Social Security Essentials

(This page contains essential facts about the topic of Social Security. For a shorter list of basic facts, click here. For comprehensive and scholarly details, click here.)

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Whenever the word “projections” is used, this refers to projections done by the United States Social Security Administration. The process of making projections is not an exact science and actual outcomes often differ from the projected ones. The Social Security Administration produces high, low, and intermediate projections. Only the intermediate numbers are cited here.[1]

A major source of information for this section is the 2008 Social Security Trustees Report. This report was published in March of 2008 and contains data from 2007. Unless otherwise stated, all dollar figures are indexed for inflation, wage growth, and other economic parameters to produce numbers that are consistent in terms of the years 2007/2008.

Figures from specific years are used based on availability, and not to produce a desired result.

* In 1935, Congress passed and Democratic President Franklin D. Roosevelt signed into law the “Social Security Act.” This law created “a system of Federal old-age benefits” for workers and their families. In 1956, the law was amended to also provide disability benefits.[2] [3]

* Pictured below is Franklin Delano Roosevelt signing the Social Security Act of 1935.[4]

* Social Security is composed of two separate entities: The “Old Age and Survivors Insurance” program and the “Disability Insurance” program. Each program has separate finances handled through two separate trust funds. For the purpose of simplicity, the figures shown below reflect the combination of both programs unless otherwise stated.[5]

* In 2007, Social Security had a total income of $784.9 billion and expenditures of $594.5 billion.[6] [7]

* As of June 30, 2007, there were over 49 million people receiving monthly benefits, or approximately 16% of the U.S. population.[8] [9]

* In 2007, Social Security taxes accounted for about 25% of all federal tax collections.[12]

* Social Security taxes are subject to a wage threshold. Any income earned above the threshold is not taxed. In 2008, the threshold was $102,000.[13] [14]

* The Social Security Act of 1935 set the wage threshold at $3,000. Income earned above this amount was not subject to Social Security taxes. This threshold was a fixed amount that was not indexed for inflation.[15]

* Between 1950 and 1971, various Congresses and Presidents passed at least six laws to increase the threshold.[16]

* In 1972, the Congress and Republican President Nixon passed a law to automatically index the threshold based upon the national average wage.[17] [18] [19]

* The Social Security Act of 1935 set the initial tax rate at 2% and specified increases that would bring the rate to 6% by 1949.[22]

* In 1939 and during the 1940s, Congresses and President Roosevelt postponed the tax rate increases scheduled in the original Social Security Act. The tax rate of 6% was delayed until 1960.[23] [24]

* Since 1950, various Congresses and Presidents have passed at least nine laws to increase Social Security tax rates above the 6% level specified in the original Social Security Act.[25]

* At the outset of the Social Security program, the federal government published an informational pamphlet that stated the following with regard to Social Security taxes:

And finally, beginning in 1949, 12 years from now, you and your employer will each pay 3 cents on each dollar you earn, up to $3,000 a year. That is the most you will ever pay.[27]

After adjusting for inflation, the result of this calculation equates to a maximum tax collection of $1,630 per person.[28] In 2007, the maximum tax collection per person was $12,090, or more than seven times this amount.[29]

* During the 2008 presidential race, Barack Obama’s campaign stated that he is considering increasing Social Security taxes on those making above $250,000/year by 2% to 4%.[30]

* During the 2008 presidential race, John McCain pledged not to increase Social Security taxes.[31] [32]

NOTE: The following projections are based upon what the current law specifies. This does not mean that there will be enough money in the Social Security program to pay for these benefits. Information concerning the financial stability of the Social Security program is contained in the next section.

* In general, to qualify for old age benefits, a person must work for ten years, earning at least $4,000 a year (in 2007).[33]

* Old age benefits are calculated in a way that takes into account the Social Security taxes paid by the worker.[34]

* People who have lower incomes receive a higher ratio of benefits to taxes.[35] The graph below compares the annual old-age benefit to the average annual taxes paid over 46 years of work:

* Old age benefits are generally increased each December based upon a cost of living adjustment. The benefit increase for 2006 was 3.3%, for 2007 2.3%, and for 2008 5.8%.[37]

* The age at which a worker receives full Social Security old age benefits is referred to as the “full retirement age.” A person’s full retirement age can be between 65 and 67 years old, depending upon their year of birth. For those born after 1959, full retirement age is 67 (More details in footnote.)[38]

* Workers have the option to start receiving Social Security benefits at the age of 62, but the benefits are reduced. (More details in footnote.) [39] Workers also have the option to start receiving benefits later than their full retirement age, and the benefits are increased. (More details in footnote.)[40]

* The statement issued by the Social Security Administration to all participants states the following:

Social Security is the largest source of income for most elderly Americans today, but Social Security was never intended to be your only source of income when you retire. You also will need other savings, investments, pensions or retirement accounts to make sure you have enough money to live comfortably when you retire.[41]

* As of 2007, Social Security benefits comprise 50% or more of the income for 63% of elderly beneficiaries. It makes up 90% or more of the income for 32% of elderly beneficiaries.[42]

* As of 2008, Social Security is paying an average of $12,948/year to individual retired workers receiving old age benefits. The poverty level for an individual is $10,400.[43] [44]

* As of 2008, Social Security is paying an average of $21,132/year to couples receiving old age benefits. The poverty level for a couple is $14,000.[45] [46]

* Elderly individuals with incomes of more than $25,000/year and couples with incomes of more than $32,000/year must pay taxes on up to 50% of their old-age benefits.[47] Half of an individual’s or couple’s old-age benefits are counted as income when determining if they meet these $25,000 and $32,000 thresholds.[48]

* Elderly individuals with incomes of more than $34,000/year and couples with incomes of more than $44,000/year must pay taxes on up to 85% of their old age benefits. Half of an individual’s or couple’s old-age benefits are counted as income when determining if they meet these $34,000 and $44,000 thresholds.[49]

* The thresholds at which people are required to pay taxes on their old-age benefits are not automatically indexed for inflation or wage growth.[50]

* In general, to qualify for disability benefits, there are two criteria that must be satisfied:

1. A “recent work” test based on your age at the time you became disabled; and

2. A “duration of work” test to show that you worked long enough under Social Security.

* In general, recipients begin to receive disability benefits after they have been disabled for five full months.[52]

* Disability benefits are calculated based upon a formula that takes into account the average Social Security taxes paid by the worker.[53]

* Disability benefits are generally increased once a year based upon the increased cost of living. The benefit increase for 2007 was 2.3%.[54]

Category	Amount (billions)	Percent of Total Social Security Benefits
Retired workers and their families	$389	67%
Survivors of deceased workers	$97	16%
Disabled workers and their families	$99	17%

* The Social Security administration is required by law to send statements to workers once a year outlining their projected benefits. You should receive it about 3 months before your birthday. If you do not receive it, call 1-800-772-1213 or go to http://www.ssa.gov/.[56]

* The Social Security program has an independent budget that is separate from the rest of the federal government.[57]

* Since 1982, Social Security has had surpluses ranging from $89 million to $190 billion per year.[58] By law, these surpluses must be loaned to the federal government, which is obligated to pay the money back with interest.[59] [60] [61] This is referred to as the “Social Security Trust Fund” and at the close of 2007 it had a balance of $2.2 trillion.[62]

* Social Security is projected to continue having annual surpluses until 2017[63] [64] at which point the federal government will owe $3.5 trillion to the Social Security program, or $10,400 for every man, woman and child living in the U.S. at the time.[65] [66]

* In 2017, the Social Security program is projected to start having annual deficits that will be covered by collecting on the money it has loaned to the federal government. By 2041, it is projected that all of this money will be paid back and the trust fund will be exhausted.[67]

NOTE: The above fact does not mean that the federal government will have enough money to pay back the Social Security program. Information concerning the ability of the federal government to do so is contained in the section: Impact on National Debt

* After 2041, Social Security is projected to have deficits every year into the foreseeable future.[68] To cover these shortfalls, it is projected that payroll taxes would need to be increased by 28% starting in 2041, rising to a 34% increase by 2082.[69] This shortfall could also be covered by reducing benefits by 21% starting in 2041, falling to a 24% reduction by 2082.[70]

* There are several other ways to quantify Social Security’s projected deficits. One is to calculate how much money must be immediately added to the trust fund so that the principle and interest would cover the shortfalls through 2082. This is referred to as the “75-year unfunded obligation” and currently amounts to $4.3 trillion ($4,300,000,000,000).[71] [72] [73] This is equivalent to 5.5 times the total income for Social Security in 2007,[74] or an additional $26,000 from every person who paid Social Security taxes in 2007.[75]

* Another way to quantify the projected deficits is to calculate the total debt the program will accumulate if money is borrowed to cover the shortfalls of the next 75 years. This debt (including interest) would amount to $36 trillion ($36,000,000,000,000) or an additional $153,000 (in 2008 dollars) for every person expected to be paying Social Security taxes in 2082.[76] [77]

* According to the 2008 Social Security Trustees’ report, relying too heavily on a 75-year projection “can lead to incorrect perceptions and policies that fail to address financial sustainability for the more distant future.” To address this shortcoming, it is calculated how much money must be placed in the Social Security Trust Fund right now in order to finance projected deficits for the infinite horizon. This amounts to $13.6 trillion,[78] [79] or an additional $83,345 for every person currently paying Social Security taxes.[80] [81]

* Back in 2004, it was projected that $3.7 trillion (2004 dollars) had to be added to the trust fund at that time to cover projected deficits for the ensuing 75 years. It was also calculated that $10.4 trillion (2004 dollars) had to be added to the trust fund to cover projected deficits for the infinite horizon.[82]

* In January 2005, a New York Times house editorial entitled “The Social Security Fear Factor,” criticized President Bush for citing the $10.4 trillion infinite horizon figure and for asserting that this amount “threatens the retirement system – and the economy itself.” This editorial also referred to Social Security’s 75-year projected shortfall of $3.7 trillion (2004 dollars) as “a manageable sliver of the economy.” [83] [84]

* The figure $3.7 trillion (2004 dollars) represents the lump sum that would need to have been added to the Social Security Trust Fund in 2004 in order for the program to remain solvent over the ensuing 75 years. This does not include interest and is roughly equivalent to the combined market capitalization of all thirty companies comprising the Dow Jones Industrial Average (in September 2008) or $23,680 per person for every person who paid Social Security taxes in 2004.[85] [86] [87] [88] [89]

* In 2001, Social Security projected the Trust Fund balance to reach $2.54 trillion by the end of 2007. It actually reached $2.24 trillion, or 13% lower than projected.[90] [91]

* In 2001, the Social Security Administration projected that payroll taxes would need to be increased by about 37% to cover the projected deficit in 2041.[92]

* In 2008, the Social Security Administration projected that payroll taxes would need to be increased by about 28% to cover the projected deficit in 2041.[93]

* In 2001, the Social Security Administration projected that payroll taxes would need to be increased by about 49% to cover the annual expected deficit in 2075.[94]

* In 2008, the Social Security Administration projected that payroll taxes would need to be increased by about 32% to cover the projected deficit in 2075.[95]

Time Period	Financial Status
1984- 2016	The Social Security program brings in more money than it spends. The surplus money is loaned to the federal government.
2017-2041	The Social Security program spends more money than it brings in. The federal government pays back the money that the Social Security program has loaned to it with interest. The trust fund ends this period with a balance of zero.
2041-2082	The Social Security program runs annual deficits that accumulate to $36 trillion, which could be covered by (a) adding $4.3 trillion to the trust fund today, or (b) increasing payroll taxes 28% starting in 2041, rising to a 34% increase by 2082, or (c) reducing benefits by 21% starting in 2041, falling to a 24% reduction by 2082.
2083 and beyond	The Social Security Program runs annual deficits that could be covered by adding $9.3 trillion to the trust fund today.[96]

* One of the causes for the projected deficits is that the number of people paying taxes compared to the number of people receiving benefits has fallen and is projected to fall further.

