Social Security in the USA

Social Security is the largest federal social welfare program in the United States. Started in 1935 as part of the New Deal, it has grown steadily in scope and cost, and currently provides the principal source of income for nearly half of all retirees in the U.S. Although it primarily provides income for retired workers, and benefits for the disabled. It is funded by a tax on payrolls, with employer and employee paying equal shares (currently about 7% each).

The current Social Security program is also known by the acronym OASDHI, which spells out the major categories of beneficaries covered by the program (Old Age, Survivors (widows and minor children of deceased workers), permanently and totally Disabled workers. Medicare is a component social insurance program in Social Security, enacted in 1965 and represented by the letter 'H' in the acronym. (The I is for insurance)

Social Security isn't actually a welfare program at all - in the sense of a pension or assistance program financed out of general tax revenue. It is a social insurance program modeled after the German social insurance programs designed in the 1880s by Theodor Lohmann and others in the administration of Otto von Bismarck. Other key social insurance programs arising from the German social insurance model include work-based health insurance, workers' compensation, and the Black Lung program. Like the German model, the Social Security "program" is actually a series of autonomous and actuarially balanced funds.

The fundamental nature of the Social Security program has been controversial from the very start in 1935. Liberal and progressive economists working in the New Deal tradition have characterized Social Security as an inter-generational transfer program. Each current generation of workers and their employers pay into the appropriate fund from which payments are then made to the current generation of eligible retirees (who previously paid into the fund to support the retirees of their working years). It is this inter-generational transfer aspect from which the title Social Security is derived. This idea is also known as social solidarity in some European contexts. This inter-generational transfer notion has been very significant historically to supporters of the program, who point to the fact that it has worked for more than 70 years, and can continue to work indefinitely as long as periodic actuarial adjustments are made. This aspect of the program has also been frequently ignored, misrepresented, discounted and even denied by critics of Social Security in contemporary policy debates. Many critics of Social Security completely deny the currency of the inter-generational transfer idea, preferring instead to characterize it as a vast national Ponzi scheme, or an inadequate pension program that suffers by comparison with private pensions.

Social Security Reform 1983

Mounting concerns that rising Social Security benefits were causing a long-term deficit and were growing too fast resulted in a bipartisan compromise in 1983. Brokered by conservative Alan Greenspan and liberal Claude Pepper, the agreement lowered benefits over the next 75 years and brought the system into balance. Key provisions included a gradual increase over 25 years in the retirement age from 65 to 67, to take account of longer life expectancy. (People could retire younger, but at a reduced rate of benefits.) Millions of people were added to the system, especially employees of state governments and of nonprofit organizations.

Privatization proposal

There is currently a movement to privatize or, to abolish the Social Security, in light of its increasing cost that is perceived to become unmanageable in future. The current U.S. president, George W. Bush, with the Republicans, supports the proposal of privatization. The majority of Democratic Party politicians and consistent large majorities of the public, however, do not support the plan.

External Links

Social Security Online

Bibliography

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• Weir, Margaret, Ann Orloff, and Theda Skocpol, eds., The Politics of Social Policy in the United States, Princeton University Press. 1988