Evaluation of the Social Security Act

1860 words (7 pages) Essay in Social Policy

06/08/19 Social Policy Reference this

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For the Social Security Act was created in to law by President Franklin D. Roosevelt in 1935. (History.com) The Social Security Act includes a seniority benefits program, unemployment protection, medical coverage for those in economic stress, economic assistance for widows and their children, and monetary assistance for incapacitated individuals. The overall purpose for Social Security was to assist the disadvantage Americans financially through the idea of “social insurance.” The creation of Social Security came with many challenges and several solutions. Today the issues of Social Security still remain and politically it is not a central concern.

According to the Social Security Administration for 2017, approximately 67 million Americans receive benefits from programs managed by the Social Security Administration. For the public Social Security is highly accepted. The acceptance of Social Security only brings about policy concerns for not only legislators but the public as well. These policy concerns have progressed slowly due to political ties to such programs within Social Security. Today the policy concerns related to Social Security are so evident that fundamental reform is necessary.

The first policy concern related to Social Security is the retirement test. The retirement test is a tax of $1 for every $2 earned for one who applied early for Social Security. (Peters 302) According to AARP, in order to take the retirement test, you must be the age of 62. To reap full benefits of Social Security, one must apply within the normal retirement age of 65. The retirement test was created in hopes of protecting individuals that were too old to work compared to those that could. The idea that Social Security is based off the principle of a “social insurance” stressed the need for a retirement test. Over the years legislators have voiced reasons why the retirement test should be removed. The first is the conceived notion of Social Security as a means-tested benefit rather than a social insurance. (Peters 302) For retirees that want to gradually move out the work force are punished for accessing their Social Security funds early. If the retirement test is eliminated then the penalty applied for accessing funds early would be non-existent. Another reason why the retirement test needs to be removed is the life expectancy for Americans has increased. The retirement age to receive full benefits from Social Security is 65. Today many Americans of the age of 65 are still able work. If the retirement test is removed many Americans would be able to work without paying the penalty aiding both the labor force and retiree. The retiree will then not suffer much of an economic burden.

A second policy concern associated with Social Security is the fixed retirement age. According to Gallup the average retirement age is 62. By lowering the retirement age many Americans will benefit from both retirement income and Social Security in good health. For many Americans would rather retire early to enjoy retirement. On the contrary, according to The Motley Fool, the Republican party strongly suggests in raising the retirement age. (They suggest raising the age between 68-70.) By raising the retirement age of receiving full benefits, program costs will be reduced and Americans would not depend on the program as long.  According to Brookings.edu by raising the retirement age would aid the funding problem related to the Social Security program. Currently the Social Security program has been overhauled due to the financing gap that first began in 1983. (Brookings) By raising the retirement age would increase promised benefits and begin to close that gap.

The third policy concern is Social Security in relation to the economy. Social Security has a substantial effect on the economy. For many Americans do not save much for retirement due to being financed through Social Security. Social Security does not accrue in a large amount over time giving the U.S. economy less capital within accumulation. (Peters 306) By Americans not saving more for retirement creates a loss within the Social Security program. According to PBS, for the next 75 years Social Security is expected to pay out $159 trillion in benefits which is more than it will collect in taxes. This effect is due to the unequal ratio of the beneficiary-to-worker. (Comparing those who are benefiting from Social Security to workers paying into the system.) A solution to aid in Social Security in relation to the economy, would be encouraging Americans to save more. By Americans saving more for retirement Social Security could be relieved of exhausting its benefits. Another solution in aiding to Social Security within the economy is making sure Americans are well informed about the Social Security program. By strengthening public understanding establishes a strategic plan for recipients. According to the Center on Budget and Policy Priorities, another solution would be having the government enforcing employer-sponsored programs such as health insurance. This will be able to cut back spending for programs such as Medicaid and Medicare. By doing this more individuals would have access to other Social Security benefits and can also begin to erode the solvency gap. According to the Social Security Administration in 2010, President Obama focused on Social Security reform on the context of the federal budget. He proposed the creation of the National Commission on Fiscal Responsibility and Reform. This commission was in charge of reviewing the federal budget while also focusing on Social Security and other entitlement programs. Today the nonpartisan commission continues to make outreach efforts within Washington. A major policy improvement they have focused on was the McCrery-Pomeroy SSDI Solutions Initiative. This initiative focused on changes related to Social Security Disability Insurance. The National Commission on Fiscal Responsibility and Reform continues to push the current administration on creating a plan to cut back on Social Security spending.