Year	Ratio of people paying taxes to people receiving benefits
1945	41.9 / 1
1950	16.5 / 1
1960	5.1 / 1
1970	3.7 / 1
1980	3.2 / 1
1990	3.4 / 1
2000	3.4 / 1
2007	3.3 / 1
2030	2.2 / 1
2070	2.1 / 1

* Factors that have contributed to the falling ratio of people paying taxes compared to people receiving benefits:

1) Increase in life expectancy without a comparable increase in the retirement age:

- From the inception of the Social Security program through 2002, the retirement age was not changed. A law passed in 1983 requires that it be increased from 65 to 67 (in stages) by the year 2027.[98] [99]

- Since Social Security began paying benefits in 1940, the life expectancy of the average 65-year old male and female has gone up 40% and 45% respectively.[100] [101] [102]

- Benefits and taxes are automatically indexed on an annual basis to compensate for inflation and wage growth. The retirement age is not indexed to compensate for increased life expectancy.[103]

2) The higher birth rate of the baby boom generation compared to the birth rates of succeeding generations:

- In 1960 (during the baby boom), the average birth rate per woman was 3.6.[104] [105] By 1975, the average birth rate had fallen to 1.77. As of 2004, it is at 2.05.[106]

- Around 2010, the baby boom generation will begin to retire. Between 2010 and 2030, it is projected that the number of people eligible for old age benefits will increase by about 66%. During the same time period, the number of people paying Social Security taxes will increase by about 10.2%.[107] [108]

Year	Population in U.S.	Number of People Receiving Disability Benefits
1960	190,172,000	687,000
2000	288,284,000	6,667,000
2005	302,863,000	8,309,000

- Between 1960 and 2005, the U.S. population grew by 59%. During the same period, the number of people receiving disability benefits increased by 1,109%.[111] [112]

The money you pay in taxes is not held in a personal account for you to use when you get benefits. Your taxes are being used right now to pay people who now are getting benefits. Any unused money goes to the Social Security trust funds, not a personal account with your name on it.[114]

* All taxes that have been paid into the Social Security system since its inception have been spent to pay benefits, fund the administrative overhead of the program, or loaned to the federal government.[115] [116] [117]

* In its 2000 budget, the Clinton administration stated that the Social Security Trust Funds

do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.[118]

* As of 2007, for every person receiving benefits, there are 3.3 people paying payroll taxes.[119] This ratio is projected to continue decreasing until beyond 2070:

No money has been taken from the Social Security program.[121] Social Security surpluses are loaned to the federal government.[122] [123] This is a requirement that was established in the original Social Security Act.[124] The federal government is required by law to pay back this money to the Social Security program with interest, and it has never failed to do so.[125] [126] [127]

* The assets of the Social Security program include all of the money that it has loaned to the federal government.[128] [129] [130] Even when this money is repaid with interest, the program is projected to be unable to pay full benefits starting in 2041. An additional $4,300,000,000,000 would need to be injected into the program today to finance the projected deficits over the next 75 years.[131] [132]

* In 2007, the administrative cost of the Social Security program was $5.5 billion. This is equal to 0.9% of the benefit payments that Social Security made that year, or enough to pay monthly Social Security retirement benefits to 424,776 individual retired workers for one year.[133] [134]

* In 1999, the Social Security Administration paid approximately $17 million dollars in benefits to an estimated 2,091 people who were deceased.[135]

* From January 2004 through April 2007, there were 44,000 instances where the Social Security Administration erroneously listed an individual as dead. After the Social Security Administration completes a face-to-face interview with the beneficiary or recipient, they process what they refer to as a “resurrection transaction” to remove the individual from the “death master file” and reinstate benefit payments.[136]

* The Social Security program has an independent budget that is separate from the rest of the federal government.[137]

* When the Social Security program collects more in taxes than it spends, it generates surplus money. By law, the only thing that the Social Security program can do with surplus money is to loan it to the U.S. government.[138] [139]

* When the Social Security program loans money to the U.S. government, the government is obligated by law to pay this money back to the Social Security program with interest. This money becomes a part of the national debt.[140] [141] [142]

1) Money that it owes to federal entities such as the Social Security program and federal employee retirement funds.

2) Money that it owes to non-federal entities such as individuals who have purchased U.S. Savings Bonds.[143] [144]

* As of June, 2008, the U.S. government owes $2.36 trillion to the Social Security program. This comes to $7,800 for every man, woman, and child living in the United States.[146] [147]

* At the start of 2017, the U.S. government is projected to owe $3.5 trillion (2008 dollars) to the Social Security program. This comes to $10,400 for every man, woman and child who is expected to be living in the United States at that time.[148] [149] [150]

* In 1999, Republican Congressman Wally Herger sponsored a “lockbox” bill in the House of Representatives. This law would have restricted Congress from using money borrowed from the Social Security program to spend on other government programs. It passed the House by a vote of 416 to 12.[153]

* Senate rules allow for a “filibuster,” in which certain votes can be blocked unless 60 of the Senate’s 100 members agree to let it take place.[154] [155] In the Senate, Republicans attempted to bring this bill up for a vote and it was blocked by a filibuster conducted by Democrats.[156]

* In February of 2001, while addressing Congress, Republican President George W. Bush stated:

Many of you have talked about the need to pay down our national debt. I listened, and I agree. We owe it to our children and grandchildren to act now, and I hope you will join me to pay down $2 trillion in debt during the next 10 years. At the end of those 10 years, we will have paid down all the debt that is available to retire. That is more debt, repaid more quickly than has ever been repaid by any nation at any time in history.[157]

* The debt that President Bush referred to in this statement excludes the debt that is owed to federal entities such as Social Security.[158]

* The following information was not included in Bush’s speech to Congress. It was found on page 201 of his budget proposal:

- The reduction in the debt owed to non-federal entities is offset by an increase in debt owed to federal entities such as Social Security.[159]

- Under Bush’s budget proposal, the national debt was to increase by 1.5 trillion dollars over the subsequent ten years.[160]

* In 1960, the Supreme Court ruled that entitlement to Social Security benefits is not a contractual right.[162]

There has been a temptation throughout the program’s history for some people to suppose that their FICA payroll taxes entitle them to a benefit in a legal, contractual sense.… Congress clearly had no such limitation in mind when crafting the law. ... Benefits which are granted at one time can be withdrawn.…[163]

* Under current law, the money that people pay in Social Security taxes is not saved for them and is not their property.[164]

* For a worker who is 34 years old in 2008 and plans to retire at 67 in 2041, their retirement benefits will be derived solely from year 2041 taxpayers. Under current law, tax revenue in 2041 is projected to be sufficient to pay 78% of Social Security benefits.[165]

* Proposals have been made to change a portion of Social Security from a benefit program to a savings program. These savings would be the personal property of each person who chose to participate. In turn, their Social Security old-age benefits would be reduced to correspond with the amount of taxes they paid into the program.[166]

* In general, such proposals include a transition cost to move from the current system to a system that includes personal accounts.[167] [168]

* Under the current system, a 22-year-old person who works for the next 45 years earning $50,000/ year will contribute $279,000 to the Social Security program. When he or she turns 67 years old in 2053, all of the money they have contributed will be spent. Any old age benefits they receive would be derived from taxpayer revenue at that time.[169] [170]

* If this same person put 16% of their Social Security taxes into a personal account and it earned 7% above the rate of inflation, he or she will have saved $263,991 (2008 dollars) when they turn 67 years old in 2053.[171]

* From 1871 to 2002, (including the Great Depression), the stock market (S&P 500) has averaged more than 8% above the rate of inflation.[172]

* The Republican Party supports giving workers the option to place a portion of their Social Security taxes into a personal account. The Democratic Party does not.[173] [174]

* Barack Obama opposes giving workers the option to place a portion of their Social Security taxes into a personal account.[175] [176]

* As of 2004, 30-year-old black men have an average life expectancy of 5.3 years beyond their full retirement age of 67. (White males – 10.3 years, Black females – 11.1 years, White females – 14.8 years).[177] [178]

* In general, for people who are single and have no children under the age of 19, their benefits stop when they pass on.[179]

* Personal ownership allows people to pass their Social Security savings to their heirs upon death.[180]

* In 1981, the South American nation of Chile instituted a social security personal ownership program.[181]

* Prior to this reform, Chile had a government-run social security program.[182]

- The contribution rate, including fees and taxes, is 14.04%.[183] [184] The tax rate for the government-run program ranged between 15.75% and 24.91%.[185]

- Each participating worker has an individual account into which their contributions are deposited. They have a choice of five government approved investment funds. [186] [187] [188]

- Full retirement age is 65 for men and 60 for women, but it is possible to retire before this age if your personal retirement account meets certain conditions.[189]

- At retirement, people have three options for how to receive their retirement money.[190]

* The average annual yield on these personal ownership accounts from 1981 to 2002 was 10.7% above the rate of inflation. The costs for administering the accounts averaged 3.4%, leaving a total annual yield of 7.3% above the rate of inflation.[191] [192]

* The government system paid benefits by taxing people who were currently working and had an accumulated deficit equal to more than 100% of GDP.[193] [194]

* The personal ownership system is self-funded and has no deficit. Three times per year workers receive a statement that informs them how much money they have saved.[195] [196] [197]

* Beginning in 1946, Social Security cards had the following sentence imprinted on them:

* Since 1961, various Congresses and Presidents have enacted laws requiring the use of Social Security numbers for identity-related functions.[200]

* Starting in 1972, the sentence reading “For Social Security Purposes -- Not For Identification” was removed from all newly issued Social Security cards.[201]

* In 1994, Democratic Congressman Dick Gephardt sponsored a law that passed Congress with 67% of Democrats and 70% of Republicans voting for it. Democratic President Bill Clinton signed it into law. This legislation contains a section entitled:

This law requires that parents submit Social Security numbers for their children with their tax return in order to obtain a tax exemption for their children.[203]

The Social Security number was originally devised to keep an accurate record of each individual’s earnings, and to subsequently monitor benefits paid under the Social Security program. However, use of the number as a general identifier has grown to the point where it is the most commonly used and convenient identifier for all types of record-keeping systems in the United States.

It goes on to state that “specific laws require a person to provide his/her number for certain purposes” and provides 15 examples of such including:

- States to administer any tax, general public assistance, motor vehicle or drivers license law within its jurisdiction

If a business or other enterprise asks you for your number, you can refuse to give it. However, that may mean doing without the purchase or service for which your number was requested.[204]

[1] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Future income and expenditures of the OASI [Old-Age & Survivors Insurance] and DI [Disability Insurance] Trust Funds will depend on many factors, including the size and characteristics of the population receiving benefits, the level of monthly benefit amounts, the size of the workforce, and the level of workers’ earnings. These factors will depend in turn on future birth rates, death rates, immigration, marriage and divorce rates, retirement-age patterns, disability incidence and termination rates, employment rates, productivity gains, wage increases, inflation, and many other demographic, economic, and program-specific factors.

Because projections of these factors and their interrelationships are inherently uncertain, a range of estimates is shown in this report on the basis of three sets of assumptions, designated as intermediate (alternative II), low cost (alternative I), and high cost (alternative III). The intermediate set represents the Board’s best estimate of the future course of the population and the economy. In terms of the net effect on the status of the [Social Security] program, the low cost is the most optimistic, and the high cost is the most pessimistic. The low and high cost sets of assumptions reflect significant potential changes in the interrelationship among factors, as well as changes in the values for individual factors. The probability is very low that all the assumptions and interactions would differ in the same direction from those expected. Outcomes with overall cost as low as (or lower than) the low cost scenario or as high as (or higher than) the high cost scenario also have a very low probability.

[2] Web page: “Legislative History: Social Security Act of 1935.” United States Social Security Administration. Accessed October 31,2008 at http://www.ssa.gov/history/35act.html

[3] Report: “Major Decisions in the House and Senate on Social Security.” By Geoffrey Kollmann and Carmen Solomon-Fears. Domestic Social Policy Division, Social Security Administration, March 26, 2001. http://www.ssa.gov/history/reports/crsleghist3.html

H.R. 7225, the Social Security Amendments of 1956, was signed by President Eisenhower on August 1, 1956. The amendments provided benefits, after a 6-month waiting period, for permanently and totally disabled workers aged 50 to 64 who were fully insured and had at least 5 years of coverage in the 10-year period before becoming disabled; to a dependent child 18 and older of a deceased or retired insured worker if the child became disabled before age 18; to women workers and wives at the age of 62, instead of 65, with actuarially reduced benefits; reduced from 65 to 62 the age at which benefits were payable to widows or parents, with no reduction; extended coverage to lawyers, dentists, veterinarians, optometrists, and all other self-employed professionals except doctors99 increased the tax rate by 0.25% on employer and employee each (0.375% for self-employed people) to finance disability benefits (thereby raising the aggregate tax rate ultimately to 4.25%); and created a separate disability insurance (DI) trust fund. The Social Security program now consisted of old-age, survivors, and disability insurance [Social Security].

[4] Web page: “History: Signing the Social Security Act of 1935.” United States Social Security Administration. Accessed November 17, 2008 at http://www.ssa.gov/history/fdrsign.html

President Roosevelt signing Social Security Act of 1935 in the Cabinet Room of the White House. Also shown, left to right:

Rep. Robert Doughton (D-NC); Sen. Robert Wagner (D-NY); Rep. John Dingell, Sr. (D-MI); Unknown man in bowtie; Secretary of Labor, Frances Perkins; Senator Pat Harrison (D-MS); Congressman David L. Lewis (D-MD). Library of Congress photo, LC-US262-123278.

[5] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 131: “The Federal Old-Age and Survivors Insurance (OASI) Trust Fund was established on January 1, 1940 as a separate account in the United States Treasury. The Federal Disability Insurance (DI) Trust Fund, another separate account in the United States Treasury, was established on August 1, 1956. All the financial operations of the OASI and DI programs are handled through these respective funds.”

[6] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 4: “In 2007, net contributions accounted for 84 percent [$656.1 billion] of total trust fund income [$784.9 billion]. Net contributions consist of taxes paid by employees, employers and the self-employed on earnings covered by Social Security.”

