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SOCIAL SECURITY



I. Social Security In Five Minutes
II. FICA Contributions and Disbursements - Historical Data
III. Criticisms
♦ Sustainability
♦ Empty Trust Funds
IV. Trivia







The Civil War Pension
Some argue that the 1861 Civil War Pension program was, in fact, the country's first social insurance program. It was initially intended to provide protection for soldiers who were disabled as a direct physical consequence of active combat. The Civil War Pension program was expanded in 1873 to include benefits for widows and dependents, in cases of death. A new proviso was added to the program in 1890 in the form of the Dependent Pension Act, which expanded the coverage to old age (including for widows and children, in cases of death). At its peak in 1894, the program provided coverage to nearly 2.5 million Americans and accounted for 37% of the federal budget.
(i) Former Confederate soldiers were excluded from the program.
(ii) Two children of Civil War vets continue to receive benefits under the Civil War Pension program to this day, 147 years after the end of the Civil War.

I. Social Security In Five Minutes


President Franklin Delano Roosevelt signed the Social Security Act into law on August 14, 1935, and the Social Security Board (the precursor to the Social Security Administration) was officially established on October 14, 1936.

The Board, and subsequently, the Social Security Administration, operates under the terms outlined under Title 42 of the U.S.C.

Widely referred to as the Economic Security Bill during the drafting stages, the Social Security Act came into being in the wake of the Great Depression and the resulting economic turmoil, which saw more than half of the nation's 7.8 million senior citizens living below the poverty line. The bill was designed to prevent a similar recurrence through the creation of a federally mandated insurance program that would provide income to retirees age 65 and above.

The Act initially faced fierce resistance from Republican legislators, who felt that the program was inherently socialistic in nature. However, the proposal proved to be popular with Americans at large, leading to a swift passage through both the House (371-33) and Senate (77-6).

The Act was amended to expand its coverage in 1939 (spouses and children), 1956 (the disabled and their beneficiaries), 1965 (Medicare, for twelve years before it fell under the jurisdiction of the Centers for Medicare and Medicaid Services) and 1972 (Supplemental Security Income, but funded by federal tax revenues, not Social Security taxes).

Social Security is funded principally through the Federal Insurance Contributions Act (FICA), a compulsory form of employment tax legislated according to the stipulations contained within Title 26 of the U.S.Code (below, left). Deposits are managed by the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund, under the supervision of the Board of Trustees of the Trust Funds, as outlined in Title 42, Chapter 7, Subchapter II, Section 401 (c) of the U.S.Code.



The Board of Trustees "shall be composed of the Commissioner of Social Security, the Secretary of the Treasury, the Secretary of Labor, and the Secretary of Health and Human Services... and of two members of the public (both of whom may not be from the same political party), who shall be nominated by the President for a term of four years and subject to confirmation by the Senate."

The six-man board is mandated to present an annual report to the Congress no later than the first day of April each year.

As of 2009, 453.7 million Americans have been registered with the Social Security Administration.

Since 1937, the agency has received contributions amounting to $13.87 trillion and disbursed $11.33 trillion.

Today, more than 30 million retirees, five million disabled Americans and about ten million beneficiaries receive support from the Social Security Administration.




II. FICA Contributions and Disbursements - Historical Data



III. Criticisms


Sustainability

There are concerns that Social Security, in its current form, is unsustainable.

The imminent and ongoing retirement of the baby boomers' generation is expected to outpace the entry of young Americans into the workforce.

Further, the consistently rising life expectancy of average Americans entails a longer coverage period.

As it is now, there have been an almost 25% growth of Americans aged 60 years and above in the last decade alone.

Under these circumstances, it is feared that the Administrations' two and a half trillion dollars surplus will rapidly diminish.




Empty Trust Funds

In its 77 year history, the Social Security Administration has stashed away a surplus amounting to $2,540,348,000,000, a figure that easily ensures its solvency for at least two decades. The $2.5 trillion surplus is deposited into a trust fund held by, wait for it, the federal government - the very same federal government that is currently almost $16 trillion in debt.

Analysts have been speculating since the early 1990s that the federal government has been dipping their hands into the Old-Age and Survivors Insurance Trust Fund (OASI) and the Disability Insurance Trust Fund (DI), despite repeated denials from four consecutive American administrations.

