[Budget of the United States Government]
[VI. Investing in the Common Good: Program Performance in Federal Functions]
[25. Social Security]
[From the U.S. Government Publishing Office, www.gpo.gov]


 
                          25.  SOCIAL SECURITY

  ----------------------------------------------------------------------

                          Table 25-1.  FEDERAL RESOURCES IN SUPPORT OF SOCIAL SECURITY                          
                                            (In millions of dollars)                                            
----------------------------------------------------------------------------------------------------------------
                                                                               Estimate                         
               Function 650                   1997   -----------------------------------------------------------
                                             Actual     1998      1999      2000      2001      2002      2003  
----------------------------------------------------------------------------------------------------------------
Spending:                                                                                                       
  Discretionary Budget Authority..........     3,457     3,205     3,163     3,211     3,201     3,192     3,194
  Mandatory Outlays:                                                                                            
    Existing law..........................   362,296   378,099   392,848   409,235   427,005   446,860   467,351
    Proposed legislation..................  ........  ........        20       102       137       151       151
Tax Expenditures:                                                                                               
  Existing law............................    23,565    24,825    25,960    27,210    28,400    29,795    31,315
----------------------------------------------------------------------------------------------------------------

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  The Old-Age, Survivors, and Disability Insurance (OASI) program, 
popularly known as Social Security, will spend about $392 billion in 
1999 to provide a comprehensive package of protection against the loss 
of earnings due to retirement, disability, or death.
  OASDI provides monthly benefits to retired and disabled workers who 
gain insured status and to their eligible spouses, children, and 
survivors (see Table 25-2). The Social Security Act of 1935 provided 
retirement benefits, and the 1939 amendments provided benefits for 
survivors and dependents. These benefits now comprise the Old Age and 
Survivors Insurance Program (OASI). Congress provided disability 
benefits by enacting the Disability Insurance (DI) program in 1956 and 
benefits for the dependents of disabled workers by enacting the 1958 
amendments.
  Social Security was founded on two important principles: social 
adequacy and individual equity. Social adequacy means that benefits will 
provide a certain standard of living for all contributors. Individual 
equity means that contributors receive benefits directly related to the 
amount of their contributions. These principles still guide Social 
Security today.

What Social Security Does

  Social Security helps alleviate poverty, provide income security, and 
maintain the lifestyles of beneficiaries.

  Alleviating Poverty: Social Security is largely responsible for 
reducing poverty among the elderly. In 1996, 16 percent of elderly, 
unmarried beneficiaries had family incomes below the poverty line. 
Without Social Security retirement benefits, 61 percent of them would 
have fallen into poverty. For elderly couples, Social Security has had a 
similar effect. In 1996, three percent of the elderly who were married 
had incomes below the poverty line. Without Social Security retirement 
benefits, 41 percent of them would have had such incomes (see Table 25-
3).
  Income Security: Social Security was originally designed to provide a 
continuing income base to help eligible workers maintain a household 
when they retired. In 1935, personal savings, family support, and 
Federal welfare programs were the main sources of income for those 65 
and older who did not work. Social Security supplemented private savings 
and employer-provided pensions to ensure an adequate level of retirement 
income. While these other vehicles are still important today, two-thirds 
of those over 65 now get the major portion of their income from Social 
Security. The

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           Table 25-2.  MILLIONS BENEFIT FROM SOCIAL SECURITY           
                     (Number of OASDI beneficiaries)                    
------------------------------------------------------------------------
                                                         Thousands of   
                                                         beneficiaries  
                                                     -------------------
                                                        1997      1999  
                                                       Actual   Estimate
------------------------------------------------------------------------
Retired workers and families:                                           
  Retired workers...................................    26,927    27,583
  Wives and husbands................................     2,953     2,911
  Children..........................................       444       451
                                                                        
Survivors of deceased workers:                                          
  Children..........................................     1,907     1,948
  Widowed mothers and fathers with child                                
   beneficiaries in their care......................       233       235
  Aged widows and widowers, and dependent parents...     5,004     5,040
  Disabled widows and widowers......................       183       193
                                                                        
Disabled workers and families:                                          
  Disabled workers..................................     4,397     4,776
  Wives and husbands................................       218       201
  Children..........................................     1,451     1,448
                                                     -------------------
Total OASDI recipients..............................    43,717    44,786
------------------------------------------------------------------------

  ----------------------------------------------------------------------
  ----------------------------------------------------------------------

   Table 25-3.  SOCIAL SECURITY PROTECTS OLDER AMERICANS FROM POVERTY   
 (Percentage of older Americans in poverty with Social Security and the 
     percent that would be in poverty in the absence of the program)    
------------------------------------------------------------------------
                                                       Without    With  
                                                       Social    Social 
                                                      Security  Security
------------------------------------------------------------------------
Aged Individuals....................................      61%       16% 
Aged Couples........................................      41%        3% 
------------------------------------------------------------------------

  ----------------------------------------------------------------------
average retiree receives a Social Security benefit equal to 43.6 percent 
of pre-retirement income. In 1997, Social Security paid about $257 
billion in benefits to over 30 million retired workers and their 
families. Along with retirement benefits, Social Security also provides 
income security for survivors of deceased workers. In 1997, Social 
Security paid about $56 billion in benefits to over seven million 
survivors.
  DI also provides income security for workers and their families who 
lose earned income when the family provider becomes disabled. Before DI, 
workers often had no such protection. To be sure, employees disabled on 
the job may have benefits from State workmen's compensation laws. 
Congress enacted DI to protect the resources, self-reliance, dignity, 
and self-respect of those suffering from non-work-related disabilities. 
DI protection can be extremely valuable, especially for young families 
that could not sufficiently protect themselves against the risk of the 
worker's disability. In 1997, Social Security paid about $45 billion in 
benefits to over six million disabled workers and their families.

