Social Security

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 sharp
decline of the stock market beginning in October of 2000 essentially killed
this idea.

Related Legislation

   * 1950 - Social Security Amendments PL 81-734
   * 1952 - Social Security Amendments PL 82-590
   * 1954 - Social Security Amendments PL 83-761
   * 1956 - Social Security Amendments PL 84-880
   * 1958 - Welfare Pensions Plans Disclosure Act PL 85-836
   * 1958 - Social Security Amendments PL 85-840
   * 1961 - Social Security Amendments PL 87-64
   * 1962 - Welfare Pensions Plans Disclosure Act PL 87-420
   * 1962 - Self-Employed Individuals Tax Retirement Act PL 87-792
   * 1967 - Social Security Act Amendments PL 90-248
   * 1969 - Tax Reform Act PL 91-172
   * 1971 - Social Security Amendments PL 92-5
   * 1972 - Social Security Amendments PL 92-336
   * 1972 - Social Security Amendments (Supplemental Security Income) PL
     92-603
   * 1973 - Social Security Benefits Increase PL 93-233
   * 1974 - Employment Retirement Income Security Act (ERISA) PL 93-406
   * 1976 - Tax Reform Act PL 94-455
   * 1977 - Social Security Act Amendments PL 95-216
   * 1978 - Revenue Act PL 95-600
   * 1983 - Social Security Act Amendments PL 98-21
   * 1986 - Tax Reform Act PL 99-514