Social Security

Government web site: www.ssa.gov
Goverment history: www.ssa.gov/history
Government history FAQ: www.ssa.gov/history/hfaq.html

Of particular interest from the history FAQ is the following Q&A,
especially the first table cited, the Tax Rate Table:

Q16: Where can I find the history of the tax rates over the years
and the amount of earnings subject to Social Security taxes?

The history of the tax rates is available as an Adobe PDF file.
(Tax rate table).
There is also a table showing the maximum amount of Social Security taxes
that could have been paid since the program began.

There are also tables showing the minimum and maximum Social Security benefit
for a retired worker who retires at age 62 and one who retires at age 65.

Also, there is a table showing the number of workers
paying into Social Security each year. (Covered workers table)
And also a table showing the ratio of covered workers to beneficiaries.
(Ratio table)

Note that
during the 1940s the tax rate to the employee was 1 percent,
during the 1950s under 2.5 percent
during the 1960s around 4 percent
during the 1970s around 6 percent
during the 1980s around 7 percent
finally reaching 7.65 percent in 1990.

Miscellaneous Articles

The debt fallout:
How Social Security went ‘cash negative’ earlier than expected

By Lori Montgomery
Washington Post, 2011-10-30

Last year, as a debate over the runaway national debt gathered steam in Washington, Social Security passed a treacherous milestone. It went “cash negative.”

For most of its 75-year history, the program had paid its own way through a dedicated stream of payroll taxes, even generating huge surpluses for the past two decades. But in 2010, under the strain of a recession that caused tax revenue to plummet, the cost of benefits outstripped tax collections for the first time since the early 1980s.

Now, Social Security is sucking money out of the Treasury. This year, it will add a projected $46 billion to the nation’s budget problems, according to projections by system trustees. Replacing cash lost to a one-year payroll tax holiday will require an additional $105 billion. If the payroll tax break is expanded next year, as President Obama has proposed, Social Security will need an extra $267 billion to pay promised benefits.


Budget battle is not all about me
By: David Walker and Lisa Borders
Washington Examiner Op-Ed, 2011-11-07


Would Roosevelt recognize today’s Social Security?
by Robert J. Samuelson
Washington Post Op-Ed, 2012-04-09


Early Social Security beneficiaries received huge windfalls.
A one-earner couple with average wages retiring at 65 in 1960
[i.e., born in 1895, with Social Security starting circa 1935]
received lifetime benefits equal to nearly 14 times their payroll taxes,
even if those taxes had been saved and invested (which they weren’t) ....

Although new recipients have paid payroll taxes higher and longer
than their predecessors,
their benefits still exceed taxes paid
even assuming (again, fictitiously) that they had been invested.
A two-earner couple with average wages retiring in 2010
would receive lifetime Social Security and Medicare benefits
worth $906,000 compared with taxes of $704,000 ....

Who’s not bargaining in good faith?
By Robert J. Samuelson
Washington Post Op-Ed, 2012-12-02

Put Social Security on the table — clearly and irrevocably. Protecting retiree benefits is the left’s political equivalent of the right’s “no new taxes” pledge. Congressional Republicans are abandoning their untenable position. Now it is time for President Obama and congressional Democrats to do the same. As long as they don’t, they aren’t bargaining in good faith, or in the national interest.

Supporting retirees is now the federal government’s main activity. There’s a huge redistribution from young to old — a redistribution that will be made worse if retiree programs are largely excluded from deficit reduction, as many liberal groups urge. Either taxes will rise steeply or other federal programs (defense, food stamps, environmental protection) will be cut sharply. The young will pay more and get less. Or, given these unpalatable choices, true deficit reduction won’t happen.

Doubters should ponder the numbers. In fiscal 2012, non-interest federal spending totaled $3.251 trillion. Of that, $762 billion went for Social Security, $469 billion for Medicare (insurance for the 65 and over population) and $251 billion for Medicaid (insurance for the poor — two-thirds goes for long-term care for the aged and disabled). Altogether, that’s 46 percent of non-interest spending. Defense, $651 billion and declining, was 20 percent.

As baby boomers retire and health costs rise, this spending will mount. In 2010, there were 40 million Americans 65 and older. By 2020, that number is projected to be 55 million; by 2030, 72 million.

All these trends are old news; I have repeatedly written about them. If we had begun cutting benefits years ago, changes could have occurred slowly. People would have received ample notice. Now we lack the luxury of time. Benefit cuts will be unfair to retirees; but avoiding cuts will be unfair to the young. That we have arrived at this juncture indicts our democratic system and many Democratic politicians, who have obstructed constructive change in retiree programs. Obama continues this short-sighted tradition.

What could justify it?

One argument is that most elderly are poor; benefit cuts will further impoverish them. Not so. The Administration on Aging reports that in 2010, 25.9 percent of households headed by someone 65 or older had incomes exceeding $75,000; 19.4 percent had incomes from $50,000 to $74,999; and 18.8 percent had incomes from $35,000 to $49,999.

Another argument is that recipients “earned” benefits through their payroll taxes, which (many believe) were saved. But they weren’t saved; they paid the benefits of earlier retirees. Even had they been saved and earned interest, they typically wouldn’t cover lifetime Social Security and Medicare benefits, estimate the Urban Institute’s C. Eugene Steuerle and Caleb Quakenbush. A couple with average wages retiring in 2010 would receive $966,000 in benefits against taxes of $722,000.

Finally, it’s often said that Social Security — no one makes this argument for Medicare — doesn’t add to the budget deficit because benefits are still covered by payroll taxes. Again, not true. In 2010, benefits exceeded taxes and are expected to do so indefinitely. The Congressional Budget Office estimates the gap to average 10 percent over the next decade and to be 20 percent by 2030. This bloats deficits.

Democrats have made Social Security into government’s largest “earmark,” supposedly unrelated to deficits and the nation’s budget problems. Social Security should be excluded from any deficit negotiation, because it “does not add one penny to our debt,” as Senate Majority Whip Dick Durbin of Illinois said last week. Aside from being technically wrong (Social Security contributes to deficits), this view is philosophically bankrupt.

No genuine debate about government priorities can exclude its biggest program and those loosely associated with it, Medicare and Medicaid. The exemption isn’t progressive, because protecting retiree benefits will intensify pressures on the social safety net. The trick is to cut retiree benefits while minimizing the impact on the elderly poor. There are ways to do this: changing the benefit inflation-adjustment formula, fully taxing Social Security payments (affecting mostly the affluent elderly), gradually raising eligibility ages.

Deficit reduction should include higher taxes on the richest Americans. But there are practical limits. Already, Obama’s proposals would, in combination with state taxes, raise some top marginal tax rates to about 50 percent. As taxes rise, so do risks of adverse economic effects and more tax avoidance. Spending must be addressed. Government has other responsibilities besides sheltering the elderly.

By evading this, Obama flirts with failure. If Democrats won’t relinquish their sacred cows, Republicans will cling to theirs. We might go over the “fiscal cliff.” Or any budget package may be tiny. We need to acknowledge new social realities affecting the elderly (longer life expectancy, better health, greater affluence). Benefit cuts can be introduced over a few years to minimize the threat to the recovery. But we need to start. Now.

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