Social Security Update

Past

In April of 1935, politicians passed the Social Security Act through the U.S. House and in June through the Senate; it was signed into law by President Roosevelt on August 14, 1935.

Ida May Fuller became the first beneficiary of recurring monthly retirement payments on January 31, 1940, with a check of $22.54 ($493 in 2017 dollars).

She had filed her retirement claim in November of 1939 after having paid a total of $24.75 in Social Security tax.  Living to age 100, she collected $22,888.92 in benefits.

Present

Chapter 14 of the textbook (page 392) says that the Social Security trust fund will be depleted by 2044.  The textbook further notes: “ . . . the government is somehow going to have to come up with the funds to make good on its pile of IOUs to the Social Security trust fund.”

Allen W. Smith, Ph.D. (Ball State and IU grad) stated that “The government has embezzled all surplus Social Security revenue, generated by the 1983 payroll tax hike, and spent the money on wars and other government programs. None of the money was saved or invested in anything.” [2].

On July 13, 2017, the Social Security and Medicare Boards of Trustees released its annual report, and it’s now projected that the theoretical combined OASDI trust funds will be depleted in 2035, (see table below).  This is a year longer than last year’s projection, which is good news.

OASI is Old Age and Survivors Insurance and DI is Social Security Disability Insurance.  Others components are Medicare Hospital Insurance (HI) and Supplementary Medical Insurance (SMI) [1].

KEY DATES FOR THE TRUST FUNDS
	OASI	DI	OASDI	HI
First year cost exceeds income excluding interesta	2010	2022	2010	2021
First year cost exceeds total incomea	2022	2019	2022	2023
Year trust funds are depleted	2035	2028	2034	2029

a Dates indicate the first year that a condition is projected to occur and to persist annually thereafter through 2090.

 Future?

According to last year’s projection, even after depletion, continuing tax income would be sufficient to pay 79% of benefits in 2034 and 74% in 2090.  This year they estimate that after depletion, tax income would be sufficient to pay 77 percent of scheduled benefits in 2034 and 73 percent in 2091.

Though I do not expect to ring in 2091 - and may not even see 2034 - some of you will see both!

Many hard-working Americans have paid the Social Security tax for decades, and I do not expect that all benefits will immediately evaporate.  Nevertheless, with nearly $20 trillion in federal debt (almost $166,000 per taxpayer) and no budget at all – let alone a balanced one - it is unrealistic to believe that our federal politicians will hold themselves accountable for unsustainable promises made decades ago by their predecessors.  After all, to be elected and to remain in office they’ve made quite a few of their own.

If Social Security happens to be there for you someday, that’s terrific!

But don’t bet your life on it.

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[1] Source: Social Security and Medicare Boards of Trustees, Summary of The 2017 Social Security and Medicare  Annual Reports <http://www.ssa.gov/oact/trsum> accessed 07/20/2017.  Full report available at <https://www.ssa.gov/oact/tr/2017/tr2017.pdf> (269 pp).

[2] Source: Allen W. Smith <http://www.fedsmith.com/2013/05/23/government-owes-2-7-trillion-to-social-security> accessed 12/10/2014.