[7] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 5: “More than 98 percent of expenditures from the combined [Social Security] Trust Funds in 2007 went to pay retirement, survivor, and disability benefits totaling $584.9 billion.”

[8] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 50: “Table IV.B2: Covered Workers and Beneficiaries, Calendar Years 1945-2085.”

[9] Web page: “Population, Population change and estimated components of population change: April 1, 2000 to July 1, 2007.” United States Census Bureau. Accessed October 31,2008 at http://www.census.gov/popest/datasets.html

{See CSV file under the heading “Population, Population change and estimated components of population change: April 1, 2000 to July 1, 2007 (NST-EST2007-alldata).” Cell O2 in the spreadsheet is the 2007 population estimate. The U.S. Census Bureau estimates the U.S. population to be 301,621,157 for 2007. The last census (2000) found the population to be 281,421,906. The 2000 census can be found at http://www.census.gov/prod/2002pubs/c2kprof00-us.pdf}

[10] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Pages 132-133: “Table VI.A1.—Contribution and Benefit Base and Contribution Rates.”

[11] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Pages 132-133: “Table VI.A1.—Contribution and Benefit Base and Contribution Rates.”

a) “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

In 2007, net contributions accounted for 84 percent [$656.1 billion] of total trust fund income. Net contributions consist of taxes paid by employees, employers and the self-employed on earnings covered by Social Security.

Year	Total Taxes and Other Revenues (in billions)
2005	$2,185.5
2006	$2,440.8
2007	$2,627.3

[13] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 4: “Net contributions consist of taxes paid by employees, employers and the self-employed on earnings covered by Social Security. These taxes were paid on covered earnings up to a specified maximum annual amount, which was $97,500 in 2007 and is increased each year automatically (to $102,000 in 2008) as the average wage increases.”

PL 103-66 The Omnibus Budget Reconciliation Act of 1993 (enacted 8/10/93). Section 13207 repeals the limitation on the amount of earnings subject to the HI [Hospital Insurance] tax beginning in 1994.

[15] Web page: “Legislative History: Social Security Act of 1935.” United States Social Security Administration. Accessed October 31,2008 at http://www.ssa.gov/history/35act.html

SEC. 811. When used in this title- (a) The term wages means all remuneration for employment, including the cash value of all remuneration paid in any medium other than cash; except that such term shall not include that part of the remuneration which, after remuneration equal to $3,000 has been paid to an individual by an employer with respect to employment during any calendar year, is paid to such individual by such employer with respect to employment during such calendar year.

[16] Report: “Summary of Major Changes in the Social Security Cash Benefits Program: 1935-1996.” By Geoffrey Kollmann. Congressional Research Service, Library of Congress. Updated December 20, 1996. http://www.ssa.gov/history/pdf/crs9436.pdf

{The phrase “at least six laws” was used because six laws were found in this 30 page document that raised the threshold during this time period. However, other documents indicated law changes that were not found here. To be on the safe side, the lowest possible number in conjunction with the term “at least” was used.}

[17] Report: “Summary of Major Changes in the Social Security Cash Benefits Program: 1935-1996.” By Geoffrey Kollmann. Congressional Research Service, Library of Congress. Updated December 20, 1996. http://www.ssa.gov/history/pdf/crs9436.pdf

The 1972 amendments introduced the concept of automatic adjustments or “indexing” to the Social Security system. They provided that, effective in 1975, benefit increases would be tied directly, or indexed, to rises in the cost of living. Under this new procedure, benefits would be increased automatically each January (through a cost-of-living adjustment, or COLA) when inflation as measured by the Consumer Price Index (CPI) rose 3% or more from the approximate time of the last benefit increase. In addition, effective in 1975, the earnings base and the exempt amount under the earnings test would be adjusted automatically to keep pace with changes in wage levels.

[18] Report: “Summary of Major Changes in the Social Security Cash Benefits Program: 1935-1996.” By Geoffrey Kollmann. Congressional Research Service, Library of Congress. Updated December 20, 1996. http://www.ssa.gov/history/pdf/crs9436.pdf

Page CRS-14: “Increased the earnings base, on an ad hoc basis, to $22,900 in 1979, $25,900 in 1980, and $29,700 in 1981. After 1981, the base would be adjusted automatically to keep up with average wages as under the prior law.”

[19] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Pages 102-103: “Table V.C1.—Cost-of-Living Benefit Increases, Average Wage Index, Contribution and Benefit Bases, and Retirement Earnings Test Exempt Amounts, 1975-2017.”

a) “The 2000 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 30, 2000. http://www.socialsecurity.gov/OACT/TR/TR00/tr00.pdf

Pages 34-35: “Table II.B1, Contribution and Benefit Base and Contribution Rates.”

b) “The 2000 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 30, 2000. http://www.socialsecurity.gov/OACT/TR/TR00/tr00.pdf

{1951 was chosen because it is the earliest year for which average wage index (AWI) data was readily available from the Social Security Administration. See also http://www.socialsecurity.gov/OACT/COLA/AWI.html}

Pages 102-103: “Table V.C1.—Cost-of-Living Benefit Increases, Average Wage Index, Contribution and Benefit Bases, and Retirement Earnings Test Exempt Amounts, 1975-2017.”

b) Web page: “Automatic Increases: National Average Wage Index.” United States Social Security Administration. Last reviewed or modified October 16, 2008.

[22] Web page: “Legislative History: Social Security Act of 1935.” United States Social Security Administration. Accessed October 31,2008 at http://www.ssa.gov/history/35act.html

In addition to other taxes, there shall be levied, collected, and paid upon the income of every individual a tax equal to the following percentages of the wages (as defined in section 811) received by him after December 31, 1936, with respect to employment (as defined in section 811) after such date:

(1) With respect to employment during the calendar years 1937, 1938, and 1939, the rate shall be 1 per centum.

(2) With respect to employment during the calendar years 1940, 1941, and 1942, the rate shall be 1 per centum.

(3) With respect to employment during the calendar years 1943, 1944, and 1945, the rate shall be 2 per centum.

(4) With respect to employment during the calendar years 1946, 1947, and 1948, the rate shall be 2 per centum.

(5) With respect to employment after December 31, 1948, the rate shall be 3 per centum.

SEC. 804. In addition to other taxes, every employer shall pay an excise tax, with respect to having individuals in his employ, equal to the following percentages of the wages (as defined in section 811) paid by him after December 31, 1936, with respect to employment (as defined in section 811) after such date:

(1) With respect to employment during the calendar years 1937, 1938, and 1939, the rate shall be 1 per centum.

(2) With respect to employment during the calendar years 1940, 1941, and 1942, the rate shall be 1 per centum.

(3) With respect to employment during the calendar years 1943, 1944, and 1945, the rate shall be 2 per centum.

(4) With respect to employment during the calendar years 1946, 1947, and 1948, the rate shall be 2 per centum.

(5) With respect to employment after December 31, 1948, the rate shall be 3 per centum.

[23] Report: “Summary of Major Changes in the Social Security Cash Benefits Program: 1935-1996.” By Geoffrey Kollmann. Congressional Research Service, Library of Congress. Updated December 20, 1996. http://www.ssa.gov/history/pdf/crs9436.pdf

Page CRS-4: “[The 1939 amendments] Postponed the increase in the tax rate, scheduled for 1940, until 1943. (Subsequent amendments during the 1940s kept postponing the increase so that it did not take effect until 1950.)”

[24] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 132: “Table VI.A1.—Contribution and Benefit Base and Contribution Rates.”

[25] Report: “Summary of Major Changes in the Social Security Cash Benefits Program: 1935-1996.” By Geoffrey Kollmann. Congressional Research Service, Library of Congress. Updated December 20, 1996. http://www.ssa.gov/history/pdf/crs9436.pdf

{The phrase “at least nine laws” was used because we found nine laws in this 30-page document that raised the tax rate during this time period. However, other documents indicated law changes that could not be found here. To be on the safe side, we used the lowest possible number in conjunction with the term “at least.”}

[26] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Pages 132-133: “Table VI.A1.—Contribution and Benefit Base and Contribution Rates.”

[27] Web page: “History: The 1936 Government Pamphlet on Social Security.” United States Social Security Administration. Accessed October 31,2008 at http://www.ssa.gov/history/ssn/ssb36.html

a) Web page: “History: The 1936 Government Pamphlet on Social Security.” United States Social Security Administration. Accessed October 31,2008 at http://www.ssa.gov/history/ssn/ssb36.html

b) Web page: “What is a Dollar Worth?” Federal Reserve Bank of Minneapolis, October 29, 2008. http://www.minneapolisfed.org/

{On the right hand side of the web page is a consumer price index based calculator that allows you to inflation adjust a dollar amount from the past into today’s dollars.}

CALCULATION: 6% of $3,000 = $180. {The tax rate of 6% is used because this was the total tax levied (employer plus employee) at that time. Figure adjusted for inflation using http://www.minneapolisfed.org/. On October 29, 2008: $180 in 1949 was worth $1,630.59.}

[29] Calculation performed with data from “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Pages 132-133: “Table VI.A1.—Contribution and Benefit Base and Contribution Rates.”

[In 2007, the wage threshold was $97,500 and the tax rate was 12.4% (employer plus employee).]

As part of a bipartisan plan that would be phased in over many years, he would ask those making over $250,000 to contribute a bit more to Social Security to keep it sound.

… Obama does not support uncapping the full payroll tax of 12.4 percent rate. Instead, he is considering plans that would ask those making over $250,000 to pay in the range of 2 to 4 percent more in total (combined employer and employee).

“I want to look you in the eye: I will not raise your taxes nor support a tax increase,” [McCain] said here Wednesday at a town-hall-style meeting at the Wagner Company, a Caterpillar dealer. “I will not do it.”

{This document contains a compilation of statements, interviews and videos whereby John McCain states his opposition to new taxes and tax increases.}

Page 4: “To qualify for benefits, you earn “credits” through your work — up to four each year. This year, for example, you earn one credit for each $1,000 of wages or self-employment income. When you’ve earned $4,000, you’ve earned your four credits for the year. Most people need 40 credits, earned over their working lifetime, to receive retirement benefits.”

{The Social Security administration is required by law to send statements to workers once a year outlining their projected benefits.}

Many people wonder how their benefit is figured. Social Security benefits are based on your lifetime earnings. Your actual earnings are adjusted or “indexed” to account for changes in average wages since the year the earnings were received. Then Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most. We apply a formula to these earnings and arrive at your basic benefit, or “primary insurance amount” (PIA). This is how much you would receive at your full retirement age—65 or older, depending on your date of birth.

NOTE: All worker earnings are taxed (up to a threshold amount that changes yearly) at the same rate, therefore there is a direct correlation between average earnings and Social Security taxes paid.

[35] Web page: “Automatic Increases: Primary Insurance Amount.” Office of the Chief Actuary, United States Social Security Administration. Last reviewed or modified March 2008. http://www.ssa.gov/OACT/COLA/piaformula.html

The “primary insurance amount” (PIA) is the benefit (before rounding down to next lower whole dollar) a person would receive if he/she elects to begin receiving retirement benefits at his/her normal retirement age. At this age, the benefit is neither reduced for early retirement nor increased for delayed retirement.

The PIA is the sum of three separate percentages of portions of average indexed monthly earnings. The portions depend on the year in which a worker attains age 62, becomes disabled before age 62, or dies before attaining age 62.

For 2008 these portions are the first $711, the amount between $711 and $4,288, and the amount over $4,288. These dollar amounts are the “bend points” of the 2008 PIA formula. A table shows bend points, for years beginning with 1979, for both the PIA and maximum family benefit formulas.

For an individual who first becomes eligible for old-age insurance benefits or disability insurance benefits in 2008, or who dies in 2008 before becoming eligible for benefits, his/her PIA will be the sum of:

(a) 90 percent of the first $711 of his/her average indexed monthly earnings, plus

(b) 32 percent of his/her average indexed monthly earnings over $711 and through $4,288, plus

NOTE: The above PIA formula weights lower average earnings more so than greater earnings on a percentage basis. See next note for more information.

Pages 132-133: “Table VI.A1.—Contribution and Benefit Base and Contribution Rates.”

[Employers and employees pay a tax of 6.2% each for a total Social Security tax of 12.4%.]

Keeping the above data constant, the following yearly income data was entered into the Online Calculator and the resulting benefits were recorded and ratios calculated. Yearly taxes are calculated at 12.4% of yearly income:

Yearly Income	Yearly Taxes Paid	Yearly Benefit at Retirement	Ratio of Yearly Benefits to Yearly Tax
$25,000	$3,100	$12,936	417%
$30,000	$3,720	$14,544	391%
$35,000	$4,340	$16,140	372%
$40,000	$4,960	$17,736	358%
$45,000	$5,580	$19,344	347%
$50,000	$6,200	$20,940	338%
$55,000	$6,820	$21,936	322%
$60,000	$7,440	$22,692	305%
$65,000	$8,060	$23,436	291%
$70,000	$8,680	$24,192	279%
$75,000	$9,300	$24,936	268%
$80,000	$9,920	$25,692	259%
$85,000	$10,540	$26,436	251%
$90,000	$11,160	$27,192	244%
$95,000	$11,780	$27,936	237%
$100,000	$12,400	$28,692	231%

[38] Publication number 05-10024: “Understanding the Benefits.” United States Social Security Administration, May 2008. http://www.ssa.gov/pubs/10024.html

For those born before 1938, the full retirement age to qualify for Social Security benefits is 65 years old.

