[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
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Table 25-1. FEDERAL RESOURCES IN SUPPORT OF SOCIAL SECURITY
(In millions of dollars)
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Estimate
Function 650 1997 -----------------------------------------------------------
Actual 1998 1999 2000 2001 2002 2003
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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)
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Thousands of
beneficiaries
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1997 1999
Actual Estimate
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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
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Total OASDI recipients.............................. 43,717 44,786
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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)
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Without With
Social Social
Security Security
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Aged Individuals.................................... 61% 16%
Aged Couples........................................ 41% 3%
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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.