The Political Fight Over Social Security

U.S. News ran a recent article wishing a happy 75 th birthday to the Social Security program, drawing parallels between the eroding economy of 1935 and the present. However, in the midst of other government and business organizations that have encountered trouble over the decades, Social Security has performed as promised.

Recent calls for reform, however, have highlighted the concern some people have for the ongoing viability of the program. These concerns are amplified by misconceptions and general lack of knowledge, despite the longevity of the program to date.

Common Misconceptions

AARP released results from a public opinion survey it commissioned regarding Social Security. It showed that although only about 35 percent of Americans are confident in the future of Social Security, that may be in large part due to the fact that a mere 20 percent of the public understands the exact nature of the financial challenges the program is facing.

Misconception: Social Security Has Added to the Federal Deficit

Social Security is funded outside of the federal budget process, by a tax on employee earnings that is matched by employers; the program has never added to the deficit. This has some questioning why the President's deficit reduction commission will reportedly be actively considering recommendations for changes to the program after its report is issued in November. Social Security has historically used its surpluses to buy government debt in the form of government securities.

Misconception: Social Security is Broke

The two funds that make up Social Security are the Federal Old-Age and Survivors Insurance (OAS) and Federal Disability Insurance Trust Funds (DI), collectively OASDI. The OASDI trustees' annual report this year said that the dollar level of trust funds is projected to be drawn down from the year 2025 until all assets are exhausted in 2037. This is the same projected depletion year as in the 2009 report. After 2037, the program can honor 75 percent of all claims.

However, when viewed individually, the DI fund is projected to be exhausted in 2018, with the OAS fund lasting through 2040. While the economic situation has forced many people to claim Social Security as soon as they become eligible at age 62, there are no age restrictions for disability claimants. Last year, DI expenses exceeded income for the first time since 1993.

Additionally, the AARP poll also showed that Americans oppose investment of Social Security revenues into private investments similar to 401(k)s by a ratio of four to one.

Misconception: Social Security Is Failing

Social Security is working for many Americans: since it began in 1935, and with the introduction of Medicare in 1965, the percentage of Americans aged 65 and older living in poverty has fallen from approximately 60 percent to 9 percent. This is lower than the rate for any age group, including children. When private fund values, homes and other investments were rapidly declining, Social Security was available for more than 50 million beneficiaries.

Opposition to Benefit Cuts

Many fear the administration will cut benefits in order to save the program. The average retiree's benefit, at $14,000, is less than minimum wage, reports U.S. News. Millions of current and future retirees will rely solely on Social Security income and cannot afford any form of reduction in benefits, whether in the form of direct cuts or raising the retirement age.

The last increase in retirement age from 65 to 67 cut benefits for an average retiree by 13 percent, says a U.S. News article. Another increase to age 68 would cut benefits again, even for those who wait until age 69 to retire. Those who wait to retire get a bonus, but when the retirement age increases, the eligibility for the bonus also increases. Additionally, raising the retirement age does not account for the disparity in life expectancy gains. Higher income men are living 5 ½ years longer than in 1982 but lower income men are living only 1 ½ years longer; lower income women have seen a decline in life expectancy.

While Social Security is providing benefits to many Americans, not all applicants are initially approved. Less than 40 percent of the DI benefit claims were initially approved in 2005, according to a recent report from the Congressional Budget Office. Only one-third of the denied applicants appealed and of those, three quarters were successful. The average applicant waits 442 days for final response. Those who have been disabled and cannot work should contact an experienced Social Security attorney about how to apply for Social Security disability benefits, including any action they can take to appeal a denial.