Social Security

Some interesting facts about Social Security- and why it’s going broke

From: “Social Security Facts.” By James D. Agresti and Stephen F. Cardone. Just Facts, January 27, 2011. Revised 4/15/15.

In 1965 0.85% of the population was on disability.  In 2013 that had grown to 3.4% of the population. Why?

  • Are Americans just in much poorer health?
  • Is this merely a reflection of an aging populations?
  • Are we seeing the impact of people dropping out because of the Great Recession?
  • Is our definition of “disabled” too liberal?
  • Do we not monitor properly those temporarily disabled?

Regardless of the reasons, the fact is we have not adjusted the system or its income to pay for all this. And no, contrary to the naive nonsense coming from Old Bernie, it is not a manufactured crisis‼️


9 replies »

  1. You are falling into the half story sold by itjustfacts. Yes, they are facts, but no they are not meaningful facts.

    The life expectancy of a retiree is up fractionally compared to the overall cost. If you keep the worker to retiree ratio in 1960 terms, the number of workers has increased from 5 to 1 to about 15 to 1. The other problem that you do not mention is that people are living longer while they are contributing. In 1940, a 21 year-old had a 48% chance to live to retirement age. Today it is closer to 80%. We are primarily living longer at a time when we are contributing to Social Security rather than drawing from it.

    Disability is rising as has been projected in the past. The primary reasons are more women in the work force and the rising age of the population. Comparing disability rates to raw population is noise.

    The man who ran Social Security in 1944 predicted where we are today with stunning accuracy. How is it that he predicted the outcome so accurately without knowing even one of the facts you have mentioned. The concept of the Baby Boom didn’t even exist.


    • When you say they are not meaningful facts, what does that mean? Do any of your comments change the financial challenges facing Social Security? Not sure I understand how living longer while working and paying taxes is a problem unless you are saying it creates a higher benefit fir a longer period, but if that is true and there is not an offset between the two, doesn’t that mean the tax rate is too low?


      • We follow facts that sound important, but really aren’t. They are vast rabbit holes. Social Security’s problems are simple, created by generations and generations of people collecting far more than they contributed. That is what the guy who ran Social Security in 1944 said was the problem and he clearly laid out the consequences. The problem is that you can’t sell dollars for dimes. Everything that you point to exacerbates the actual underlying problem. The facts that you provide are not the problem themselves.

        For 50 years, the government has kicked the can. We have expanded coverage. If we expanded the system to 100% coverage, we would net about 4 million workers. We have expanded taxes. The tax to the average person is up by 10 fold. So there isn’t room for more taxes. Benefits of future retirees deliver such a low return that benefit cuts are not realistic. The core problem with Social Security is that there is no way to kick the can anymore.

        Birth rates do not solve anything as shown by the baby boomers. The system is financed so increasing birthrates only postpones the problem while it grows. Yes the Boomers got us through the 70s into the 80s. Tax increases/benefit cuts allowed us to add years.

        Living longer while you are paying taxes is not a problem. It is actually a solution. When most people quote data on life expectancy, they look at life expectancy of a baby. Most of that change has made the system more solvent not less.

        The debate about Social Security reform has nothing to do with how to fix the system. It is how do we allocate the brokenness of the past.


      • I agree with your assessment of the basic problem, but others don’t. They see the lost earnings on the taxes paid over the years as part of the argument that they do not collect more than they paid in. In other words in total they would have more if they invested the tax money over their working lives. I don’t agree with that logic, but trad comments by Benefits Jack as an example.


      • The guy from 1944 predicted that the return on Social Security would decrease over time until beneficiaries like Bene Jack would have to pay more for Social Security benefits than they would for annuity insurance from a private company.

        “It is a mathematical certainty that the longer the present pay-roll tax rate remains in effect, the higher the future pay-roll tax must be if the insurance system continues to be financed wholly by payroll taxes. Therefore, the indefinite continuation of the present contribution rate (assuming the system is self-sustaining, and the costs are shared equally by the employees and employers) will eventually necessitate raising the employees’ contribution rate later to a point where future beneficiaries will be obliged to pay more for their benefits than if they obtained this insurance from a private insurance company.”