For those born between 1938 and 1959, the full retirement age to qualify for Social Security benefits is defined by the following chart:

Year of Birth	Full Retirement Age
1938	65 and 2 months
1939	65 and 4 months
1940	65 and 6 months
1941	65 and 8 months
1942	65 and 10 months
1943 – 1954	66
1955	66 and 2 months
1956	66 and 4 months
1957	66 and 6 months
1958	66 and 8 months
1959	66 and 10 months

For those born after 1959, the full retirement age to qualify for Social Security benefits is 67 years old.

[39] Publication number 05-10024: “Understanding the Benefits.” United States Social Security Administration, May 2008. http://www.ssa.gov/pubs/10024.html

You may start receiving benefits as early as age 62. However, if you start your benefits early, your benefits are reduced permanently. Your benefit is reduced about one-half of one percent for each month you start your Social Security before your full retirement age. For example, if your full retirement age is 66 and you sign up for Social Security when you are 62, you would only get 75 percent of your full benefit.

NOTE: The reduction will be greater in future years as the full retirement age increases.

[40] Publication number 05-10024: “Understanding the Benefits.” United States Social Security Administration, May 2008. http://www.ssa.gov/pubs/10024.html

If you choose to delay receiving benefits beyond your full retirement age, your benefit will be increased by a certain percentage, depending on the year you were born. The increase will be added in automatically from the time you reach full retirement age until you start taking benefits or reach age 70, whichever comes first. If, for example, you were born in 1940, your benefit would increase 7 percent for each year, between your full retirement age and age 70, that you do not get retirement benefits.

[42] “Social Security Administration Fiscal Year 2007 Performance and Accountability Report.” United States Social Security Administration, November 7, 2007.

Page 8: “As shown in the chart Percent of Elderly Beneficiary Income from Social Security Benefits, Social Security benefits comprise at least 90% of total income for one-third of the elderly beneficiaries. For nearly two-thirds of elderly beneficiaries, it is their major source (50-100 percent of their income).”

Chart data source: U.S. Census Bureau’s Current Population Survey, March 2007.

[43] Publication number 05-10024: “Understanding the Benefits.” United States Social Security Administration, May 2008. http://www.ssa.gov/pubs/10024.html

[The average 2008 monthly Social Security benefit for an individual is $1,079/month, or $12,948/year.]

[45] Publication number 05-10024: “Understanding the Benefits.” United States Social Security Administration, May 2008. http://www.ssa.gov/pubs/10024.html

[The average 2008 monthly Social Security benefits for a couple is $1,761/month, or $21,132/year.]

[47] Publication number 05-10024: “Understanding the Benefits.” United States Social Security Administration, May 2008. http://www.ssa.gov/pubs/10024.html

You will have to pay taxes on your benefits if you file a federal tax return as an “individual” and your total income is more than $25,000. If you file a joint return, you will have to pay taxes if you and your spouse have a total income that is more than $32,000. For more information call the Internal Revenue Service’s toll-free number, 1-800-829-3676.

To find out whether any of your benefits may be taxable, compare the base amount (explained later) for your filing status with the total of:

If part of your benefits are taxable, how much is taxable depends on the total amount of your benefits and other income. Generally, the higher that total amount, the greater the taxable part of your benefits.

Maximum taxable part. Generally, up to 50% of your benefits will be taxable.

To find out whether any of your benefits may be taxable, compare the base amount (explained later) for your filing status with the total of:

Maximum taxable part. Generally, up to 50% of your benefits will be taxable. However, up to 85% of your benefits can be taxable if either of the following situations applies to you.

• The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly).

• You are married filing separately and lived with your spouse at any time during 2007.

[50] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 56: “In contrast, the projected income from taxation of benefits, expressed as a percentage of taxable payroll, is expected to generally increase throughout the long-range period. This is because increasing income from taxation of benefits reflects not only rising benefit and income levels, but also the fact that benefit-taxation threshold amounts are not indexed.”

Rules for work needed for the “recent work” test
In or before the quarter you turn 24.	1.5 years of work during the three-year period ending with the quarter your disability began.
In the quarter after you turn age 24 but before the quarter you turn 31.	Work during half the time for the period beginning with the quarter after you turned 21 and ending with the quarter you became disabled. Example: If you become disabled in the quarter you turned age 27, then you would need 3 years of work out of the six-year period ending with the quarter you became disabled.
In the quarter you turn age 31 or later.	Work during five years out of the ten-year period ending with the quarter your disability began.

Examples of work needed for the “duration of work” test
If you become disabled…	Then you generally need:
Before age 28	1.5 years of work
Age 30	2 years
Age 34	3 years
Age 38	4 years
Age 42	5 years
Age 44	5.5 years
Age 46	6 years
Age 48	6.5 years
Age 50	7 years
Age 52	7.5 years
Age 54	8 years
Age 56	8.5 years
Age 58	9 years
Age 60	9.5 years

Page 12: “When do my benefits start? If your application is approved, your first Social Security disability benefits will be paid for the sixth full month after the date your disability began.”

Page 13: “How much will my benefits be? The amount of your monthly disability benefit is based on your average lifetime earnings. The Social Security Statement that you receive each year displays your lifetime earnings and provides an estimate of your disability benefit.”

[54] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 102: “Table V.C1.—Cost-of-Living Benefit Increases, Average Wage Index, Contribution and Benefit Bases, and Retirement Earnings Test Exempt Amounts, 1975-2017.”

[55] Table constructed with data from: “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 29: “Table III.A5.—Distribution of Benefit Payments by Type of Beneficiary or Payment, Calendar Years 2006 and 2007.”

NOTE: “Percent of Total” column does not necessarily add up to 100% due to the exclusion of categories representing minor amounts.

[57] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

[58] Web page: “Old-Age, Survivors, and Disability Insurance Trust Funds, 1957-2007.” Office of the Chief Actuary, United States Social Security Administration. Updated June 10, 2008. http://www.ssa.gov/OACT/STATS/table4a3.html

[59] Web page: “Social Security Trust Funds: Frequently Asked Questions.” United States Social Security Administration. Last reviewed or modified June 3, 2008. http://www.ssa.gov/OACT/ProgData/fundFAQ.html

“By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government.”

“Additionally, the Government Trust Funds are required by law to invest accumulated surpluses in Treasury securities. The Treasury securities issued to the public and to the Government Trust Funds (intragovernmental holdings) then become part of the total debt.”

“The faith of the United States Government is pledged to pay, in legal tender, principal and interest on the obligations of the Government issued under this chapter.”

[62] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

[63] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 53: “Beginning in 2017, the [Social Security] program under the intermediate assumptions is projected to experience increasingly large cash-flow shortfalls….”

[64] Web page: “Table VI.F7-Operations of the Combined OASI and DI Trust Funds in Constant 2008 Dollars, Calendar Years 2008-85.” United States Social Security Administration. Last reviewed or modified March 25, 2008. https://www.socialsecurity.gov/OACT/TR/TR08/lr6f7.html

NOTE: This table projects the assets of the Trust Funds at the end of each year and shows assets at the end of 2017 as $3.51 trillion. Though there is not a surplus projected beyond 2017, the Trust Fund assets are projected to grow into 2021 due to interest income. This same table is present in the 2008 Social Security Trustees Report, but does not contain all data for outer years.

[65] As shown by the following four sources, the $3.5 trillion Social Security Trust Fund projected for 2017 will have been loaned to the federal government which is required to pay it back with interest:

a) Web page: “Legislative History: Social Security Act of 1935.” United States Social Security Administration. Accessed October 31,2008 at http://www.ssa.gov/history/35act.html

Section 201(b): “It shall be the duty of the Secretary of the Treasury to invest such portion of the amounts credited to the Account as is not, in his judgment, required to meet current withdrawals. Such investment may be made only in interest-bearing obligations of the United States or in obligations guaranteed as to both principal and interest by the United States.”

b) “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 214: “Funds not withdrawn for current monthly or service benefits, the financial interchange, and administrative expenses are invested in interest-bearing Federal securities, as required by law; the interest earned is also deposited in the trust funds.”

d) “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 24: “All securities held by the trust funds are backed by the full faith and credit of the United States Government, as required by law.”

a) Web page: “Table VI.F7-Operations of the Combined OASI and DI Trust Funds in Constant 2008 Dollars, Calendar Years 2008-85.” United States Social Security Administration. Last reviewed or modified March 25, 2008. https://www.socialsecurity.gov/OACT/TR/TR08/lr6f7.html

{Trust Fund assets are projected to be $3.51 trillion in 2017. By law, these monies would have been loaned to the federal government.}

b) Web page: “Table V.A2.-Social Security Area Population as of July 1 and Dependency Ratios Calendar Years 1950-2085.” United States Social Security Administration. Last reviewed or modified March 25, 2008. https://www.socialsecurity.gov/OACT/TR/TR08/lr5a2.html

[67] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 2: “Annual cost will exceed tax income starting in 2017, at which time the annual gap will be covered with cash from redemptions of special obligations of the Treasury that make up the trust fund assets until these assets are exhausted in 2041.”

[68] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 18: “Based on the Trustees’ best estimate, program cost will exceed tax revenues starting in 2017 and throughout the remainder of the 75-year projection period. Social Security’s combined trust funds are projected to allow full payment of scheduled benefits until they become exhausted in 2041. At that time annual tax income to the trust funds is projected to equal about 78 percent of program costs.”

“The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 18: “For example, payroll taxes could be raised to finance scheduled benefits fully in every year starting in 2041. In this case, the payroll tax would be increased to 15.94 percent at the point of trust fund exhaustion in 2041 and continue rising to 16.60 percent in 2082.”

Report: “Combined OASDI Trust Fund Operations: 2008 Trustees Report Intermediate Assumptions.” Office of the Chief Actuary, United States Social Security Administration, October 16, 2008.

Year	Income (excluding interest)	Scheduled Benefits
2041	3,085,670	3,898,638
2082	18,023,648	23,739,110

[71] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 59: “The present value of future cost less future tax income over the long-range period, minus the amount of trust fund assets at the beginning of the projection period, amounts to $4.3 trillion for the [Social Security] program. This amount is referred to as the 75-year ‘open group unfunded obligation’. “

[72] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 208 [appendix]: “Open group unfunded obligation. This measure is computed as the excess of the present value of the projected cost of the program over a specified time period (for example the next 75 years or the infinite future) over the sum of (1) the value of trust fund assets at the beginning of the period and (2) the present value of the projected tax income of the program, assuming scheduled tax rates and benefit levels.”

Present values recognize that a dollar next year is worth less than a dollar today, because a dollar today could be saved and earn a year’s-worth of interest. To create a present value, future amounts are thus reduced using an assumed interest rate, and those reduced amounts are summed. The resulting present value is the amount that would have to be put in the bank today at the assumed interest rate to fund the future cash flows. …

For [Social Security], over the next seventy-five years revenues from payroll and benefit taxes are estimated at $36.4 trillion in present value and expenditures to the public at $42.9 trillion in present value, resulting in net obligations of $6.6 trillion. From the trust fund perspective, the net obligation is reduced by the $2.2 trillion trust fund for an unfunded obligation of $4.3 trillion.

CALCULATION: Shortfall of $4,300,000,000,000 / Total 2007 Social Security income $784,900,000,000 = 5.4784

Page 11: “The balance of the combined trust funds peaks at $2.7 trillion in 2017 (in present value) and then turns downward. This cumulative amount continues to be positive, indicating trust fund assets, or reserves, through 2040. However, after 2040 this cumulative amount becomes negative, indicating a net unfunded obligation. Through the end of 2082, the combined funds have a present-value unfunded obligation of $4.3 trillion.”

Table IV.B2.—Covered Workers¹ and Beneficiaries, Calendar Years 1945-2085 …

¹ Workers who are paid at some time during the year for employment on which OASDI taxes are due.

[The number of covered workers (those paying Social Security taxes) in 2007 was 163,177,000.]

a) Report: “Combined OASDI Trust Fund Operations: 2008 Trustees Report Intermediate Assumptions.” Office of the Chief Actuary, United States Social Security Administration, October 16, 2008.