  Maintaining Lifestyles: Before Social Security, about half of those 
over 65 depended on

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others, primarily relatives and friends, for all of their income. The 
same was often true for people with disabilities. Now, with Social 
Security, the vast majority of those over age 65 and those with 
disabilities can live relatively independent lives. Moreover, their 
families no longer carry the sole responsibility of providing their 
financial support.

Growth in Retirement Benefits

  Social Security's retirement component is facing financial stress due 
to changing demographics and its own financing. The retirement program 
is largely ``pay as you go''--current retirement benefits are financed 
by current payroll contributions. Such financing worked well in the 
past, when five workers paid for every retiree. But, when the baby boom 
generation retires, eventually only two workers will pay for every 
retiree (see Chart 25-1). Furthermore, while the system's financial 
burden will increase greatly with the baby boomers' retirement, the 
Social Security Trustees do not expect demographic trends to improve 
markedly in later periods.
  Adding to the financial stress, baby boomers are having fewer babies 
and living longer. In 1957, women had an average of 3.7 babies, compared 
to 1.99 today. In 1935, life expectancy was 63 years for females, 60 for 
males. By contrast, baby boomers have a much longer life expectancy--73 
years for females and 67 for males. The longer people live, the longer 
they will collect Social Security. The more time that people spend 
retired, the more people there are to support at any one time, and the 
fewer there are working and contributing to provide that support.

Growth in Disability Benefits

  Social Security's disability component has grown rapidly since its 
inception. The program provided about $45 billion to about six million 
disabled beneficiaries and their families in 1997, compared to $57 
million for 150,000 disabled workers in 1957. Growth has been especially 
rapid in the last 10 years, with the number of beneficiaries rising by 
75 percent and benefits rising by 125 percent.




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  What has caused the growth? More and more baby boomers are reaching 
the age at which they are increasingly prone to disabilities; the number 
of women insured has risen; and laws, regulations, and court decisions 
have expanded eligibility for benefits. In addition, the annual share of 
beneficiaries leaving the rolls has fallen steadily, making it more 
important to ensure that those remaining on the rolls are all, in fact, 
eligible for benefits. To maintain DI's integrity, the Administration 
proposes to maintain support for continuing disability reviews (CDRs)--a 
periodic review of individual cases that ensures that only those 
eligible continue to receive benefits.
  The budget proposes a Ticket to Independence pilot program to 
encourage DI beneficiaries and Supplemental Security Income (SSI) 
disabled recipients to re-enter the workforce. Currently, the Social 
Security Administration (SSA) refers these beneficiaries to State and, 
in limited cases, private Vocational Rehabilitation agencies. Under this 
proposal, beneficiaries could choose their own public or private 
vocational rehabilitation provider--and the provider could keep a share 
of the DI and SSI benefits that the Federal Government no longer pays to 
these individuals after they leave the rolls.

A Long-range Problem, but No Crisis

  The OASDI trust funds are not in balance over the next 75 years--the 
period over which the Social Security Trustees have traditionally 
measured Social Security's well-being. In their 1997 report, the 
Trustees estimated that the combined OASDI trust funds would have a cash 
imbalance in 2012 and be insolvent in 2029. Much of the deterioration 
arises from changes described above in demographics over the measurement 
period. The President wants to work with Congress on a bipartisan basis 
to develop a long-term solution to the financing challenge. Acting 
sooner rather than later to address the long-term inadequacies of OASDI 
financing will reduce the magnitude of changes needed.

Social Security Administration (SSA)

  SSA administers OASI and DI as well as SSI, which is part of the 
Income Security function. SSA also provides services to Medicare on 
behalf of the Health Care Financing Administration, which is part of the 
Medicare function.
  SSA's Performance Plan for 1999 generally reflects its commitment to 
maintain the quality of its program administration, reflected in terms 
of customer service delivery, operational efficiency, and program 
integrity. SSA's key performance measures and commitments for 1999 
include the following.
  For customer service delivery:
  SSA will maintain its current performance level of ensuring 
          that 95 percent of callers access the 800-number within five 
          minutes of their first call.
  The average processing time for completing hearings on appeals 
          of disability claims decisions will be 284 days by year-end, 
          compared to 398 days at the end of 1997.
  For operational efficiency:
  SSA will process 3,143,000 claims for Social Security 
          retirement and survivors benefits, compared to 3,129,000 in 
          1997.
  For program integrity:
  SSA will process 1,637,000 reviews of the eligibility of 
          recipients of DI and SSI disability benefits, compared to 
          690,000 disability reviews in 1997.

Tax Expenditures

  Social Security recipients pay taxes on their Social Security benefits 
only when their overall income, including Social Security, exceeds 
certain income thresholds. These thresholds reduce total Social Security 
beneficiary taxes by $26 billion in 1999 and $143 billion from 1999 to 
2003.