Making the Case for Social Security Reform

Whether you consider Social Security an entitlement program or an earned benefit program, there is little doubt that the federal program requires reform to survive in some form. Conservatives advocate cutting benefits across the board, others want to increase both benefits and payroll deductions.

Where do you stand?

From the Social Security Administration:

Who Receives Social Security Benefits?

Social Security, the federal social insurance program, provides retirement income for those who have worked and paid into the program through automatic payroll deductions, widows’ and widowers’ and surviving minor children’s benefits as survivors of eligible program participants and monthly income to those disabled with sufficient qualifying work history and payments into the program.

How Is Social Security Funded?

Many of those who are or will be beneficiaries of Social Security rankle at the claim that the program is an entitlement program because it suggests Social Security benefits are an unearned privilege. However, people who are eligible to receive benefits in the future, both employed and self-employed, are mandated to pay into Social Security via automatic payroll deductions for the employed and required contributions from the self-employed. Payroll deductions of 6.2 percent of gross wages are contributed by the employee and employer; for the self-employed, the contribution to Social Security in 12.4 percent of gross earnings up to $117,000/year.

This table, provided by the Social Security Administration in the Summary of the 2016 Annual Reports of the Social Security and Medicare Boards of Trustees shows the program’s income sources:

2016-07-10 (1)

Key for trust funds mentioned in table:

OASI: Old Age and Survivors Insurance

DI: Disability Insurance

HI: Hospital Insurance

SMI: Supplementary Medical Insurance


From the National Academy of Social Insurance:

Workers to Recipient Ratio Continues to Decrease, Putting Program Reserves in Jeopardy

Those in the know have realized for decades that the time was quickly approaching when the Social Security program would be paying out far more than it was taking in – namely into the mid-years of retirement for the baby boomer generation, those born between 1946 through 1964, who number in excess of 76 million.

As long as the ratio of those paying into Social Security exceeded those receiving benefits, the program has remained solvent. That ratio remained relatively stable through 2008 at 3.3 to 3.4, is currently 2.8 and projected to be only 2.2 by 2035 under current Social Security laws. With that in mind, the program’s trust fund reserves are estimated to become depleted in 2037.

There have been incremental changes in payroll taxes since the inception of the program in 1935. What began as a 1 percent tax remained so through 1949; in 1950 it increased to 1.50 percent with incremental changes instituted in both the tax amount and the maximum taxable wage base through the years until the current tax rate of 6.20 percent occurred in 2013.

The Big Question: What Type of Reform Fits the Values and Needs of the American Public?

The answer(s) to the question is more than one of dollars and cents; it goes to the heart of the intention of Social Security when it was first created – to keep retirees, the disabled and beneficiaries’ minor children out of poverty. If as a society we still accept this as a civil duty, a social obligation to those who are unable to earn a living wage and have met the eligibility requirements for benefits, then the reform sought must be to strengthen the program. Doing so will require an increase in the payroll tax rate, raising the maximum taxable annual earnings rate, both or another solution altogether.

There are many who believe that Social Security was created as a supplement to other retirement income, but that is not the case. When Social Security was “born,” few private sector jobs provided pension plans for their workers. In the current era, politicians and financial advisers refer to Social Security retirement benefits as supplementary to pension income and life savings, but the fact remains 22 percent of married couples and 47 percent of single people rely on Social Security for 90 percent or more of their monthly income after retirement. Fifty-three percent of married couples and 74 percent of single people rely on Social Security’s retirement benefits for at least 50 percent of their monthly income.

If the Social Security program was to be scrapped entirely, the most radical approach voiced by a few, or even if benefits are cut 20 percent or more, how will those who already depend on their benefit payments continue to pay rent, insurance, or buy groceries? Won’t their financial needs have to be picked up by another program or will we as a society accept that millions of people no longer in a position to earn a living wage will be hungry, homeless or ill?

As citizens and voters, we have choices to make – sooner than later.




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  1. Deb Jones

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