Backgrounder on Social Security, 2005

Issue

The Social Security program helps ensure a minimum level of security for all workers, their families, and persons with disabilities.  Social Security is most often thought of as a retirement program, but about one-third of its beneficiaries are not retirees. Social Security provides three different kinds of benefits for workers and their families: lifetime retirement benefits for retirees who have worked at least ten years, their spouses, and their children; disability insurance for workers, their spouses, and their children; and survivors' insurance for the families of deceased workers.

Social Security takes in money from payroll taxes paid by all workers and their employers on all or a portion of their income, currently up to $90,000.  Historically, the money collected from payroll taxes would be paid out in benefits to retired or disabled workers or their surviving spouses and children.  In recent years, this income has exceeded the guaranteed benefits resulting in a surplus. This surplus was the result of the expanded workforce made up of the large post-war baby boom generation.  In the coming years, these numbers may reverse themselves as the baby boomers reach retirement age, resulting in increasing numbers of beneficiaries and decreasing numbers of workers contributing to the system.  This imbalance and fear of a shortfall are what continues to drive the current debate about if and how to reform Social Security.

At the end of December 2003, Social Security provided monthly benefits to 47 million beneficiaries (or one in every 6 Americans). Social Security paid a total of $471 billion to retired workers, disabled workers, and to the surviving family members of deceased workers in 2001.  In 2002, Social Security beneficiaries included about 3 million children under the age of 18.

USCCB Position

In May 1999, the Administrative Board of the U.S. Catholic Conference released: A Commitment to All Generations: Social Security and the Common Good.   In this statement, the bishops recognized that the Social Security program is the largest and one of the most successful social programs in the United States because it offers an effective, dignified way for Americans to honor their obligations to the elderly, persons with disabilities, and their dependents.

The statement identifies five key criteria which USCCB will use to evaluate reform proposals:

• Changes in Social Security should not put at risk those individuals and families whose resources are already very limited.
• The disability and survivors’ portions of the Social Security program should remain linked to the retirement portion to ensure continuity of commitment to workers and their families in cases of disability and death.
• Any changes made in the tax structure should be weighed in favor of the poor.  Those with lower incomes should bear less of the total Social Security tax burden than those who are more affluent.
• Benefit inadequacies with respect to the benefits received by some women should be remedied.
• Principles of equity and concern for the common good support bringing employees from all sectors of the economy into the Social Security program.

Action

The President has made reforming the Social Security system a high priority.  There is much discussion and debate over the merits of the system and its short and long term viability.  Among the proposals being discussed are changes to the payroll tax structure, retirement age, or the rate of benefits.  The provision in the President’s proposal that is currently receiving the most attention is the establishment of private accounts by which younger workers would have the option of investing part of their payroll tax into the stock market in the hope of a higher return at retirement.

As of this writing, most of the proposals, including the President’s have not been put into legislative language.  USCCB staff will be studying these proposals as they are fleshed out and applying the criteria in A Commitment to All Generations to legislation.  In the broader debate, we will focus on how the proposed changes touch poor families and individuals and people with disabilities.  Our particular priority will be continuing the guarantee of Social Security, especially for those who rely on it for basic income support.