Dr. Allen W. Smith's 2003 book, The Looting of Social Security: How the Government is Draining America's Retirement Account, accused the George H. W. Bush and Bill Clinton administrations of spending the entire trust fund on government programs. Dr. Allen also charged that the federal government's "$2.5 trillion debt to Social Security is the real reason that so many politicians want to cut benefits. They are trying to find a way to avoid having to repay the looted money."

The Associated Press also ran a critical piece on March 14, 2010, which accused Congress "of raiding the Social Security trust funds to pay for other programs, masking the size of the budget deficit."

Washington Post's Charles Krauthammer perhaps explained the situation best in an article last year.

"When your FICA tax is taken out of your paycheck, it does not get squirreled away in some lockbox in West Virginia where it's kept until you and your contemporaries retire. Most goes out immediately to pay current retirees, and the rest (say, $100) goes to the U.S. Treasury - and is spent. On roads, bridges, national defense, public television, whatever - spent, gone.

In return for that $100, the Treasury sends the Social Security Administration a piece of paper that says: IOU $100. There are countless such pieces of paper in the lockbox. They are called "special issue" bonds. Special they are: They are worthless."


The ruse finally came into the open during the debt ceiling crisis in 2011. Speaking to CBS' Scott Pelley on July 12, 2011, President Obama indicated that failure to increase the federal debt ceiling may prevent the government from mailing out Social Security checks. The implication was obvious; the federal government could only meet its obligation (to Social Security, among others) if it was allowed to borrow.
Pelley: Can you tell the folks at home that no matter what happens, the Social Security checks are gonna go out on August the third? There are about $20 billion worth of Social Security checks that have to go out the day after the government is supposedly gonna go into default?

Mr. Obama: Well, this is not just a matter of Social Security checks. These are veterans' checks, these are folks on disability, and their checks. There are about 70 million checks that go out each month.

Pelley: Can you guarantee, as president, those checks will go out on August the third?

Mr. Obama: I cannot guarantee that those checks go out on August 3rd if we haven't resolved this issue. Because there may simply not be the money in the coffers to do it.


IV. Trivia


Trivia 1: The Social Security Board issued its first ever Social Security number to 23-year old John D. Sweeney, Jr., of New Rochelle, New York, on December 1, 1936 (SSN 055-09-0001)

Trivia 2: Ms. Grace D. Owen of Concord, New Hampshire, was the recipient of the lowest possible Social Security number (SSN 001-01-0001). However, owing to logistics and the geographic distribution of numbers, her registration was approved well after Mr. Sweeney.

Trivia 3: Ms. Ida May Fuller of Brattleboro, Vermont, became the first American to receive a monthly Social Security check. She was issued a check in the amount of $22.54 on January 31, 1940.






 

 

2012 Republican Presidential Nominee
Former Governor of Massachusetts

Mitt Romney

Presidential Candidate Mitt Romney

Romney Position on Social Security

Governor Romney believes that Social Security must be reformed in order to remain fiscally solvent for the long-term. He advocates a progressive price indexing tied to a lower inflation growth model, as well as reducing benefits for top bracket earners.
“Now, my own view is, that we have to make it very, very clear that Social Security is a responsibility of the federal government, not the state governments, that we're going to have one plan, and we're going to make sure that it's fiscally sound and stable.

And I'm absolutely committed to keeping Social Security working. I put in my book that I wrote a couple of years ago a plan for how we can do that and to make sure Social Security stable not just for the next 25 years, but for the next 75.”
September 22, 2011: Fox News-Google GOP Presidential debate, Orlando Convention Center

Gerald Seib: Governor Romney, in the book you wrote just before this campaign began, you said you were surprised that the press in the last campaign didn’t press for more specifics on how to fix Social Security and Medicare, so let’s fix that tonight. Let me ask you specifically: Would you reduce the cost of these programs by raising the retirement age for Social Security, by raising the eligibility age for Medicare, or by reducing benefits for seniors with higher incomes?

Mitt Romney: Let me lay it out. First of all, for the people who are already retired or 55 years of age and older, nothing changes. It’s very important, because I know the Democrats are going to be showing videos of, you know, old people being thrown off cliffs and so forth. But don’t forget… don’t forget who it was that cut Medicare by $500 billion, and that was President Obama to pay for Obamacare. So let’s not forget that.

