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Commentary or Blog Post

"Today, the Social Security Trustees released their 2011 report on the financial status of both Social Security and Medicare. The reports make clear that both programs are on unsustainable paths, and reforms will be necessary to make them solvent. This analysis focuses on the financial status of Social Security."

"President Obama has called Rep. Paul Ryan's budget 'an attempt to impose a radical vision on our country,' but as this week's chart illustrates, if something radical doesn't happen, entitlement spending will nearly double by 2050. The amount of spending on Medicare, Medicaid, Social Security and Obamacare subsidies will soar over the next 38 years, leaving future generations with an alarming...

"Assuming that no white knight (aka NJ Gov. Christie) enters the scene for the Republicans, this fall will be a race between Mitt & 'O.' I’ve listened to them discuss their views on a hot button of mine, Social Security.

Not surprisingly, both sides have dodged this issue. They say we need adjustments and refer to the 'need' to extend the retirement age. They also agree that some...

"Action is needed on Social Security reform before the first wave of baby boom retirements-starting in 2008-threaten the resources of the system, Greenspan told the Senate Banking Committee."

John Barrett, a law professor at St. John's University in New York, gives historical background on the Social Security Act especially in context of the involvement of Supreme Court Justice Robert Jackson.

But three neighboring Texas counties, which opted out of Social Security 30 years ago by creating personal retirement accounts, have avoided a fiscal train wreck while providing retirees with even more retirement income.

"You worked hard your whole life and paid thousands of dollars in Social Security taxes. Now it's time to retire. You're legally entitled to Social Security benefits, right? Wrong. There is no legal right to Social Security, and that is one of the considerations that may decide the coming debate over Social Security reform."

According to this recent investment article, retirees shouldn't count on Social Security to care of all their post-retirement expenses. Bruno writes, "There's simply too much risk associated with taking a wait-and-see approach on both programs. And the costs of under-saving clearly outweigh the risks of over-saving when it comes to retirement security."

"The findings of a new report released today indicate that the decline in the stock market in the last six months of 2008 dramatically worsened the retirement outlook for middle-class Americans. The analysis, conducted by Ernst & Young LLP on behalf of the retirement coalition Americans for Secure Retirement (ASR), finds that due to the economic downturn, the retirement assets of recent...

Recognizing that something must be done (and soon) to reform the Federal Entitlement Programs, President Obama acknowledged that, "What we have done is kicked this can down the road. We are now at the end of the road and are not in a position to kick it any further. We have to signal seriousness in this by making sure some of the hard decisions are made under my watch, not someone else's."

"I happily support a social safety net (preferably financed by the private sector but I'm OK with the public sector taking up the slack), especially for people who cannot care for themselves. But we have taken the idea of a safety net and transmogrified it into an entitlement state that gives more and more money (and cheap drugs!) to folks who can afford to pay their own freight. That just ain...

Social security personal-accounts "are not the speculative vehicles Deomcrats want you to think they are."

Cato Instituter's Michael Tanner writes, “In financing terms, the Social Security trust fund is an irrelevancy. Come 2014, when Social Security's payroll tax income falls below its benefit obligations, the program will need large infusions of tax dollars. The existence of the Trust Fund means only that until 2034 those dollars will come through increased income taxes rather than increased...

"One of the most enduring myths of Social Security is that a worker has a legal right to his Social Security benefits. Many workers assume that, if they pay Social Security taxes into the system, they have some sort of legal guarantee to the system's benefits. The truth is exactly the opposite. It has long been law that there is no legal right to Social Security....

Moos reports on recent pushes for Social Security reform.

"The 2009 Social Security and Medicare Trustees Reports show the combined unfunded liability of these two programs has reached nearly $107 trillion in today's dollars - about seven times the size of the U.S. economy and 10 times the size of the outstanding national debt. The Social Security and Medicare deficits are on a course to engulf the entire federal budget. If our policymakers wait to...

"Rethinking social insurance programs in this way would produce a more progressive approach to aiding the needy, a better balance between social obligation and individual responsibility, and a sensible budget process that reflects our national priorities and American values.

It would provide real economic security to today's aging baby boomers while starting to reduce the staggering...

