees.
Poverty had hit senior citizens harder than any other age group, but Social Security benefits whittled away their financial hardships to the point where seniors now have the lowest rate of poverty of any age group in the United States.
“We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family against the loss of a job and against poverty-ridden old age,” Roosevelt said on Aug. 14, 1935.
Today the Social Security Administration says that about one-third of recipients depend on Social Security for more than 90 percent of their income, while another third rely on the program for more than half of their money. The agency estimates that about 13 million would fall below the poverty line without Social Security.
When Social Security was created, the U.S. bishops were concerned about some aspects of the law, especially how it would affect nonprofits and Catholic child welfare programs, especially in rural areas. Men and women religious were not permitted to join the Social Security system until 1972.
The bishops’ National Catholic Welfare Conference, the precursor to today’s U.S. Conference of Catholic Bishops, had a representative among the members of an advisory council to the House Committee on Economic Security. It was Msgr. John A. Ryan, director of conference’s department of social action.
Getting a government check in the throes of the Great Depression must have seemed like a godsend for a generation of Americans who had worked hard all their adult lives only to see their savings wither away from the stock market crash of 1929 or from the myriad of bank closures that followed.
Now, with the country in what is arguably the worst economic shape since the Great Depression—many term the ongoing slump the “great recession”—talk has revived about changing some, or all, of the rules currently governing Social Security.
Last year was the first year where payouts outstripped revenue, eight years ahead of previous forecasts, because sustained joblessness meant fewer paycheck deductions going into Social Security. Meanwhile, retirements—not all of them wholly voluntary—prompted many older Americans to apply for their benefits.
Republicans, meanwhile, are talking again of privatizing Social Security. Their mid-decade plan, never enacted, would have offered those paying into the system the option to invest some of their Social Security account in stocks or mutual funds. As the stock market nosedived in 2008, many would-be retirees breathed a sigh of relief. Some call for the abolition of Social Security, while others wonder what’s behind the eagerness to dismantle a program that has done so much for so many.
Social Security is a main target of the bipartisan National Commission on Fiscal Responsibility and Reform convened by President Barack Obama earlier this year. The body is to make recommendations by December as to how the nation can reduce the deficit and improve its long-range fiscal health.
The Republican co-chair is former Sen. Alan Simpson of Wyoming and the Democratic co-chair is former Clinton White House Chief of Staff Erskine Bowles. The commission has floated the idea of scaling back Social Security as one way to reduce the federal deficit.
If nothing is done, Social Security would run dry in 2041, according to an analysis prepared by Public Agenda, a Washington think tank. Based on receipts that would be coming into the system that year, Social Security would have to cut benefits by 25 percent to break even.
So what’s the next step? The baby-boom generation will begin retiring in a couple of years and be eligible for full Social Security benefits—and the actuarial tables show them living longer, with fewer workers coming behind them to keep the trust fund solvent.
One long-standing argument for a way to bring more needed cash into the Social Security trust fund is to raise the amount of payroll taxes for the program levied on an employee’s annual income.
Currently, the income ceiling is $106,800. The Social Security tax is 6.20 percent; an additional 1.45 percent is withheld for Medicare; the same total, 7.65 percent, is also imposed on employers. So the maximum withholding for both employee and employer is $6,621.60. (Self-employed people use a different calculation, but essentially pay both parts.)
These numbers are unchanged from 2009. But the proposal hasn’t caught on with lawmakers reluctant to raise taxes so close to an election.
One of the few proposals to win majority support in polls of Americans is to cap the benefits paid to wealthier retirees.
House Republican Leader John Boehner of Ohio suggested in early September that the retirement age to collect full benefits be raised to 70. But a Center for Economic and Policy Research paper issued in August noted that, of those ages 58 and up, male workers (37 percent), Hispanic men (62.4 percent), immigrant workers (47.5 percent) and those at the bottom end of the wage scale (56.4 percent) had physically demanding jobs. Further, 77.2 percent of workers without a high school diploma toiled in difficult jobs, meaning they’ve been working harder physically, and longer chronologically, than the typical American.
However the issue is ultimately decided, it appears as if the supplemental retirement program could be in need of some Social Security of its own.