[The Social Security Trust Fund end of year assets are projected to be -$277,143,351,000,000 in 2082.]

b) Web page: “Selected Economic Variables: Table VI.F6.-Selected Economic Variables Calendar Years 2007-85.” United States Social Security Administration. Last reviewed or modified March 25, 2008. http://www.socialsecurity.gov/OACT/TR/TR08/lr6f6.html

[77] Calculation performed with data from the source above and the following source:

Web page: “Table IV.B2.-Covered Workers and Beneficiaries Calendar Years 1945-2085.” United States Social Security Administration. Last reviewed or modified March 25, 2008. https://www.socialsecurity.gov/OACT/TR/TR08/lr4b2.html

[The number of covered workers (those paying Social Security taxes) in 2082 is projected to be 234,346,000.]

[78] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 61: “However, there are limitations on what can be conveyed using summarized measures alone. For example, overemphasis on summary measures (such as the actuarial balance and open group unfunded obligation) for the 75-year period can lead to incorrect perceptions and policies that fail to address financial sustainability for the more distant future.”

[79] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Another limitation is that continued, and possibly increasing, annual shortfalls after the period are not reflected in the 75-year summarized measures. In order to address this limitation, this section presents estimates of unfunded obligations that extend to the infinite horizon. The extension assumes that the current-law [Social Security] program and the demographic and most economic trends used for the 75-year projection continue indefinitely. The one exception is that the ultimate assumed real-wage differential for the long-range period of 1.1 percent is increased to 1.2 percent, phased in over the 10-year period 2083 to 2092. This change essentially maintains consistency with the assumed reduction in the growth of health care expenditures after 2082. (See the Medicare Trustees Report.) The values in table IV.B6 indicate that extending the calculations beyond 2082 adds $9.3 ($13.6 - $4.3) trillion in present value to the amount of the unfunded obligation estimated through 2082. That is, over the infinite horizon, the [Social Security] open group unfunded obligation is projected to be $13.6 trillion. The $9.3 trillion increment reflects a significant financing gap projected for [Social Security] over the infinite future period after 2082. Of course, the degree of uncertainty associated with estimates beyond 2082 is substantial.

[80] Report: “Social Security and Medicare Trust Funds and the Federal Budget.” By James Duggan and Christopher Soares. Office of Economic Policy, U.S. Department of Treasury, March 2008. http://www.treas.gov/offices/economic-policy/reports/...

Page 16: “Present values recognize that a dollar next year is worth less than a dollar today, because a dollar today could be saved and earn a year’s-worth of interest. To create a present value, future amounts are thus reduced using an assumed interest rate, and those reduced amounts are summed. The resulting present value is the amount that would have to be put in the bank today at the assumed interest rate to fund the future cash flows.”

Page 50: “Table IV.B2.—Covered Workers and Beneficiaries, Calendar Years 1945-2085.”

[The number of covered workers (those paying Social Security taxes) for 2007 was 163,177,000.]

Page 61: “That is, over the infinite horizon, the [Social Security] open group unfunded obligation is projected to be $13.6 trillion.”

[82] Report: “The 2004 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 23, 2004. http://www.socialsecurity.gov/OACT/TR/TR04/tr04.pdf

Page 59: “Table IV.B7.—Unfunded OASDI [Social Security] Obligations for 1935 (Program Inception) Through the Infinite Horizon.”

“Over a 75-year time frame, Social Security’s shortfall is estimated by the Congressional Budget Office at $2 trillion and by the Social Security trustees at $3.7 trillion, a manageable sliver of the economy in each case.”

If you’ve lent even one ear to the administration’s recent comments on Social Security, you have no doubt heard President Bush and his aides asserting that a $10 trillion shortfall threatens the retirement system - and the economy itself. That $10 trillion hole is the basis of the president’s claim last month that “the [Social Security] crisis is now.” It’s also the basis of the administration’s claim that the cost of doing nothing to reform the system would be far greater than the cost of acting now.

[85] Report: “The 2004 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 23, 2004. http://www.socialsecurity.gov/OACT/TR/TR04/tr04.pdf

Page 56: “The present value of future cost less future tax income over the long-range period, minus the amount of trust fund assets at the beginning of the projection period, amounts to $3.7 trillion. This amount is referred to as the 75-year ‘open group unfunded obligation’.”

[86] Report: “Social Security and Medicare Trust Funds and the Federal Budget.” By James Duggan and Christopher Soares. Office of Economic Policy, U.S. Department of Treasury, March 2008. http://www.treas.gov/offices/economic-policy/reports/...

Page 20 [The thirty companies comprising the Dow Jones Industrial Average as of September 22, 2008]:

3M Company, Alcoa Incorporated, American Express Company, AT&T Incorporated, Bank of America Corporation, Boeing Corporation, Caterpillar Incorporated, Chevron Corporation, Citigroup Incorporated, Coca-Cola Company, DuPont, Exxon Mobil Corporation, General Electric Company, General Motors Corporation, Hewlett-Packard Company, Home Depot Incorporated, Intel Corporation, International Business Machines, Johnson & Johnson, J.P. Morgan Chase & Company, Kraft Foods Inc., McDonald’s Corporation, Merck & Company, Incorporated, Microsoft Corporation, Pfizer Incorporated, Procter & Gamble Company, United Technologies, Verizon Company, Wal-Mart Stores Incorporated, Walt Disney Company

[Market capitalization values (in billions USD) for the thirty Dow Jones Industrial Average stocks (symbol) between 3PM and 4PM EST on September 29, 2008]:

3M Company (MMM): 46.52, Alcoa Incorporated (AA): 17.37, American Express Company (AXP): 39.88, AT&T Incorporated (T): 167.76, Bank of America Corporation (BAC): 146.96, Boeing Corporation (BA): 39.51, Caterpillar Incorporated (CAT): 35.91, Chevron Corporation (CVX): 164.75, Citigroup Incorporated (C): 103.30, Coca-Cola Company (KO): 119.41, DuPont (DD): 36.03, Exxon Mobil Corporation (XOM): 395.63, General Electric Company (GE): 237.86, General Motors Corporation (GM): 5.08, Hewlett-Packard Company (HPQ): 109.21, Home Depot Incorporated (HD): 41.60, Intel Corporation (INTC): 100.32, International Business Machines (IBM): 153.44, Johnson & Johnson (JNJ): 189.16, J.P. Morgan Chase & Company (JPM): 147.82, Kraft Foods Inc. (KFT): 48.73, McDonald’s Corporation (MCD): 68.07, Merck & Company, Incorporated (MRK): 66.12, Microsoft Corporation (MSFT): 235.20, Pfizer Incorporated (PFE): 119.59, Procter & Gamble Company (PG): 203.43, United Technologies (UTX): 54.57, Verizon Company (VZ): 87.03, Wal-Mart Stores Incorporated (WMT): 231.55, Walt Disney Company (DIS): 55.75.

CALCULATION: Sum of all thirty companies’ market capitalization: $3,411.81 billion.

Page 50: “Table IV.B2.—Covered Workers and Beneficiaries, Calendar Years 1945-2085.”

b) “The 2004 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 23, 2004. http://www.socialsecurity.gov/OACT/TR/TR04/tr04.pdf

Page 59: “Table IV.B7.—Unfunded OASDI [Social Security] Obligations for 1935 (Program Inception) Through the Infinite Horizon.”

CALCULATION: $3,700,000,000,000 (75-year unfunded liability in 2004 present value terms) / 156,250,000 (the number of covered workers who paid Social Security taxes in 2004) = $23,680

[90] The 2001 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 19, 2001. http://www.socialsecurity.gov/OACT/TR/TR01/tr01.pdf

Page 39: “Table IV.A3.—Operations of the Combined OASI and DI Trust Funds, Calendar Years 1996-2010.”

[91] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

“Trust Fund Operations in Current Dollars: Intermediate Assumptions 2001 Trustees Report.” Office of the Chief Actuary, Unites States Social Security Administration, February 13, 2001.

[In 2001, Social Security projected 2041 income excluding interest to be $3.528 trillion and payroll taxes to be $3.323 trillion. Total Social Security program outgo was projected to be $4.755 trillion in 2041.]

Pages 132-133: “Table VI.A1.—Contribution and Benefit Base and Contribution Rates.”

Report: “Trust Fund Operations in Current Dollars: Intermediate Assumptions 2001 Trustees Report.” Office of the Chief Actuary, Unites States Social Security Administration, February 13, 2001.

[In 2001, Social Security projected 2075 income excluding interest to be $16.19 trillion and payroll taxes to be $15.049 trillion. Total Social Security program outgo was projected to be $23.592 trillion in 2075.]

Report: “Combined OASDI Trust Fund Operations: 2008 Trustees Report Intermediate Assumptions.” Office of the Chief Actuary, United States Social Security Administration, October 16, 2008.

[In 2008, Social Security projected 2075 income excluding interest to be $13.36 trillion and payroll taxes to be $12.479 trillion. Total Social Security program outgo was projected to be $17.333 trillion in 2075.]

[96] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Overemphasis on summary measures for a 75-year period can lead to incorrect perceptions and to policy prescriptions that do not achieve sustainable solvency. Thus, careful consideration of the trends in annual deficits and unfunded obligations toward the end of the 75-year period is important. In addition, summary measures for a time period that extends to the infinite horizon are included in this report. These measures provide an additional indication of Social Security’s very long-run financial condition, but are subject to much greater uncertainty. These calculations show that extending the horizon beyond 75 years increases the unfunded obligation. Over the infinite horizon, the shortfall (unfunded obligation) is $13.6 trillion in present value, or 3.2 percent of future taxable payroll and 1.1 percent of future GDP. These calculations of the shortfall indicate that much larger changes may be required to achieve solvency beyond the 75-year period as compared to changes needed to balance 75-year period summary measures.

[97] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 50: “Table IV.B2.—Covered Workers and Beneficiaries, Calendar Years 1945-2085.”

[98] Web page: “In-Depth Research: Legislative History. Summary of P.L. 98-21, (H.R. 1900), Social Security Amendments of 1983- Signed on April 20, 1983.” The Social Security Administration’s Office of Legislative and Congressional Affairs, November 26, 1984. http://www.ssa.gov/history/1983amend.html

“Raises the age of eligibility for unreduced retirement benefits in two stages to 67 by the year 2027. Workers born in 1938 will be the first group affected by the gradual increase.”

[99] Publication number 05-10024: “Understanding the Benefits.” United States Social Security Administration, May 2008. http://www.ssa.gov/pubs/10024.html

For those born before 1938, the full retirement age to qualify for Social Security benefits is 65 years old.

For those born between 1938 and 1959, the full retirement age to qualify for Social Security benefits is defined by the following chart:

Year of Birth	Full Retirement Age
1938	65 and 2 months
1939	65 and 4 months
1940	65 and 6 months
1941	65 and 8 months
1942	65 and 10 months
1943 – 1954	66
1955	66 and 2 months
1956	66 and 4 months
1957	66 and 6 months
1958	66 and 8 months
1959	66 and 10 months

For those born after 1959, the full retirement age to qualify for Social Security benefits is 67 years old.

Page 21: “[On January 31, 1940] Ida May Fuller became the first person to receive an old-age monthly benefit check.”

[101] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

{Data from 2004 is used because it is the latest year available in this table that is not an estimate. Footnote 1 on Table V.A3 states: “The period life expectancy at a given age for a given year represents the average number of years of life remaining if a group of persons at that age were to experience the mortality rates for that year over the course of their remaining lives.”}

[102] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

[103] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

{See pages 100 through 107 which explains “automatically adjusted program parameters” in detail.}

[104] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 200: “Baby boom. The period from the end of World War II through the mid-1960s marked by unusually high birth rates.”

[105] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Pages 80-81: “Table V.A1.—Principal Demographic Assumptions, Calendar Years 1940-2085.”

[106] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Pages 80-81: “Table V.A1.—Principal Demographic Assumptions, Calendar Years 1940-2085.”

[107] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

The primary reason that the estimated [Social Security] cost rate increases rapidly between 2010 and 2030 is that the number of beneficiaries is projected to increase more rapidly than the number of covered workers. This occurs because the relatively large number of persons born during the baby boom will reach retirement eligibility age, and begin to receive benefits, while the relatively small number of persons born during the subsequent period of low fertility rates will comprise the labor force. A comparison of the numbers of covered workers and beneficiaries is shown in table IV.B2.

Page 50: “Table IV.B2.—Covered Workers and Beneficiaries, Calendar Years 1945-2085.”

a) Covered workers 2030 (projected) 184,974,000 minus covered workers 2010 (projected) 167,817,000 / 167,817,000 = 10.22%

b) Old-Age & Survivors Insurance Beneficiaries (OASI) 2030 (projected) 71,547,000 minus OASI beneficiaries 2010 (projected) 43,165,000 / 43,165,000 = 66%

[109] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 82-83: “Table V.A2.—Social Security Area Population as of July 1 and Dependency Ratios, Calendar Years 1950-2085.”

[110] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Pages 124-125: “Table V.C5.—DI Beneficiaries With Benefits in Current-Payment Status at the End of Calendar Years 1960-2085.”

Page 82: “Table V.A2.—Social Security Area Population as of July 1 and Dependency Ratios, Calendar Years 1950-2085.”

Page 124: “Table V.C5.—DI Beneficiaries With Benefits in Current-Payment Status at the End of Calendar Years 1960-2085.”