"Here’s some bad news: The latest report of the Social Security and Medicare trustees shows an unfunded liability for both programs of $63 trillion. That is equal to about 4.5 times the entire U.S. gross domestic product.

The unfunded liability is the amount we have promised in benefits, looking indefinitely into the future, minus the payroll taxes and premiums we expect to collect. It’...

"They are not guaranteed legally because workers have no contractual or property rights to any benefits whatsoever. In two landmark cases, Flemming v. Nestor and Helvering v. Davis, the U.S. Supreme Court ruled that Social Security taxes are not contributions or savings, but simply taxes, and that Social Security benefits are simply a government...

"This week, Mercatus Center Research Fellow Veronique de Rugy examines the annual share of the U.S. budget spent on programs benefiting senior citizens (i.e., those aged 65 and over). Data on Social Security and Medicare spending from the Congressional Budget Office is used to show the historical trends and projected share of the budget between 1970 and 2084."

This short article compares the political and economic climate of the Reagan reforms to Social Security in the early 1980's with the situation currently facing Congress. As today, there was great debate over the existence of structural problems with Social Security as well as what the right course of action was to fix its bad health. But unlike the 1983 reforms, today's highly politicized...

"Numerous lawmakers embrace a discredited theory of the Constitution that would not only end Medicare outright but also cause countless other cherished programs to be declared unconstitutional. Under this theory, Pell Grants, federal student loans, food stamps, federal disaster relief, Medicaid, income assistance for the poor, and even Social Security must all be eliminated as offensive to the...

This article addresses the difficulty of formulating and implementing policy quickly in the current Congress. As Goldwein writes, "Although the features of Clinton's health care reform and Bush's Social Security reform were quite different, I believe they failed for the same reason: crowded politics. In both cases, the overwhelming number of groups and individuals interested...

While the most recent Trustees' Report "shows some deterioration in the program's long-run outlook", the progressive Center on Budget and Policy Priorities claims that "the report does not depict a program in crisis. [Still], policymakers should act sooner rather than later to put the program on a sound long-run footing. Today's beneficiaries and workers approaching retirement, however, need...

Harvard economist Greg Mankiw lays three reasons why democrats oppose social security reform: 1) Political opportunism; 2) They oppose the spread of stock ownership; and 3) They distrust the public with their own money.

Chart or Graph

Simple math implies that the age for collecting full benefits should rise from 67 to 72, so that expenses more closely match workers' ability to pay. Under this scenario, while Americans are living 30% longer, the 'retirement' age would rise just 7%, still well below the increase in life expectancy since Social Security was created.

These charts show a breakdown by age group of ownership rates according to the type of asset.

Households in all age groups have made gains compared with their predecessors over the course of many decades, but the incomes of the oldest households have risen four times as sharply as those of the youngest ones. As a result, incomes of the oldest households, which have been lower than those of younger households, are catching up.

"The latest Trustees report shows Social Security’s position has deteriorated since last year."

"The amount of spending on Medicare, Medicaid, Social Security and Obamacare subsidies will soar over the next 38 years, leaving future generations with an alarming debt burden."

"Medicare and Social Security accounts are currently in cash flow deficit, these deficits are projected to continue and grow into the future, from around 3% of GDP in 2010 to 16% of GDP in 2083."

"Even for the lowest tax bracket, taxes would have to more than double to pay for current Medicare, Medicaid and Social Security spending."

In 2009, households headed by adults ages 65 and older possessed 42% more median net worth (assets minus debt) than households headed by their same-aged counterparts had in 1984. During this same period, the wealth of households headed by younger adults moved in the opposite direction.

These charts show a breakdown of assets factoring into the net worth of different age groups.

The table above provides a breakdown of the number of Social Security and Supplemental Security Income beneficiaries for the month of December 2011.

"Because the primary source of income for OASDI and HI is the payroll tax, it is customary to compare the programs’ non-interest income and costs expressed as percentages of taxable payroll, the 'income rate' and 'cost rate' shown in Chart B."

"In the near-term, the reason for larger shortfalls in this year’s report is largely due to economic changes that caused considerably lower taxable earnings in 2010...."

"In 2006, 89% of married couples and 88% of nonmarried persons aged 65 or older received Social Security benefits."