What, what I would do with Social Security is that I would lower, if you will, the 2.0, the version for the next generations coming up, I’d lower the rate of inflation growth in the benefits received by higher-income recipients and keep the rate as it is now pretty high for lower income recipients. And I’d also add a year or two to the retirement age under Social Security. That balances Social Security.

…. I, I know it’s popular here to say, oh we could just, we can do this and it’s not going to cost anything. But look, it’s going to get tough to get our federal spending from the current 25 percent of the GDP down to 20, down to 18 percent, which has been our history. We’ve got a huge number of obligations in this country and cutting back is going to have to happen. I know something about balancing budgets.

In the private sector, you don’t have a choice. You balance your budget, or you go out of business. And we, we simply can’t say we’re going to go out and borrow more money to let people set up new accounts that take money away from Social Security and Medicare today. Therefore, we should allow people to have a voluntary account, a voluntary savings program, tax free. That’s why I’ve said anybody middle income should be able to save their money tax free. No tax on interest, dividends or capital gains.

That will get American’s saving and accomplishes your objective, Mr. Speaker, without threatening the future of America’s vitality by virtue of fiscal insanity.
January 16, 2012: Fox News/ Wall Street Journal Debate in South Carolina


President Obama has had three years in office, during which time he has attacked every serious proposal to preserve and strengthen America’s entitlement programs. Mitt Romney has laid out the approach he would take to modernizing America’s entitlement programs, guaranteeing their continued vitality for future generations. Mitt’s proposals will not raise taxes and will not affect today’s seniors or those nearing retirement. He proposes that Social Security should be adjusted in a couple of commonsense ways that will put it on the path of solvency and ensure that it is preserved for future generations.

• First, for future generations of seniors, Mitt believes that the retirement age should be slowly increased to account for increases in longevity.

• Second, for future generations of seniors, Mitt believes that benefits should continue to grow but that the growth rate should be lower for those with higher incomes.

With just those two simple steps, and no change in benefits for those at or near retirement, America can guarantee the preservation of the Social Security system for the foreseeable future.

The Republican nominee must be someone who is committed to saving Social Security. Mitt will ensure that America honors all of its commitments to today’s seniors and strengthens the program so that it is financially secure for future generations.
Mittromney.com, Social Security




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Declared 2012 Republican Presidential Candidate
U.S. Representative from the State of Texas

Ron Paul

Presidential Candidate Ron Paul

Paul Position on Social Security

Congressman Paul believes that Social Security is unconstitutional, and has degenerated into a Ponzi scheme. A Ron Paul presidency would see a gradual phasing out of Social Security, although his administration would honor existing retirees who depends on the agency’s monthly check. Paul, who opposes plans to privatize the agency, believes that Americans should not depend on the government to take care of themselves.
Chris Wallace: You talk a lot about the Constitution. You say Social Security, Medicare, Medicaid, are all unconstitutional.
Ron Paul: Technically they are.
Chris Wallace: Why? Why?
Ron Paul: There's no authority. Article 1, Section 8 doesn't say I can set up insurance program for people. What part of the Constitution… The liberals are the ones that use the general welfare.
Chris Wallace: OK. All right. Well, I don't know that I'm a liberal, but let's put it up on the screen, because that's exactly the point. Article 1, Section 8 of the Constitution:
“The Congress shall have the power to lay and collect taxes - to pay the debts and provide for the common defense and general welfare of the United States.”
Doesn't Social Security come under promoting…
Ron Paul: No. Absolutely…
Chris Wallace: … promoting the general welfare?
Ron Paul: Absolutely not.
Chris Wallace: Why not?
Ron Paul: General welfare is a general condition, maybe sound currency is general welfare, maybe markets, maybe judicial system, maybe a national defense, but this is specific welfare. This justifies the whole welfare state, the military industrial complex, the welfare to foreigners, the welfare state that imprisons our people and impoverishes our people and gives us our recession.
So, no. Why would you have Article 1, Section 8? And why would you have the Amendment number 9 and 10? That means there is no reason for article 1, number 10 if you believe that? Revenue clause? That is such an extreme liberal view point that has been mis-taught in our schools for so long. And that's what we have to reverse, that very notion that you're presenting.
Chris Wallace: Congressman, it's not just a liberal view. It was the decision of the Supreme Court in 1937 when they said that Social Security was constitutional under Article 1, section 8 of the Constitution.
Ron Paul: Yes. And the Constitution and the court said slavery was legal, too. And we had to reverse that. So, I'll tell you, just because a court in '37 went very liberal on us and expanded the role of government - no, I think the original intent is not a bad idea. I think limitation of government power. If we aren't clear on this, we're going to get into a mess. Our government is going to get very big -- and we're going to have a very big deficit and we're going to have a financial crisis. And it's type of thinking that is leading to us to that very problem that we're facing today.
May 15, 2011: Paul on “Fox News Sunday With Chris Wallace.”



