Social Security in the 21st Century

Abstract

The Social Security program is now 75 years old and debate and reform are in the air. Some decry that its benefits are inadequate and should be improved, especially for lifetime low earners, women and minorities. Others, more loudly, proclaim that the system is in financial difficulty and, if nothing is done, will soon go broke. As a result of the last major amendments enacted in 1983, Social Security trust funds now have reserves of $2.5 trillion, at least on paper. However, the trust funds are an accounting device. There is no real money there. It has been spent by the Treasury to fund other government programs and has served to mask a significant portion of the federal deficit for the past 25 years. The Social Security problem is really a federal fiscal problem. The U.S. Treasury owes the Social Security Administration a great deal of money, and the bill is about to become due. In 2010, for the first time in decades, Old Age, Survivor and Disability Insurance expenditures are greater than Federal Insurance Contribution Act tax revenue. This will soon become a permanent condition and a great deal of attention is being directed at solving the funding problem. This article, after examining the Old Age Survivor and Disability Insurance program’s origins, development and current benefit structure, focuses on its funding arrangements. Saving Social Security will be relatively easy. Managing its impact on the federal budget will be daunting.