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Social Security (United States)

In the United States Social Security is a federal government social welfare program. It provides benefits to the elderly retired and to the disabled, and also provides survivors' insurance. The following programs are provided under the Social Security system:

  • Retirement insurance
  • Survivors insurance
  • Disability insurance
  • Hospital and medical insurance for the aged and disabled
  • Black lung benefits
  • Supplemental security income (SSI)
  • Administration for Children and Families
  • Unemployment insurance
  • Medical assistance
  • Food stamp supplements
  • Child support enforcement and establishment of paternity
  • Services for maternal and child health and child welfare
  • Workers' compensation
  • Railroad retirement, sickness, and unemployment insurance
  • Veterans benefits
  • Federal, State, and local government employees' retirement systems

Social Security was created during the administration of Franklin Delano Roosevelt, in 1935. It is administered by the Social Security Administration.

The amount of benefits in retirement is typically based on the total accumulation of Social Security Income over a beneficiary's working career.

Social Security Tax Benefits are funded via a Social Security Payroll Tax[?]. This tax is 6.2% of an employee's income paid by the employer, and 6.2% paid by the employee. Self-employed people are responsible for the entire tax. This tax is paid only on the employee's first $87,000 of income, although that cutoff increases yearly.

Social security tax is paid into the Social Security Trust Fund maintained by the U.S. Treasury. Surpluses from this trust fund have been used by the federal government to fund other government programs. However, it is predicted due to the aging populace of the U.S. that at some point the fund flowing into the trust fund from payroll taxes will be insufficient to cover payments to benefit recipients, if the system remains in its current form. This is because benefits are paid from taxes currently being collected, rather than from the taxes previously paid by the current beneficiaries. This also explains why the aging of the Baby Boomer generation presents a threat to the U.S. Social Security system: as more of the Baby Boomers retire, there will be more people collecting social security benefits than there will be workers paying taxes for social security benefits.

There is widespread disagreement as to when the trust fund will run out of money, based primarily on different modeling assumptions. In particular, the most pessimistic numbers assume a lower rate of economic growth than has occurred at any time since the fund was created and a continuing decline of net capital flowing into the system. Conversely, the most optimistic numbers assume a forecast of overall economic growth.

A side effect of the Social Security program in the United States has been the near-universal adaptation of the program's identification number, the Social Security number, as a form of unique identification in the U.S. A multitude of U.S. entities use the social security number as a personal identifier. These include government agencies such as the Internal Revenue Service, as well as private agencies such as banks, creditors, health insurance companies, and employers. Laws are in place governing acceptable uses for the number; these laws are, however, often unenforced.

Reform of the social security system is a politically delicate subject in that retirees who receive Social Security benefits are an important bloc of voters. Indeed, Social Security has been called "the third rail of American politics," in that any politician who dares touch it may come to regret it.

In the late 1990s and early 2000s, there were several proposals to reform Social Security by converting it from a pay-as-you-go system into one in which workers would have accounts which could include stocks. At the time, this idea was popular because of the high rates of return of the stock market in the 1990s and the popularity of 401(k) plans[?]. However, the stock market crash of 2000[?] essentially killed this idea.

Related Legislation

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