The greatest threat to your Social Security retirement funds is Congress itself. Congress has never required that Social Security tax dollars be kept separate from general revenues. In fact, the Social Security “trust fund” is not a trust fund at all. The dollars taken out of your paycheck are not deposited into an account to be paid to you later. On the contrary, they are spent immediately to pay current benefits, and to fund completely unrelated federal programs. Your Social Security administration “account” is nothing more than an IOU, a hopeful promise that enough younger taxpayers will be around to pay your benefits later. Decades of spendthrift congresses have turned the Social Security system into a giant Ponzi scheme, always dependent on new generations. The size and longevity of the Baby Boom generation, however, will finally collapse the house of cards.

We've all heard proposals for “privatizing” the Social Security system. The best private solution, of course, is simply to allow the American people to keep more of their paychecks and invest for retirement as they see fit. But putting Social Security funds into government-approved investments could have dangerous consequences. Private companies would become a partner of sorts with the government. Individuals still would not truly own their invested Social Security funds. Payroll taxes likely would be raised to cover payments to current beneficiaries, as the President alluded to when warning us that fixing Social Security would be “costly.”
November 8, 2004: Social Security: House of Cards, by Ron Paul, Texas Straight Talk

Wolf Blitzer: Let me ask you this hypothetical question.
A healthy 30-year-old young man has a good job, makes a good living, but decides, you know what?  I’m not going to spend $200 or $300 a month for health insurance because I’m healthy, I don’t need it.  But something terrible happens, all of a sudden he needs it. Who’s going to pay if he goes into a coma, for example?  Who pays for that?
Ron Paul:  Well, in a society that you accept welfarism and socialism, he expects the government to take care of him.
Wolf Blitzer:  Well, what do you want?
Ron Paul:  But what he should do is whatever he wants to do, and assume responsibility for himself.  My advice to him would have a major medical policy, but not be forced…
Wolf Blitzer:  But he doesn’t have that.  He doesn’t have it, and he needs intensive care for six months.  Who pays?
Ron Paul:  That’s what freedom is all about, taking your own risks. This whole idea that you have to prepare and take care of everybody –
Wolf Blitzer:  But Congressman, are you saying that society should just let him die?
Ron Paul:  No.  I practiced medicine before we had Medicaid, in the early 1960s, when I got out of medical school.  I practiced at Santa Rosa Hospital in San Antonio , and the churches took care of them.  We never turned anybody away from the hospitals.
September 12, 2011: CNN/Tea Party Republican debate, Tampa


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Declared 2012 Republican Presidential Candidate


Matt Snyder

Presidential Candidate Matt Snyder

Snyder Position on Social Security

Snyder believes that the only flaw with the current Social Security system is Congress’ ability to get their hands on the money that goes into it. It is not unreasonable to raise the retirement age to reflect modern life-spans. Snyder is open to reasonable plans including options in lieu of full payment/full benefits system of today.

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Declared 2012 Republican Presidential Candidate
Businessman

Vern Wuensche

Presidential Candidate Vern Wuensche

Wuensche Position on Social Security

• Vern Wuensche believes that those 55 and older should not have their benefits tampered with.

• Wuensche believes that those under 55 should be allowed to invest a portion of the payroll taxes in a menu of investment options. Most of the profits from this would go to the investor’s retirement fund but a portion would go to help reduce the present shortfall in our system.

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