The final policy concern is financing Social Security. In relation to the U.S. economy, the overall concern for Social Security, is how will the program financially maintain benefits to individuals who have paid into it. According to the Social Security Administration, approximately 50% of Americans depend on Social Security for their income. Social Security remains an essential component for household income. Currently Social Security is financed mainly through payroll taxes. It is projected by the Center on Budget and Policy Priorities that by 2034 trust funds within Social Security will be exhausted. This is due to the distortion of workers and those receiving benefits from the program. A solution professed by the democratic party, for financing Social Security, would be raising additional revenue. According to The Motley Fool their plan is to either eradicate or increase taxes through payroll. By eradicating the payroll tax will eliminate Social Security but by increasing the payroll tax will begin to save the program. According to the Social Security Administration the current tax rate is 12.4%. (half is paid by employer while the other half is paid by employee.)  If the payroll tax is increased this will begin to close the solvency gap. This will also help in providing continued benefits for individuals who already paid in to the program.

The likelihood of success of such proposals on Social Security reform is very slim. According to Investopedia a few changes are expected in 2019 but overall within the program changes are still non-existent. The tax cap will remain the same at 6.2%. The full retirement age will set to increase only by six months. (66 and six months) For individuals who continue to work, while receiving Social Security benefits, that have not hit the full retirement age, will have a limit of $1 for every $3 earned. The threshold for Social Security will increase by $70 for individuals that are blind and $40 for the non-blind. The last minor change is Social Security recipients now have access to view their COLA (Cost of Living Adjustment) notice online.

Overall it is very clear that the Social Security program is in need of some type of reform. It seems the current placement of a few Social Security policies are extremely outdated. Policies centered around the retirement test, retirement age, the economy, and financing within the program have created challenges for both recipients. It seems the current administration seems to be unfocused about Social Security reform. The sooner Social Security reform becomes in effect the better outcome for longevity for the program will be. So many Americans rely on Social Security, with the creation of reform can help ensure that recipients will continue to receive desired benefits.

Work Cited

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  • Burtless, Gary. “Increasing the Eligibility Age for Social Security Pensions.” Brookings, Brookings, 10 May 2017.
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  • Editors, History.com. “Social Security Act.” History.com, A&E Television Networks, 26 Jan. 2018.
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  • “Policy Basics: Top Ten Facts about Social Security.” Center on Budget and Policy Priorities, Center on Budget and Policy Priorities, 6 Sept. 2018.
  • Probasco, Jim. “Social Security Increase Highest Since 2012.” Investopedia, Investopedia, 29 Oct. 2018.
  • Romig, Kathleen. “Increasing Payroll Taxes Would Strengthen Social Security.” Center on Budget and Policy Priorities, Center on Budget and Policy Priorities, 11 Oct. 2017.
  • Smith, Barbara A., and Kenneth A. Couch. “How Effective Is the Social Security Statement? Informing Younger Workers about Social Security.” Social Security Administration Research, Statistics, and Policy Analysis, Social Security Office of Retirement and Disability Policy, 1 Nov. 2014.
  • “Social Security.” How Is Social Security Financed? | Press Office | Social Security Administration, Social Security Press Office, 2018.
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  • Williams, Sean. “Analysis: The Must-Read Trump Quote on Social Security’s Future.” USA Today, Gannett Satellite Information Network, 9 July 2018.
  •          Williams, Sean. “When It Comes to Social Security, Republicans and Democrats Agree on Only 1 Thing.” The Motley Fool, The Motley Fool, 16 Dec. 2017.

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