[Disability insurance beneficiaries in 1960: 687,000; disability insurance beneficiaries in 2005: 8,309,000.]

[113] Transcript: “NBC Nightly News” (6:30 PM ET). NBC, February 26, 2004.

BRIAN WILLIAMS reporting: Inside this small private elementary school in Manhattan, Mimi Baso came to work this morning thinking about retirement. She has no plans to retire but these days worries about getting back all the Social Security money she paid in.

[114] Publication number 05-10024: “Understanding the Benefits.” United States Social Security Administration, May 2008. http://www.ssa.gov/pubs/10024.html

The current Social Security system works like this: when you work, you pay taxes into Social Security. The tax money is used to pay benefits to:

[115] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 27: “Table III.A3.—Operations of the Combined OASI and DI Trust Funds, Calendar Year 2007.”

{This table accounts for all receipts and disbursements of the Social Security Trust Funds. Trust Fund assets increased in 2007 by $190.4 billion. As tables VI.A5 and VI.A6 show, all of these additional monies were invested in government obligations.}

Page 142: “Table VI.A5. Assets of the OASI [Old-Age & Survivors Insurance] Trust Fund, End of Calendar Years 2006 and 2007.”

Page 143: “Table VI.A6. Assets of the DI [Disability Insurance] Trust Fund, End of Calendar Years 2006 and 2007.”

{Note that the total OASDI [Social Security] Trust Fund assets at the close of 2007 ($2,238 trillion) are equivalent to the sum of the OASI [Old-Age and Survivors Insurance] and DI [Disability Insurance] assets ($2,023 billion and $214.88 billion respectively) that are invested in government obligations. All Trust Fund assets are thus invested in government obligations.}

[116] Web page: “Legislative History: Social Security Act of 1935.” United States Social Security Administration. Accessed October 31, 2008 at http://www.ssa.gov/history/35act.html

[117] Report: “Major Decisions in the House and Senate on Social Security.” By Geoffrey Kollmann and Carmen Solomon-Fears. Domestic Social Policy Division, Social Security Administration, March 26, 2001. http://www.ssa.gov/history/reports/crsleghist3.html

{The Social Security Act of 1935 established that assets be invested in obligations of the United States or guaranteed by the United States. The 2008 Trustees Report shows that this was the case in 2007. The document referenced here shows that there have not been any major decisions altering this in the intervening years. Thus, all money paid to Social Security during its seventy-plus years was either spent or loaned to the federal government.}

[118] Report: Analytical Perspectives: Budget of the United States Government, Fiscal Year 2000. Executive Office of the President of the United States, U.S. Government Printing Office, 1999. http://www.gpoaccess.gov/usbudget/fy00/pdf/spec.pdf

These balances are available to finance future benefit payments and other trust fund expenditures—but only in a bookkeeping sense. These funds are not set up to be pension funds, like the funds of private pension plans. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large trust fund balances, therefore, does not, by itself, have any impact on the Government’s ability to pay benefits.

[119] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

1 Workers who are paid at some time during the year for employment on which OASDI taxes are due.

Web page: “Covered Workers and Beneficiaries: Table IV.B2.-Covered Workers and Beneficiaries Calendar Year 1945-2085.” United States Social Security Administration, Last reviewed or modified March 25, 2008. https://www.socialsecurity.gov/OACT/TR/TR08/lr4b2.html

[121] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 135: “The Social Security Act does not permit expenditures from the [Old-Age & Survivors Insurance] and DI [Disability Insurance] Trust Funds for any purpose not related to the payment of benefits or administrative costs for the OASDI [Social Security] program.”

[122] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

[124] Web page: “Legislative History: Social Security Act of 1935.” United States Social Security Administration. Accessed October 31,2008 at http://www.ssa.gov/history/35act.html

[125] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 24: “All securities held by the trust funds are backed by the full faith and credit of the United States Government, as required by law.”

{Social Security’s assets are contained in the “Federal Disability Insurance Trust Fund” and the “Federal Old-Age and Survivors Insurance Trust Fund.” Both of these appear on page 9 in “Table III - Detail of the Public Debt Outstanding.”}

[127] Web page: “Social Security Trust Funds: Frequently Asked Questions.” United States Social Security Administration. Last reviewed or modified June 3, 2008. http://www.ssa.gov/OACT/ProgData/fundFAQ.html

[128] Web page: “Trust Fund Data: Old-Age and Survivors Insurance Trust Funds, 1937-2007.” Office of the Chief Actuary, United States Social Security Administration, Updated June 10, 2008. http://www.socialsecurity.gov/OACT/STATS/table4a1.html

[129] Web page: “Trust Fund Data: Disability Insurance Trust Fund, 1957-2007.” Office of the Chief Actuary, United States Social Security Administration. Updated June 10, 2008. http://www.socialsecurity.gov/OACT/STATS/table4a2.html

{This data and the data from the previous footnote account for the assets of the Social Security Trust Fund since 1937.}

[130] Web page: “FAQ’s: Debunking some Internet Myths. Myths and Misinformation about Social Security.” United States Social Security Administration. Last reviewed or modified January 14, 2008. http://www.socialsecurity.gov/history/InternetMyths.html

Starting in 1969 (due to action by the Johnson Administration in 1968) the transactions to the Trust Fund were included in what is known as the “unified budget.” This means that every function of the federal government is included in a single budget. This is sometimes described by saying that the Social Security Trust Funds are “on-budget.” This budget treatment of the Social Security Trust Fund continued until 1990 when the Trust Funds were again taken “off-budget.” This means only that they are shown as a separate account in the federal budget. But whether the Trust Funds are “on-budget” or “off-budget” is primarily a question of accounting practices--it has no affect on the actual operations of the Trust Fund itself.

[131] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

[132] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

{The unfunded obligation is the amount that would need to be added to the Social Security Trust fund today in order to keep it solvent over the 75 year horizon.}

[133] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 29: “Net administrative expenses charged to the [Old-Age & Survivors Insurance] and DI [Disability Insurance] Trust Funds in calendar year 2007 totaled $5.5 billion. This amount represented 0.8 percent of contribution income and 0.9 percent of expenditures.”

Publication number 05-10024: “Understanding the Benefits.” United States Social Security Administration, May 2008. http://www.ssa.gov/pubs/10024.html

[The average 2008 monthly Social Security benefit for retired workers is $1,079.]

CALCULATION: $5,5000,000,000 / $12,948 (average individual retired worker’s yearly Social Security retirement benefit for 2008) = 424,776

[135] Report: “The Social Security Administration’s Procedures to Identify Representative Payees Who Are Deceased.” Office of the Inspector General, Social Security Administration, September 1999. http://www.ssa.gov/oig/ADOBEPDF/auditpdf/9861009.pdf

SSA’s procedures do not ensure that new Rep Payees are selected when former Rep Payees have died. Since SSA does not identify all cases in which a Rep Payee has died, benefit payments continue to be paid to deceased Rep Payees. Based on our review, we estimate that 2,091 deceased Rep Payees received $17.33 million in Old-Age, Survivors and Disability Insurance [Social Security] and Supplemental Security Income (SSI) payments from the date of the Rep Payee’s death through June 1998 (the date we began our review).

{The explanation of a “Rep Payee” from this report: “Some individuals are not able to manage or direct the management of their finances because of their age or mental and/or physical impairments. For such people, Congress provided for payment to be made through Rep Payees who receive and manage the benefit payments of the beneficiaries/recipients.”}

[136] Report: “Benefit Payments in Instances Where the Social Security Administration Removed a Death Entry From the Beneficiary’s Record,” United States Social Security Administration, Office of the Inspector General. June 2008. http://www.ssa.gov/oig/ADOBEPDF/A-06-07-27156.pdf

In instances when death reports are posted in error, SSA deletes the death entry from the DMF [death master file] (“resurrect” the record) and, when applicable, reinstates benefit payments. SSA employees may only process transactions to resurrect a record when presented with proof the original death entry was posted in error. Unless the mistake resulted from an administrative error, the resurrection transaction should not be processed before completion of a face-to-face interview with the beneficiary or recipient. To validate the integrity of these transactions, SSA requires that two employees be involved in the process. SSA also requires that employees document the events leading to and facts

Since January 2004, SSA has provided us with electronic files containing updates made to the DMF, including instances when individual records were removed from the DMF. Preliminary analysis of these files indicated that, from January 2004 through April 2007, SSA deleted more than 44,000 individuals’ death entries from the DMF. SSA records indicated 20,623 of these individuals were in current payment status on or after April 27, 2007 and received approximately $17.2 million in monthly SSA benefit payments.

[137] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

The Federal Old-Age and Survivors Insurance (OASI) Trust Fund was established on January 1, 1940 as a separate account in the United States Treasury. The Federal Disability Insurance (DI) Trust Fund, another separate account in the United States Treasury, was established on August 1, 1956. All the financial operations of the OASI and DI programs are handled through these respective funds. The Board of Trustees is responsible for overseeing the financial operations of these funds.

[138] Web page: “Social Security Trust Funds: Frequently Asked Questions.” United States Social Security Administration. Last reviewed or modified June 3, 2008. http://www.ssa.gov/OACT/ProgData/fundFAQ.html

“By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are ‘special issues’ of the United States Treasury. Such securities are available only to the trust funds.”

[139] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Page 214: “[Social Security Trust] Funds not withdrawn for current monthly or service benefits, the financial interchange, and administrative expenses are invested in interest bearing Federal securities, as required by law; the interest earned is also deposited in the trust funds.”

[140] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

[142] Report: “Monthly Statement of the Public Debt of the United States.” Bureau of the Public Debt, United States Department of the Treasury, June 30, 2008.

The Debt Held by the Public is all federal debt held by individuals, corporations, state or local governments, foreign governments, and other entities outside the United States Government less Federal Financing Bank securities. Types of securities held by the public include, but are not limited to, Treasury Bills, Notes, Bonds, TIPS, United States Savings Bonds, and State and Local Government Series securities.

Intragovernmental Holdings are Government Account Series securities held by Government trust funds, revolving funds, and special funds; and Federal Financing Bank securities. A small amount of marketable securities are held by government accounts.

[144] NOTE: There is considerable confusion regarding the terminology associated with the national debt. Listed below are some frequently used terms categorized by their proper meaning:

(b) Portion of the national debt owed to federal entities – Nonmarketable debt, Intragovernmental holdings, debt held by the government, government held debt.

(c) Portion of the national debt owed to non-federal entities – Marketable debt, debt held by the public, publicly held debt. (Just Facts has come across numerous instances where politicians and reporters use terms that refer to the overall national debt, when in fact, they are only referring to this portion of the debt.)

[145] Report: “Monthly Statement of the Public Debt of the United States.” Bureau of the Public Debt, United States Department of the Treasury, June 30, 2008.

[146] Report: “Monthly Statement of the Public Debt of the United States.” Bureau of the Public Debt, United States Department of the Treasury, June 30, 2008.

[147] Web page: “Population, Population change and estimated components of population change: April 1, 2000 to July 1, 2007.” United States Census Bureau. See CSV file located at: http://www.census.gov/popest/datasets.html

{The United States Census Bureau estimates the U.S. population to be 301,621,157 for 2007. The last census (2000) found the population to be 281,421,906. The 2000 census can be found at http://www.census.gov/prod/2002pubs/c2kprof00-us.pdf}

[148] Web page: “Table VI.F7-Operations of the Combined OASI and DI Trust Funds in Constant 2008 Dollars, Calendar Years 2008-85.” Office of the Chief Actuary, United States Social Security Administration. Last reviewed or modified March 25, 2008. https://www.socialsecurity.gov/OACT/TR/TR08/lr6f7.html

[149] As shown by the following four sources, the $3.5 trillion Social Security Trust Fund projected for 2017 will have been loaned to the federal government which is required to pay it back with interest:

a) Web page: “Legislative History: Social Security Act of 1935.” United States Social Security Administration. Accessed October 31,2008 at http://www.ssa.gov/history/35act.html

Page 24: “All securities held by the trust funds are backed by the full faith and credit of the United States Government, as required by law.”

a) Web page: “Table VI.F7-Operations of the Combined OASI and DI Trust Funds in Constant 2008 Dollars, Calendar Years 2008-85.” Office of the Chief Actuary, United States Social Security Administration. Last reviewed or modified March 25, 2008. https://www.socialsecurity.gov/OACT/TR/TR08/lr6f7.html

{Trust Fund assets are projected to be $3.51 trillion in 2017. By law, these monies would have been loaned to the federal government.}

b) Web page: “Table V.A2.-Social Security Area Population as of July 1 and Dependency Ratios Calendar Years 1950-2085.” Office of the Chief Actuary, United States Social Security Administration. Last reviewed or modified March 25, 2008. https://www.socialsecurity.gov/OACT/TR/TR08/lr5a2.html

{The rate of inflation was used from these tables to calculate how the national debt of $270,522,171,896 from 1957 would have grown due to inflation alone up until 2007.}

[153] “H.R. 1259 - Social Security and Medicare Safe Deposit Box Act of 1999.” United States House of Representatives, March 24, 1999. http://thomas.loc.gov/

Sec 2 (b): “Purpose: It is the purpose of this Act to prohibit the use of Social Security surpluses for any purpose other than reforming Social Security and Medicare.”

