Research Proposal on "Social Security the First Recorded Applicant"

Research Proposal 5 pages (1543 words) Sources: 3 Style: MLA

[EXCERPT] . . . .

Social Security

The first recorded applicant for a lump sum payment from Social Security was Ernest Ackerman, who retired only one day after the Social Security program began. For his nickel put into Social Security, he received a lump sum payment of seventeen cents. The lowest payment made was only five cents (Geneology Today)! And did you know that the first idea of a social security benefit came about in 1795? Thomas Paine said, "...were a workman to receive an increase in wages daily, he would not save it against old age...Make then society the treasurer to guard it for him in a common fund" (Paine).

President Franklin D. Roosevelt signed the Social Security Act on August 14, 1935. It is one of the most historically important pieces of legislation in the history of our country, and was an incredible achievement on FDR's part to get it passed. It came in the middle of the Great Depression and engendered a number of other programs to help many different groups of American citizens. The legislation received its designation from the social insurance program that gave retired workers 65 and over a steady income.

There was actually a precursor of Social Security -- a social security plan meant for a special group of Americans -- disabled Civil War veterans -- hundreds of thousands of them, as well as widows and orphans. A pension plan was made available for them with similarities to later developments in Social Security.

Social Security meant quite a change from the traditional American heritage of "every man for himself" and "pull yourself up" from any distress or problems you might have -- the pioneer spirit. Willpower should be used to relieve any personal or social ills. The United States didn't think about having any national legislation or insurance for unemployment or health, or retirement payments. People would shake their heads if offered public assistance; they didn't know what it was back then, but it sounded bad to people who had always been self-reliant and whose grandparents had crossed the country in a covered wagon. The only people who had any sort of insurance were the war veterans.

Misery was closer than anyone could imagine, though, in the guise of a depression like this country had never seen before. It generated a campaign for retirement or old-age pensions led by a retired doctor, Francis Townsend. FDR answered the call by passing the Social Security Act in 1935. The idea would be to fund peoples' old age using payroll taxes accumulated from them and others during their working lives. The original document has been changed many times. The most notable might have been in 1939 when spouses who survived a working person and their children under the age of 18, were included as beneficiaries. Of course, the down side was that payroll taxes increased to pay for it.

Additional changes were made as the middle of the century rolled by. Payroll taxes were around four percent in the 1950s. Additional workers became Social Security beneficiaries. The benefit was increased. The first cost-of-living allowance (COLA) since 1940 was added. Then, another new feature -- disability insurance -- began and increased over the following years. Women became eligible to retire at 62.

The 1960s saw more benefits -- and more taxes. Early retirement for men was allowed when they reached 62. Now, payroll taxes leaped to six percent. In 1965, President Johnson signed Medicare, a health care program for those over 65, which Social Security was to administer. Today, however, the Health Care Financing Administration (HCFA) handles Medicare.

Another boon to retirees was received in 1972 when Social Security was ordered to provide an annual COLA automatically. The amount of the increase would be tied to how much consumer prices increased. The actual increase started showing up in 1975 Social Security checks.

Though it had been known for a long time that some changes would have to be made in order to finance the Social Security program as baby-boomers began to retire, the 1980s saw the first serious concerns about the system's ability to fund itself. President Reagan signed into law, in 1983, the first tax on Social Security benefits. Federal employees received coverage, the retirement age was increased as of the year 2000, and the Social Security Trust Funds reserves were increased. Then, in 1985, it was decided that Social Security funds should be tracked apart from the remainder of the national budget, so the Trust Funds were moved out of the federal budget. Payroll taxes had now taken a giant jump to 11.4%.

Payroll taxes rose to 12.4% in 1993. In 1996, the year 2012 was labeled as the date the Social Security system would go into the red ink and 2029 as the date the trust funds would be gone. To keep the system financially okay at all, payroll taxes would have to increase 50% or benefits would have to be cut by 30%, according to the experts. By 1999, the total long-term liabilities surpassed the assets of the Social Security fund by more than $19 trillion.

No one really knows at this point how the Social Security system will meet the ever-increasing demands of the "Baby Boom" generation (those born between 1946 and 1964). At the beginning of his second term, President Bush campaigned to permit younger workers to invest a part of their Social Security contributions in the stock market with little success (The Social Security Act).

Short-Term and Long-Term Problems

The short-term problem is to figure out a way to pay for the program. The long-term problem is to figure it out before the fund runs out of money in 2029. And the final problem both short- and long-term -- is to try to get the Democrats and Republicans in Congress to work together (for a change).

Today's 32-year-olds will face a 26% cut in Social Security retirement benefits unless the program is revamped long before they reach retirement age. Even that figure is misleading. Why? Well let's just say it's because the Trust Fund contains no actual assets. It holds government bonds which are simply a piece of paper with "IOU" written on it. It simply attaches a quantity to how much money the government owes the system.

The Trust Fund surplus will be wiped out by 2040 even if Congress can find a way to cash in the bonds. At that point, Social Security will have to rely solely on revenue from the payroll tax -- and that won't be sufficient to pay all promised benefits.

Many of today's young workers will pay more in taxes than they receive in benefits. They will lose money under Social Security. And Social Security taxes are already at such a high level, relative to benefits, that Social Security has simply become a bad deal for younger workers, providing a low, below-market rate-of-return.

But the other (of many) important problems with the current Social Security system is that workers don't own their benefits. They are completely dependent on the votes of Congress to determine what they'll receive in retirement.

For the most part Social Security's problems have always been answered with a hushed stillness. Candidates, when forced to talk to the issue, have uttered answers that have ranged from unsatisfying to incomprehensible (Tanner).

Solutions to the Problems

Congress would have to raise almost $6 trillion today in order to finance all the Social Security benefits it has promised to pay between 2017 and 2080. That's more than twice what the entire federal government will spend next year on all programs, and it doesn't include the trillions of dollars in payroll taxes Social Security will collect in the coming years. Unless something changes, the money simply won't be there (Feulner).

Two changes would begin to address this problem: update… READ MORE

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