Among households headed by adults younger than 35, the share with income below the poverty line has jumped since 1967. Among households headed by adults ages 65 and older, the share living below the poverty line declined.

The tables above provide a breakdown of total and average monthly payments to Social Security and Supplemental Security Income beneficiaries for the month of February 2011.

"This chart compares the Congressional Budget Office’s (CBO’s) projections for the end of year balance of Social Security accounts from 2008 and 2009."

"The combined deficits of both programs now require about 14 percent of general income tax revenues [see the figure above]."

"These long-term deficits are due to the aging of the population, which has pushed the program’s costs from 4.2 percent of GDP in 2000 to 4.9 percent this year, and will push them to as high as 6.2 percent by 2035."

"Repaying what is owed to Social Security will add to deficits in the rest of the budget each year over the next 75 years .... "

Social Security tax receipts exceeded outlays in every year between 1984 and 2008, leading to a cumulative surplus of $1.4 trillion.

"Chart D shows the trust fund ratios through 2040 under the intermediate assumptions."

"According to the Trustees, the DI program deficits will equal about $275 billion over the next decade."

Half of the entire budget will be consumed by payments for senior citizens by 2030.

Analysis Report White Paper

"This paper analyzes 'progressive price indexing.' It contains five significant findings...."

Examines ten common misconceptions about how Social Security functions. Written in question/answer format, John first addresses the myth and then combats it with the factual interpretation of what the actual data suggests.

Suggestions and recommendations from the Cato Institute for members of the 108th Congress. Information includes quotations from expert witnesses, testimonies, and charts and graphs.

This document includes a great deal of current and historical data about Social Security benefits.

"By the year 2030 - the midpoint of the baby boomer retirement years - the cost of elderly entitlement programs will be about double what it is today, relative to the national income. That means we will either have to double the payroll tax rate (currently 15.3 percent) or cut every benefit in half."

This report demonstrates through 12 case studies how Social Security reform could help workers create new and lasting wealth and help provide for their retirement. Since critics of Personal Retirement Accounts (PRAs) often focus on concerns for lower-income workers, the 12 case studies focus exclusively on low-income and moderate-income earners.

"As America moves into the 21st century, two public policy issues are becoming increasingly important: the need to reform Social Security and the need to spur economic growth and raise real wages. Recent evidence suggests that it may be possible to solve both problems simultaneously."

An examination of eight of the most frequently asked questions about Social Security including questions like, "Social Security seems to have been working fine for decades. Why is there a problem with it now?", "Are things really so bad that the program will go bankrupt?", and "What would it take to fix Social Security's finances?"

"The analysis finds that almost three out of five middle-class new retirees can expect to outlive their financial assets if they attempt to maintain their current pre-retirement standard of living. To avoid outliving their financial assets, middle-class retirees will have to reduce their standard of living, on average, by 24 percent."

"There have been a number of proposals to invest the Social Security surplus in the financial markets. Some proposals call for the government to do the investing. Others would have workers deposit part of their payroll tax payments in individual accounts that would be invested in assets, such as stocks and bonds."

This article provides a good overview of the social security problem and explains why regardless of the reform-whether it be benefit reductions, tax increases, debt issuance or privatization-solving the social security problem will cost money. The only question is who will pay and when.

This web memo concisely addresses several basic Social Security issues.

"However, the National Committee to Preserve Social Security and Medicare recently released a voluminous study by John Mueller arguing that Social Security would provide higher returns and benefits than a system of personal investment accounts for all workers today, of all income levels and family combinations."

This Congressional Budget Office primer on Social Security describes the elements of the program that are most relevant to the current debate about Social Security's future. It examines the demographical graying of the U.S. population and looks at several strategies that have been proposed for preparing for that aging population.

"Prompt action is essential if we are to restore confidence in the future of Social Security and enable today's workers to plan for a secure retirement." The report points out the importance of acting sooner rather than later because delay will only serve to give policymakers fewer and more difficult choices.

One of the foremost Social Security analysts addresses Personal Retirement Accounts. John covers how one might structure and regulate PRA's and "deals with the question of raising or eliminating the existing cap on wages."

"Households headed by older adults have made dramatic gains relative to those headed by younger adults in their economic well-being over the past quarter of a century, according to a new Pew Research Center analysis of a wide array of government data."