The filibuster is widely viewed as one of the Senate’s most characteristic procedural features. Filibustering includes any use of dilatory or obstructive tactics to block a measure by preventing it from coming to a vote. The possibility of filibusters exists because Senate rules place few limits on Senators’ rights and opportunities in the legislative process. …

Senate Rule XXII, however, known as the “cloture rule,” enables Senators to end a filibuster on any debatable matter the Senate is considering. Sixteen Senators initiate this process by presenting a motion to end the debate. The Senate does not vote on this cloture motion until the second day after the motion is made. Then it usually requires the votes of at least three-fifths of all Senators (normally 60 votes) to invoke cloture. Invoking cloture on a proposal to amend the Senate’s standing rules requires the support of two-thirds of the Senators present and voting.

Invoking cloture usually requires a three-fifths vote of the entire Senate—”three-fifths of the Senators duly chosen and sworn.” If there are no vacancies, therefore, 60 Senators must vote to invoke cloture. In contrast, most other votes require only a simple majority (that is, 51%) of the Senators present and voting, assuming that those Senators constitute a quorum. In the case of a cloture vote, the key is the number of Senators voting for cloture, not the number voting against. Failing to vote on a cloture motion has the same effect as voting against the motion: it deprives the motion of one of the 60 votes needed to agree to it.

There is an important exception to the three-fifths requirement to invoke cloture. Under Rule XXII, an affirmative vote of two-thirds of the Senators present and voting is required to invoke cloture on a measure or motion to amend the Senate rules. This exception has its origin in the recent history of the cloture rule. Before 1975, two-thirds of the Senators present and voting (a quorum being present) was required for cloture on all matters. In early 1975, at the beginning of the 94th Congress, Senators sought to amend the rule to make it somewhat easier to invoke cloture. However, some Senators feared that if this effort succeeded, that would only make it easier to amend the rule again, making cloture still easier to invoke. As a compromise, the Senate agreed to move from a maximum of 67 votes (two-thirds of the Senators present and voting) to a minimum of 60 votes (three-fifths of the Senators duly chosen and sworn) on all matters except future rules changes, including changes in the cloture rule itself.11”

2. Notwithstanding the provisions of rule II or rule IV or any other rule of the Senate, at any time a motion signed by sixteen Senators, to bring to a close the debate upon any measure, motion, other matter pending before the Senate, or the unfinished business, is presented to the Senate, the Presiding Officer, or clerk at the direction of the Presiding Officer, shall at once state the motion to the Senate, and one hour after the Senate meets on the following calendar day but one, he shall lay the motion before the Senate and direct that the clerk call the roll, and upon the ascertainment that a quorum is present, the Presiding Officer shall, without debate, submit to the Senate by a yea-and-nay vote the question:

“Is it the sense of the Senate that the debate shall be brought to a close?” And if that question shall be decided in the affirmative by three-fifths of the Senators duly chosen and sworn -- except on a measure or motion to amend the Senate rules, in which case the necessary affirmative vote shall be two-thirds of the Senators present and voting -- then said measure, motion, or other matter pending before the Senate, or the unfinished business, shall be the unfinished business to the exclusion of all other business until disposed of.

Thereafter no Senator shall be entitled to speak in all more than one hour on the measure, motion, or other matter pending before the Senate, or the unfinished business, the amendments thereto, and motions affecting the same, and it shall be the duty of the Presiding Officer to keep the time of each Senator who speaks. Except by unanimous consent, no amendment shall be proposed after the vote to bring the debate to a close, unless it had been submitted in writing to the Journal Clerk by 1 o’clock p.m. on the day following the filing of the cloture motion if an amendment in the first degree, and unless it had been so submitted at least one hour prior to the beginning of the cloture vote if an amendment in the second degree. No dilatory motion, or dilatory amendment, or amendment not germane shall be in order. Points of order, including questions of relevancy, and appeals from the decision of the Presiding Officer, shall be decided without debate.

After no more than thirty hours of consideration of the measure, motion, or other matter on which cloture has been invoked, the Senate shall proceed, without any further debate on any question, to vote on the final disposition thereof to the exclusion of all amendments not then actually pending before the Senate at that time and to the exclusion of all motions, except a motion to table, or to reconsider and one quorum call on demand to establish the presence of a quorum (and motions required to establish a quorum) immediately before the final vote begins. The thirty hours may be increased by the adoption of a motion, decided without debate, by a three-fifths affirmative vote of the Senators duly chosen and sworn, and any such time thus agreed upon shall be equally divided between and controlled by the Majority and Minority Leaders or their designees. However, only one motion to extend time, specified above, may be made in any one calendar day.

	Voted YES	Voted NO	Not Voting
Republican	55
Democratic		44	1

{A total of 60 yea votes were needed to invoke cloture and allow the bill itself to be voted on.}

Page 11: “At the end of 2001, there will be $3.2 trillion in publicly held debt. About $2.0 trillion can actually be retired over the next 10 years.”

{The 2 trillion dollars to be retired is “publicly held debt.” The numbers cited do not include the debt owed to federal entities.}

NOTE: Page 201 contains a chart with a section labeled, “Held By.” Compare the following two line items:

(a) “Debt securities held as assets by Government accounts.” This is the debt owed to federal entities. Between 2001 and 2011, it rises by 3,782 billion dollars (goes from $2,219 billion to 6,001 billion).

(b) “Debt held by the public (gross).” – This is the debt owed to non-federal entities. Between 2001 and 2011, it falls by 2,252 billion dollars (goes from $3,410 billion to $1,158 billion).

NOTE: Page 201 contains a chart with a section labeled, “Debt Outstanding, End of Year.” Examine the line item, “Total, gross federal debt.” This is the national debt. Between 2011 and 2001, it increases by 1,530 billion dollars. Note that this figure matches the result of the calculation in the previous footnote.

[161] Web page: “Legislative History: Social Security Act of 1935.” United States Social Security Administration. Accessed October 31, 2008 at http://www.ssa.gov/history/35act.html

“SEC. 1104. The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress.”

[162] Web page: “Social Security History: Supreme Court Case: Flemming vs. Nestor.” United States Social Security Administration. Accessed on November 11, 2008 at http://www.ssa.gov/history/nestor.html

In this 1960 Supreme Court decision Nestor’s denial of benefits was upheld even though he had contributed to the program for 19 years and was already receiving benefits. Under a 1954 law, Social Security benefits were denied to persons deported for, among other things, having been a member of the Communist party. Accordingly, Mr. Nestor’s benefits were terminated. He appealed the termination arguing, among other claims, that promised Social Security benefits were a contract and that Congress could not renege on that contract. In its ruling, the Court rejected this argument and established the principle that entitlement to Social Security benefits is not contractual right.

[163] Web page: “Social Security History: Supreme Court Case: Flemming vs. Nestor.” United States Social Security Administration. Accessed on November 11, 2008 at http://www.ssa.gov/history/nestor.html

There has been a temptation throughout the program’s history for some people to suppose that their FICA payroll taxes entitle them to a benefit in a legal, contractual sense. That is to say, if a person makes FICA contributions over a number of years, Congress cannot, according to this reasoning, change the rules in such a way that deprives a contributor of a promised future benefit. Under this reasoning, benefits under Social Security could probably only be increased, never decreased, if the Act could be amended at all. Congress clearly had no such limitation in mind when crafting the law. Section 1104 of the 1935 Act, entitled “RESERVATION OF POWER,” specifically said: “The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress.” Even so, some have thought that this reservation was in some way unconstitutional. This is the issue finally settled by Flemming v. Nestor.

[164] Web page: “Social Security History: Supreme Court Case: Flemming vs. Nestor.” United States Social Security Administration. Accessed on November 11, 2008 at http://www.ssa.gov/history/nestor.html

TO ENGRAFT UPON THE SOCIAL SECURITY SYSTEM A CONCEPT OF “ACCRUED PROPERTY RIGHTS” WOULD DEPRIVE IT OF THE FLEXIBILITY AND BOLDNESS IN ADJUSTMENT TO EVER-CHANGING CONDITIONS WHICH IT DEMANDS. SEE WOLLENBERG, VESTED RIGHTS IN SOCIAL-SECURITY BENEFITS, 37 ORE. L. REV. 299, 359. IT WAS DOUBTLESS OUT OF AN AWARENESS OF THE NEED FOR SUCH FLEXIBILITY THAT CONGRESS INCLUDED IN THE ORIGINAL ACT [363 U.S. 603, 611], AND HAS SINCE RETAINED, A CLAUSE EXPRESSLY RESERVING TO IT “THE RIGHT TO ALTER, AMEND, ORREPEAL ANY PROVISION” OF THE ACT. SEC. 1104, 49 STAT. 648,42 U.S.C. SEC. 1304.

[165] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

Redemption of trust fund assets will allow continuation of full benefit payments on a timely basis until 2041, when the trust funds are projected to become exhausted. This redemption process will require a flow of cash from the General Fund of the Treasury. Pressures on the Federal Budget will thus emerge well before 2041. Even if a trust fund’s assets are exhausted, however, tax income will continue to flow into the fund. Present tax rates are projected to be sufficient to pay 78 percent of scheduled benefits after trust fund exhaustion in 2041 and 75 percent of scheduled benefits in 2082.

[166] Article: “Retiring With Dignity: Social Security Vs. Private Markets.” By William G. Shipman. The Cato Institute, August 14, 1995. http://www.cato.org/pubs/ssps/ssp2.html

Many of the individual account provisions included in recent solvency proposals would redirect some portion of each participating worker’s Social Security payroll tax to an individual account and later pay a reduced traditional monthly Social Security benefit. Some plans base the amount of reduction, or “benefit offset”, on a hypothetical or shadow account balance accumulated to retirement (or to entitlement to disability benefits in some proposals). The rate of return at which hypothetical accounts accumulate is generally set at a level such that workers should have a good chance of doing better with their actual investments over a working lifetime. These “benefit offsets” are a source of savings to the Social Security trust funds. Individual account provisions of this type generally do not, in themselves, improve the solvency of the Social Security trust funds. As a result, some proposals often include some additional revenues (like General Fund transfers) for a period of years before the benefit offset provision has matured.

[168] Memorandum: “Estimated Financial Effects of the ‘Social Security Personal Savings Guarantee and Prosperity Act of 2008.’” By Stephen C. Goss (Chief Actuary). United States Social Security Administration, May 21, 2008. http://www.ssa.gov/OACT/solvency/index.html

Under the plan specifications described below the Social Security program would be expected to be solvent and to meet its benefit obligations throughout the long-range period 2008 through 2082. The long-range [Social Security] actuarial deficit of 1.70 percent of payroll and the [Social Security] long-range unfunded obligation of $4.3 trillion in present value would be eliminated. In addition, trust fund assets expressed as a percentage of annual program cost are projected to be rising at the end of the 75-year period. Thus, the proposal meets the long-range criteria for sustainable solvency and would be expected to remain solvent for the foreseeable future. General Fund transfers are, however, expected to be needed under the plan in years 2032 through 2063, totaling $4.1 trillion in present discounted value. All estimates are based on the intermediate assumptions of the 2008 Trustees Report plus additional assumptions described below.

{This is one example of a personal account proposal and its transition costs. Several more proposal examples are available at the same Web address: http://www.ssa.gov/OACT/solvency/index.html}

[170] “The 2008 Annual Report of the Board of Trustees of The Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” The Board of Trustees of the Federal OASDI Trust Funds, March 28, 2008. http://www.ssa.gov/OACT/TR/TR08/tr08.pdf

($992/year) compounded annually over 45 years at 7% = $263,991 (year 2008 dollars)

NOTE: Calculated with starting balance of $0, adding $992 per year and compounding one time per year. As a benchmark, the Chilean personal ownership accounts have been earning about 7% above the rate of inflation per year. (see upcoming section).

[172] Book: Market Volatility. By Robert J. Shiller. MIT Press, 1989. Chapter 26.

Page 19: “Comprehensive reform should include the opportunity to freely choose to create your own personal investment accounts which are distinct from and supplemental to the overall Social Security system.”

“In the midst of the 2005 debate over Social Security privatization, Obama gave a major speech at the National Press Club forcefully arguing against privatization. He also repeatedly voted against Republican amendments that aimed to privatize Social Security or cut benefits.”

[177] Report: “National Vital Statistics Report, Volume 56, Number 9: United States Life Tables, 2004.” By Elizabeth Arias. Division of Vital Statistics, United States Centers for Disease Control, December 28, 2007. http://www.cdc.gov/nchs/data/nvsr/nvsr56/nvsr56_09.pdf

Page 3: “Table A. Expectation of life by age, race, and sex: United States, 2004.”

