Ever since Gov. Rick Perry of Texas suggested that Social Security is nothing but a ``ponzi scheme’’ during a recent Republican Presidential debate, the rhetoric about whether the troubled underfinanced system is worth saving or done away with has sparked some heated debate about a program representing approximately one-fifth of the federal budget and provides retirement, disability and survivors' benefits to over 50 million Americans.
Though Mr. Perry has been heavily criticized for his ``ponzi scheme’’ remark, others, both Democrats and Republicans, are conceding Social Security is in desperate need of reform if it hopes to survive the coming decades ahead.
So as a way to lower the decibel level of the Social Security war of words being waged in the political arena, I compiled some of the most updated data available on the current state of the Social Security system with the hope it is in line with Sgt Joe Friday’s indispensible directive : ``Just the facts Ma’am.’’
• The Social Security system is funded by a payroll tax of 12.4 percent up to a maximum amount of income ($106,800 in 2010). Half of the tax is paid by employers and half by employees.
• Ninety-six percent of wage earners in the country pay Social Security taxes, with most of them paying more in Social Security taxes than they do in federal income taxes.
• The largest group of workers not covered by Social Security consists of about one-quarter (5.7 million in 2007) of state and local government employees.
• According to the Congressional Research Service, as of June 2011, there were 54.8 million Social Security beneficiaries. Sixty-four percent of beneficiaries were retired workers and 15 percent were disabled workers. The remaining 21 percent were survivors or the spouses and children of retired or disabled workers. Currently, Social Security covers an estimated 156.9 million workers.
• In 2010, for the first time since the ratification of the Social Security Amendments of 1983, Social Security’s annual outlays will exceed its annual tax revenues, the Congressional Budget Office projects.
• When Social Security operates with a cash flow deficit, the program cashes in federal government securities to supplement current Social Security tax revenues.
• When there are no surplus governmental receipts, the increased spending for Social Security from the general fund can only be paid for by the federal government raising taxes or other income, reducing other spending, or borrowing from the public.
• The Social Security Administration’s 2011 Annual Report projects that the Social Security trust fund will remain solvent until 2036. Social Security benefits scheduled under current law can be paid in full until that time.
• Beginning in 2023, program expenditures are projected to exceed total income (tax revenues plus interest income) and trust fund assets will begin to be drawn down to help pay for benefits and administrative expenses.
• After the trust funds are exhausted, which is projected to occur in 2036, the program would operate using current Social Security tax revenues, sufficient to pay only an estimated 77 percent of benefit payments scheduled under current law in 2036 and about 74 percent of scheduled benefits in 2085.
• Between 2010 and 2030, the number of people aged 65 and older is projected to increase by 78 percent, while the number of workers supporting the system is projected to increase by 7 percent.
• During the 111th Congress, four Social Security reform measures were introduced with none of them receiving congressional action. Again, during the 112th Congress to date, several Social
Security reform measures have been introduced; but none have received congressional action
• An indication of the success of Social Security is attributed to the fact that between 1959 and 2009, the poverty rate for Americans age 65 and older dropped from 35.2 to 8.9 percent.
• According to the Urban Institute, even though the Social Security program was not designed to be the sole financial resource for retirees, in 2008 nearly a quarter relied on Social Security for 90 percent or more of their income
• According to the Social Security Administration, 50 percent of the workforce has no private pension coverage; while 31percent of the workforce has no savings set aside specifically for retirement.
• By 2036, there will be almost twice as many older Americans as today – from 41.9 million today to 78.1 million.
• From 1984 to 2009, Social Security generated surplus tax revenues.
• The average Social Security benefit is $1,170 a month, or about $14,000 a year
• The full retirement age is now 66 and will increase to 67 for those born in 1960 or later.
• Nine out of ten individuals age 65 and older receive Social Security benefits.
• Social Security benefits represent about 41 percent of the income of the elderly.
• More than 50 million Americans – living in about one in four households – receive Social Security benefits, with about 70 percent going to retired workers and families, and the rest going to disabled workers and survivors of deceased workers
• In 2009, a record number of Americans filed for Social Security benefits, many opting to retire early.
• Retired workers and their dependents account for 69 percent of total benefits paid.
• Disabled workers and their dependents account for 19 percent of total benefits paid
• About one in eight of today’s 20-year-olds will die before reaching age 67.
• A much higher share of Americans retire before age 63 today than in 1970.
• Workers eligible for full retirement at age 67 will receive just 70 percent of their full pensions each month if they retire at 62. If the full retirement age is moved to 68, those who retire at 62 would receive only 65 percent of their full pensions.
• In fiscal year 2010: Medicare and Medicaid ate up 21 percent of federal spending; Social Security consumed 20 percent; Defense consumed 20 percent. Other mandatory spending, such as veterans’ compensation, unemployment Insurance, and food stamps consumed 17 percent; leaving only 16 percent for everything else, including veterans’ health care, homeland security and law enforcement, education and student aid, roads and bridges, food and drug inspection, energy and the environment.
September 15, 2011
Source: The National Commission on Fiscal Responsibility and Reform; The Urban Institute, Congressional Research Service, Congressional Budget Office; Social Security Administration; The Bipartisan Policy Center's Debt Reduction Task Force.
Web Sites to Keep in Mind
Congressional Budget Office: Social Security InfoGraphic (By the Numbers, Long Term Projections)