This article debunks many of the "myths" underlying the arguments against privatizing a portion of Social Security.

"This paper critically examines ten leading myths that have gained currency in the debate about reforming the U.S. Social Security system, including myths that have been propagated by both proponents and opponents of including personal accounts as part of any reform package."

"The findings of the original Retirement Vulnerability Report revealed that a majority of middle-class Americans are likely to outlive their financial resources in retirement."

This report looks at the federal government as if it were a business, with the goal of informing the debate about our nation's financial situation and outlook. In it, we examine USA Inc.'s income statement and balance sheet. We aim to interpret the underlying data and facts and illustrate patterns and trends in easy-to-understand ways.


Video clip of President Roosevelt signing the 1935 Social Security bill into law and his speech to the American Public afterwards.

A recent report "indicates that the decline in the stock market in the last six months of 2008 worsened the retirement outlook for middle-class Americans. The analysis, conducted by Ernst & Young on behalf of the Americans for Secure Retirement coalition (ASR), shows that the retirement assets of recent and near retirees decreased between 14 and 17 percent in the last six months of 2008...

Mike Lee discusses social Security, including Helvering v. Davis, as part of his 2010 Utah Republican senatorial campaign.

Milton Friedman criticizes Social Security, especially that there was never a public demand for Social Security. He explains that it was sold as an insurance program, but that it is not an insurance program but instead a regressive tax on employers and employees. He uses Social Security as an example of a myth that government expansion occurs because of popular...

Primary Document

The full text version of the original legislation which was signed into law August 14, 1935 by FDR.

This government report concludes that "under current law the cost of Social Security will increase faster than the program's income, because of the aging of the baby-boom generation, expected continuing low fertility, and increasing life expectancy. Based on the Trustees' best estimate, program cost will exceed tax revenues starting in 2018 and throughout the remainder of the 75-year...

This annual report presented by Social Security and Medicare Boards of Trustees describes the current and projected financial conditions of the two programs.

"The financial conditions of the Social Security and Medicare programs remain challenging. Projected long-run program costs for both Medicare and Social Security are not sustainable under currently scheduled financing, and will...

Full Audio and text of FDR's comments after signing into law the Social Security Act of 1935.

From the Social Security Administration's "Background to the Case":

"The fact that workers contribute to the Social Security program's funding through a dedicated payroll tax establishes a unique connection between those tax payments and future benefits. More so than general federal income taxes can be said to...

"Any doubt remaining after Butler as to the scope of the General Welfare Clause was dispelled a year later in Helvering. There the Court defended the constitutionality of the 1935 Social Security Act, requiring only that welfare spending be for the common benefit as distinguished from some mere local purpose. Justice Benjamin Cardozo...

Mises explained economic phenomena as the outcomes of countless conscious, purposive actions, choices, and preferences of individuals, each of whom was trying as best as he or she could ... to attain ... wants and ... avoid ... consequences.

Provides breakdown data of Social Security beneficiaries.

"In this extensive collection of history-related materials, we present both the institutional history of the Social Security Administration and the history of the Social Security program."

The Court found, 5-4, that the Social Security Act was constitutional and a proper use of congressional power. The Court found that there was no violation of the Tenth Amendment, and that Congress may pass laws concerning general welfare. The dissenting opinion by Justice Butler argued that the Social Security Act was repugnant to the Tenth Amendment.

Summarized charts of the SSA which discuss the provisions of the original legislation.

"SSA will do the best it can to provide the American people with the service they need, and I know firsthand how important the program can be to a family facing catastrophic illness or the loss of a family member. It is clear that we are stretching our ability to balance funding realities with the quality service the American people have come to expect from our Agency."

"The Old-Age, Survivors, and Disability Insurance (OASDI) program in the United States makes available a basic level of monthly income upon the attainment of retirement eligibility age, death, or disability by insured workers. The OASDI program consists of two separate parts that pay benefits to workers and their families—Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI)....

"As health care costs continue to grow faster than the economy and the baby-boom generation nears eligibility for Social Security and Medicare, the United States faces inevitable decisions about the fundamentals of its spending policies and its means of financing those policies. This Congressional Budget Office report looks at a range of possible paths for federal spending and...