[178] Publication number 05-10024: “Understanding the Benefits.” United States Social Security Administration, May 2008. http://www.ssa.gov/pubs/10024.html

[179] Publication number 05-10024: “Understanding the Benefits.” United States Social Security Administration, May 2008. http://www.ssa.gov/pubs/10024.html

{There are exceptions to this if a person has child over the age of 18 who is disabled, and in certain cases where a person is divorced and their ex-spouse is still alive.}

[180] Report: “Strengthening Social Security and Creating Personal Wealth for All Americans.” The President’s Commission to Strengthen Social Security, December 21, 2001. http://www.csss.gov/reports/Final_report.pdf

Page 11: “Personal accounts improve retirement security by facilitating wealth creation and providing participants with assets that they own and that can be inherited, rather than providing only claims to benefits that remain subject to political negotiation.”

Pages 17-18: “In 1981, Chile became the first Latin American country to privatize its social security system. Chile switched from a defined-benefit, pay-as-you-go (PAYGO) system to a defined contribution system of individual accounts managed by private companies.”

[182] Report: “The Chilean Pension System, Fourth Edition.” Superintendencia de Administradoras de Fondos de Pensiones (Superintendant of The Chile Pension Fund Administration), May 2003. http://www.safp.cl/573/articles-3523_chapter2.pdf

Page 32: “Table II.5: BENEFITS OF THE THREE MAIN INSTITUTIONS IN THE OLD SYSTEM.”

Pages 19-20: “Under Chile’s new system, workers pay 10 percent of earnings (mandatory for employees, voluntary for the self employed) to an individual account run by a pension fund management company (administradora de fondos de pension,or AFP). They also pay about 1.98 percent for administrative fees and 0.64 percent for survivors and disability insurance for a total of about 2.62 percent (AIOS 1999).”

NOTE: According to the Superintendencia de Administradoras de Fondos de Pensiones, administrative fees have averaged higher than what is quoted here. In keeping with our Standards of Credibility, Just Facts is using the higher amount of 3.4%. See next note for details.

[184] Report: “The Chilean Pension System, Fourth Edition.” Superintendencia de Administradoras de Fondos de Pensiones (Superintendant of The Chile Pension Fund Administration), May 2003. http://www.safp.cl/573/articles-3523_chapter6.pdf

Page 152: “Table No. VI.11: MONTHLY SOCIAL SECURITY COST FOR A MEMBER WITH THE AVERAGE INCOME OF THE AFP SYSTEM.”

{The average of the values in the column labeled “Social Security Cost % of Average Income” is 3.4%. Note that this cost has been on a downward trend.}

[185] Report: “The Chilean Pension System, Fourth Edition.” Superintendencia de Administradoras de Fondos de Pensiones (Superintendant of The Chile Pension Fund Administration), May 2003. http://www.safp.cl/573/articles-3523_chapter2.pdf

{This range of rates represents those from the three main social security institutions (known as “Cajas”) in Chile in 1980. These three institutions involved 94% of the workers covered under Chile’s “old system.” The government collected between 32.5% and 41.04% of taxable wages for pensions, health benefits, industrial accidents and other things, but used the monies for these programs without distinction. See the bottom of page 28 and Table II.1 of this same document for explanation.}

[186] Report: “The Chilean Pension System, Fourth Edition.” Superintendencia de Administradoras de Fondos de Pensiones (Superintendant of The Chile Pension Fund Administration), May 2003. http://www.safp.cl/573/articles-3523_chapter4.pdf

Page 53: “The Pension System is based on individual capitalization. Each member has an individual account in which his/her social security contributions are deposited. These are capitalized and earn the yield on the investments made by the Administrators with the resources of the Funds.”

{This document is in Spanish and outlines the five funds available to investors.}

[188] Report: “The Chilean Pension System, Fourth Edition.” Superintendencia de Administradoras de Fondos de Pensiones (Superintendant of The Chile Pension Fund Administration), May 2003. http://www.safp.cl/573/articles-3523_chapter4.pdf

The worker chooses the institution that he/she wishes to join, and may change from one Administrator to another whenever he/she thinks it advisable. He/she also has a free choice with regard to the type of Pension Fund in which to put his/her social security savings, though in the case of older members and pensioners there are certain limitations attached to the choice of Funds with relatively higher risk, as far as their mandatory contributions are concerned.

Old-age pension: Age 65 (men) or age 60 (women). If aged 55 or older (men) or aged 50 or older (women) on August 19, 2004, retirement before the normal retirement age is possible for insured persons with a pension equal to at least 50% of the insured’s average wage in the last 10 years and at least equal to 110% of the minimum old-age pension. If younger than age 55 (men) or age 50 (women) on August 19, 2004, retirement before the normal retirement age is possible for insured persons with a pension equal to at least 55% of the insured’s average wage in the last 10 years (rising to 70% by August 19, 2010) and at least equal to a 150% of the minimum old-age pension (beginning August 19, 2007).

[190] Report: “The Chilean Pension System, Fourth Edition.” Superintendencia de Administradoras de Fondos de Pensiones (Superintendant of The Chile Pension Fund Administration), May 2003. http://www.safp.cl/573/articles-3523_chapter4.pdf

Decree-Law 3,500 established the existence of the following pension options from which members can choose, each with its own system of financing and administration:

a. Programmed Withdrawal: On retirement the worker keeps his/her Individual Capitalization Account in the Administrator to which he/she belongs, withdrawing annual amounts which are obtained by dividing the accumulated balance in the account by the capital required33. These annual amounts are divided into monthly instalments, are readjusted according to the rise in the cost of living and are recalculated every twelve months. With this kind of pension it is the AFP which manages the resources and the member who assumes the risks of longevity and reinvestment, while retaining the ownership of his/her funds. With the implementation of the law of multifunds, members receiving pensions under this option may choose any of the three lower-risk Funds (C, D and E) for the balance corresponding to their mandatory contributions. The reason for this restriction is to avoid pensioners taking high risks in investments made with their mandatory resources, since this might have an irreversible effect on the level of their retirement pensions and on the state guarantees for minimum pensions that are involved. Nonetheless, they may choose any of the five Funds for their voluntary contributions, agreed deposits and voluntary savings account. In addition to the above, the member may revoke his/her pension option decision at any time and change to the Life Annuity alternative.

b. Life Annuity: Members may sign a contract to have their pension paid by a Life Insurance Company (chosen by themselves). This company promises to pay them a constant monthly income, in real terms, as long as they live, and to pay a survivorship pension to their beneficiaries. In this way, the member’s resources are transferred to the Life Insurance Company which assumes both the financial risk and the risk of longevity on the part of the pensioner and his/her family group. Once the member has chosen this pension option and signed the contract, the decision is irrevocable, because the ownership of the resources is lost.

c. Temporary Income with Deferred Life Annuity: On deciding in favour of a temporary income, a contract is signed with a Life Insurance Company for the payment of a fixed monthly income, readjustable in UF, as from a date some time after the moment of retirement. Between the date on which the member requests this kind of pension and the date on which he/she begins to receive the life annuity, he/she receives a monthly pension financed with funds held specially for this purpose in his/her capitalization account at his AFP. In this way the member retains the ownership and assumes the financial risk of the part of his/her fund that remains in the AFP for a defined period in his/her life. On the other hand he/she does not assume the longevity risk, because that, like the financial risk for the second period, is covered by the Insurance Company with which he/she has signed the life annuity contract. The deferred life annuity cannot be less than 50% of the first temporary income payment nor more than 100% of that payment.

[191] Report: “The Chilean Pension System, Fourth Edition.” Superintendencia de Administradoras de Fondos de Pensiones (Superintendant of The Chile Pension Fund Administration), May 2003. http://www.safp.cl/573/articles-3523_chapter6.pdf

Page 152: “Table No. VI.11: MONTHLY SOCIAL SECURITY COST FOR A MEMBER WITH THE AVERAGE INCOME OF THE AFP SYSTEM.”

{The average of the values in the column labeled “Social Security Cost % of Average Income” is 3.4%.}

[192] Book: Terms of Trade: Glossary of International Economics. By Alan V. Deardoff. World Scientific, 2006.

“Real” is defined as “expressed in terms of the amounts of goods and services that something is worth at market prices” and “adjusted for inflation.”

Page 3: “By the early 1970s the system had clearly gotten out of hand. Contribution rates had increased from 16 to 26 percent of total payroll; the government’s contribution to the pension system had increased to about 38 percent of the system’s total revenues, or about 4 percent of gross domestic product; and the implicit debt of the system was over 100 percent of GDP.”

[194] Report: “The Chilean Pension System, Fourth Edition.” Superintendencia de Administradoras de Fondos de Pensiones (Superintendant of The Chile Pension Fund Administration), May 2003. http://www.safp.cl/573/articles-3523_chapter2.pdf

One of the main characteristics of the Social Security System then in force was that it originally functioned as a Partial Capitalization System. In other words, the active contributors financed the pensions of the passive, but at the same time a reserve fund was created with part of the resources collected. Although in the early stages it was possible to capitalize part of the resources collected, this became increasingly difficult, and it turned into a simple Pay-as-you-go System. In other words, no reserves were accumulated.

[195] Report: “The Chilean Pension System, Fourth Edition.” Superintendencia de Administradoras de Fondos de Pensiones (Superintendant of The Chile Pension Fund Administration), May 2003. http://www.safp.cl/573/articles-3523_chapter6.pdf

The liabilities of the Pension Funds are made up almost entirely of net worth; in fact in March 2002, 98.8% of the liabilities of the Type 1 Fund corresponds to net worth, while in the case of the Type 2 Fund this percentage rises to 99%. The net worth of the Pension Fund is made up of the individual capitalization accounts, the voluntary savings accounts and the compensation savings accounts. It also includes misplaced contributions and revenue which is in the process of being credited to personal accounts.

NOTE: The Pension Fund’s assets are matched evenly to its liabilities. The liabilities that are counted against the Pension Fund assets are made up principally of individual capitalization accounts. In other words, the program is self-funded and is not accruing a deficit.

[196] Report: “The Chilean Pension System, Fourth Edition.” Superintendencia de Administradoras de Fondos de Pensiones (Superintendant of The Chile Pension Fund Administration), May 2003. http://www.safp.cl/573/articles-3523_chapter4.pdf

Page 93: “Three times a year, in the months of February, June and October, all members whose capitalization account has shown some movement during the previous four-month period receive a summary, at their home address, of the movements in their account during the last four months: deposits, charges and balance, both in pesos and in units.”

[197] Report: “The Chilean Pension System, Fourth Edition.” Superintendencia de Administradoras de Fondos de Pensiones (Superintendant of The Chile Pension Fund Administration), May 2003. http://www.safp.cl/573/articles-3523_chapter6.pdf

[198] Data supplied by Jefe Division Estudios, Superintendencia de Pensiones (Chief of the Research Division, Superintendant of Pensions). Available in PDF format upon request.

[199] Web page: “History: Frequently asked questions.” United States Social Security Administration. Last reviewed or modified January 14, 2008.

Q21: When did Social Security cards bear the legend “NOT FOR IDENTIFICATION”?

A: The first Social Security cards were issued starting in 1936, they did not have this legend. Beginning with the sixth design version of the card, issued starting in 1946, SSA added a legend to the bottom of the card reading “FOR SOCIAL SECURITY PURPOSES -- NOT FOR IDENTIFICATION.” This legend was removed as part of the design changes for the 18th version of the card, issued beginning in 1972. The legend has not been on any new cards issued since 1972.

[201] Web page: “History: Frequently asked questions.” United States Social Security Administration. Last reviewed or modified January 14, 2008.

Q21: When did Social Security cards bear the legend “NOT FOR IDENTIFICATION”?

[202] Bill: “H.R. 5110, Public Law 103-465 – Bill Summary and Status for the 103rd Congress.” Congress of the United States of America, December 8, 1994. http://thomas.loc.gov/

[203] Bill: “H.R. 5110, Public Law 103-465 – Bill Summary and Status for the 103rd Congress.” Congress of the United States of America, December 8, 1994. http://thomas.loc.gov/

(a) EARNED INCOME CREDIT- Clause (i) of section 32(c)(3)(D) is amended to read as follows:

`(i) IN GENERAL- The requirements of this subparagraph are met if the taxpayer includes the name, age, and TIN of each qualifying child (without regard to this subparagraph) on the return of tax for the taxable year.’

(b) DEPENDENCY EXEMPTION- Subsection (e) of section 6109 is amended to read as follows:

`(e) FURNISHING NUMBER FOR DEPENDENTS- Any taxpayer who claims an exemption under section 151 for any dependent on a return for any taxable year shall include on such return the identifying number (for purposes of this title) of such dependent.’

(1) IN GENERAL- Except as provided in paragraph (2), the amendments made by this section shall apply to returns for taxable years beginning after December 31, 1994.

(A) returns for taxable years beginning in 1995 with respect to individuals who are born after October 31, 1995, and

(B) returns for taxable years beginning in 1996 with respect to individuals who are born after November 30, 1996.