        A pay-as-you-go system creates no wealth with which to pay positive economic returns. For every plus dollar, there must be an off-setting minus dollar. The system was stacked so that the minus dollars fell on future workers. That is all our current debate is about. How can we shift the minus dollars to future workers. The fact is that we can’t shift it.


      • I have been watching the economy change over the last 40 years and the social security debate for almost as long.
        The problem is most companies do not provide retirement benefits at all. Not so 40 years ago. 103,346 retirement plans in 1975, 46,926 plans in 2011, only 44% of the plans are open to new hires.
        The employer tax will need to be raised to cover all income not just the first $118,500. Also, the tax has not been raised since 1990, it needs to go to 10%(a 2.35 % increase on employer and employee), this will be more in line with what a person receives in retirement.
        We know there is a problem with Social Security and we need to fix it. Or if we do not the elderly will just go on welfare and the taxpayers will have to fund the program anyway. I believe with a few adjustments the program can continue to provide income to millions who have worked their entire life and need the income to keep them out of poverty.


      • There are plenty of pension options – count all plans, db and cd and profit sharing 401k. Also, because the average tenure continues to be < 6 years, don't forget individual retirement accounts. Employers that do offer a plan typically factor the cost into their total rewards, and often pay less or offer fewer benefits as a result.


  2. Actually, since the early 1990’s, when President George H. W. Bush signed into law the Americans With Disabilities Act, the Social Security definition of disability has always been at odds with the treatment of disability by employers, and the receipt of individual disability benefits under an insurance policy, employer-sponsored disability benefits and Social Security disability benefits.

    Here’s the simple scoop (and you noticed this as well Dick when you were employed), EVERYDAY:
    – There are people who are truly disabled who are making the sacrifice and struggling to get to work, to make a contribution,
    – There are people who are clearly able bodied, and sound of mind, who have given up the effort and stay home to collect benefits, whether from an individual LTD policy, an employer’s group plan, or Social Security, and
    – A tax free benefit of 50%, 60% or more of predisability earnings is like a narcotic – and for most people, it is just enough to get buy on; so, few individuals who commence Social Security disability benefits ever leave, even if they are able to work (one study by Social Security found that less than 1/2 of 1% return to work while other studies show that up to 2.8% of individuals receiving Social Security benefits return to work).

    No one knows, of course, but it is likely that some who receive Social Security disability are members of our underground economy because there is no one managing their claim. And, there are “return to work” programs that allow individuals to supplement their social security disability payments. In 2015, a trial work month is any month your total earnings are over $780. If you’re self-employed, you have a trial work month when you earn more than $780 (after expenses) or work more than 80 hours in your own business. The trial work period continues until you have worked nine months within a 60-month period. Extended period of eligibility— After your trial work period, you have 36 months during which you can work and still receive benefits for any month your earnings aren’t “substantial.” In 2015, we consider earnings over $1,090 ($1,820 if you’re blind) to be substantial.

    The Disability Insurance (DI) Trust Fund was created with passage of the Social Security Act Amendments of 1956. DI became effective on January 1, 1957. What was going on in the background, was that the Social Security trustees increased the DI portion of the OASDI tax rate 360% during the period 1957 – 2000 (the last year of increase), while the OAS portion only increased 265%. Interestingly, DI rates in 1983 – 2003 were lower than the DI rate in 1982. At the same time, during the period 1957 through 2014, the wage base increased 2,821%!.

    In fact, by increasing the wage base subject to taxation, they were also increasing the wage base for calculating benefits – which, in turn, created a substantial disability benefit that is attractive to anyone who wishes to stop working, or is unable to find a job.


    • The wisdom of what you say was made clear during the recession when so many went immediately from collecting unemployment to collecting Social Security disability; in others words able and looking for one day, unable to work the next.


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