What is Social Security Insurance?
Social Security, the system and the concept, has been the topic of considerable discussion in recent elections. Concern about solvency and bureaucracy, protection of benefits and COLA's are just a few of the topics that Americans "agree to disagree" on. The system itself has only been in operation for a little more than 70 years but its core issues have changed very little since 1935. Controversial since its inception, Social Security will continue to spark debate in future administrations.
Other People Are Reading
-
Identification
-
Social Security is a U.S. government-administered insurance program based on contributions by workers that returned over $600 billion to retired or injured workers and their dependents in 2008. Social Security, now called the Old-Age, Survivors, and Disability Insurance (OASDI) program, provides pension, disability and survivor's benefits averaging about $1000 monthly in supplemental income to beneficiaries. In an economy where less than 50 percent of the workforce has a private pension plan, Social Security provides the majority of retirement income for most American citizens.
History
-
The Social Security Act of 1935 provided aid to the elderly and death benefits in the midst of the Great Depression. The Act was modified by several court decisions but a tax paid by wage earners began paying death benefits in 1937 and regular benefits in 1940. Early amendments set up a Social Security Trust Fund and Aid to Dependent Children and added non-working spouses of workers who contributed. In the 1950's, more classifications of workers were added to the system, including agricultural, domestic and government workers. Medicare health insurance was added by the Social Security Act of 1965 and benefits were supplemented with "cost of living adjustments" (COLA) in 1975 and Supplemental Security Income (SSI), a program of welfare for elderly poor who have not contributed to the system was established. Social Security also helps fund state-administered unemployment insurance for workers. Throughout its history, retirement age and tax rates have varied and the Social Security Administration's office or website are the best places to find current information.
-
Significance
-
Social Security and the other programs of the New Deal marked a period of social experimentation unmatched in American history. They were created to deal with the first global economic disaster, an equally unparalleled event. The Social Security Act of 1935 and other New Deal legislation marked the triumph of "Keynsian Economics," proposed by British economist John Maynard Keynes, which advocated government intervention in the periodic cycles of boom and bust that had been common since the beginning of the Industrial Revolution in the mid-18th century.
Effects
-
In 1935, the average life expectancy was about 77 years and the poverty rate among senior citizens was approximately 50 percent. Today the average life expectancy is 83 and fewer than 10 percent of seniors live in poverty. Together with Medicare, COLA provisions and benefits for occupations not covered by the original act, over 50 billion citizens benefited from Social Security programs in 2008. Social Security and the OASDI have stabilized and improved life for millions of people since its beginnings.
Misconceptions
-
Social Security was never intended as a pension system. It was intended to be insurance against old-age poverty, paid for by workers before retirement age. The system is not broke; a unitary federal budgeting system has "hidden" trust funds at times and the financial status needs clarification. The drop in worker-to-beneficiary ratio is projected to be 3.3 for each beneficiary to 2.1 for each beneficiary by 2034, making good management rather than radical change a necessity for the system's continued success.
-
Resources
- Photo Credit Microsoft Office clip art
