Five Facts on Social Security
President Biden’s raucous back-and-forth with House Republicans during his State of the Union address brought the long-term challenges facing Social Security back into the public’s eye. Here are Five Facts about this critical social program that needs reforms in the near term to ensure Americans can rely on it in the long term.
1. Social Security was created under President Franklin Delano Roosevelt during the Great Depression.
The Roosevelt administration created Social Security as part of the New Deal in 1935. Americans first started paying taxes to fund the program two years later. And in 1940, the first monthly Social Security benefit check – totaling $22.54 – was issued to Vermonter Ida May Fuller.
2. For most of its history, Social Security ran a surplus, but that’s changed in recent decades.
In the mid-20th century, a population boom and strong economic growth meant that Social Security was bringing in more tax money than it needed to distribute to retirees. That led to the creation of the Social Security trust fund which keeps money handy in case of economic downturns. But declining birthrates and longer lifespans have strained the system. In 1950, America had 16.5 workers paying into Social Security for every one beneficiary. Today, that ratio has dropped to 2.8 workers per beneficiary, which explains why the Social Security trust fund is slowly being depleted as tax revenues can’t keep up with the costs of benefits.
3. The most-recent major reforms to Social Security took place in 1983.
Forty years ago, President Ronald Reagan and House Speaker Tip O’Neill worked together to implement reforms to ensure the Social Security trust fund would still be able to pay promised benefits to retirees. These reforms included increasing the payroll tax used to fund Social Security. But they also raised the retirement age from 65 to 67 and made a portion of Social Security benefits taxable. This helped replenish the trust fund to levels not seen since the 1950s.
4. A 2020 poll found 96% of Americans believe Social Security remains one of the most important programs in existence.
The AARP study that year also reported that 69 million people received Social Security benefits – accounting for 9 out of every 10 individuals over the age of 65. At the same time, the study found that 57% of respondents were not confident in the long-term future of Social Security. Since 2008, the rising cost of Social Security benefits have once again outpaced the growth of the trust fund, putting the program at risk.
5. The nonpartisan Congressional Budget Office projects that the Social Security trust fund will be depleted in 10 years.
A December 2022 study by the CBO found that the costs of Social Security benefits will continue to rise without an accompanying increase in tax revenues or reforms to the program. They project that the balance of the Social Security trust fund will hit zero in 2033. That could mean retirees could see their benefits cut by as much as 25% within the decade.