Why Social Security Benefits Are Disappearing

People with disabilities are already learning first-hand what America’s baby-boomer generation will soon discover for itself; the Social Security system is underfunded, and as a result benefits are quickly disappearing.

The Social Security system was developed during the Roosevelt administration as a response to widespread poverty during the Great Depression. Amended in 1965 to include disability benefits, the Social Security program was specifically developed to help prevent future situations that might create another depression.

Nearly all working Americans pay into the Social Security system, regardless of age. The Federal Insurance Contributions Act (FICA) requires a certain portion of every paycheck to be paid directly to the U.S. government, to be used specifically for the funding of social security programs including Medicare, retirement pension, survivor benefits (pension for a widow or widower), AND disability insurance. These are the taxes that make your paycheck look smaller than you think it should (oh, those taxes). But what are Americans really getting for their money?

Most people are familiar with one aspect of Social Security – retirement funds. Currently, citizens can apply for social security retirement benefits when they turn either 65 or 67, depending on the year they were born. But what if something happens to the primary wage earner in your family before retirement age? Well, workers who become disabled due to an injury or illness are supposed to be eligible to recover some of those taxes in the form of Social Security Disability Insurance (SSDI) benefits. Unfortunately, Americans with disabilities are discovering that what they are eligible for in theory and what they can actually recover are two very different things.

The reason for the gap between people who should be eligible for benefits and those who are actually able to receive benefits is simple math. The Social Security system used to be fully funded by FICA taxes; the payroll taxes for each year paid for the benefits given out each year. Indeed, there was a surplus of taxes above the needs for each year’s benefits. In order to maintain the system, the government created a Social Security trust fund in which they invested the remainder of the taxes. Eventually, two situations arose which had the effect of depleting the fund.

First, the U.S. government borrowed against the assets in the fund. Borrowing against assets has the automatic effect of devaluing the asset; if you have a house worth $100,000 dollars (lucky you), then you have $100,000 is assets. If you take out a loan worth half the amount of the house, $50,000, then you only have a remaining $50,000 in assets – half what you had without the loan. Though the example is simplified, the same is true of the Social Security trust fund. The government borrowed against the fund to pay for other programs, thus the value in the trust fund began to decrease.

Second, the baby boomer generation reached maturity. In the 1980’s, the government’s financial projections stated that there were so many people in the baby boomer generation (and future generations, as they had their own children) that the Social Security trust fund, already devalued by the borrowing the government had done against it, would not be able to sustain itself by using FICA taxes. In other words, the Social Security system is going bankrupt. There are more people who need benefits than there is money in the system. The system was designed to be a pay-as-you-go system, with each year’s payroll taxes paying for the same year’s benefits. It was not designed to be a financial asset for the U.S. government to borrow against, nor did the original design take into account the exponential growth in the population.

Unfortunately, rather than educate citizens about the system, the government tends to provide hyperbole and half-measures which do more to cover up the problem than they do to solve it. So instead of delivering benefits to everyone who is eligible, the government now finds ways to reduce benefit payouts. The minimum retirement age at which workers can apply for pension benefits is rising. Fewer and fewer people are able to receive medical benefits, such as Medicare or disability insurance, even though they paid into the system as FICA required.

Rather than explain to applicants why benefits are being denied, the government takes advantage of our nation’s premium on values such as independence and strong work ethics, and blames individuals for not “deserving” benefits, ostensibly because they are not trying hard enough to earn money or live independently. If you were born after 1937, you do not “deserve” pension benefits at age 65 (and the age will continue to be raised). If you are not dying in the courtroom (sometimes even if you are), you do not “deserve” disability benefits. If you are denied disability under SSDI, you do not “deserve” Medicare benefits. The result is that American citizens, citizens who have worked and paid into the Social Security system, are being denied Social Security benefits left and right. Our most vulnerable citizens, those in poverty, the elderly, the disabled, children, the unemployed or under-employed, are being left to fend for themselves, while the government fosters the myth that denials are a result of applicant fraud - not federal fund mismanagement. But the fact is that even according to the Social Security Administration’s public reports, only about 12% of SSDI benefits are terminated due to lack of medical need; the remaining terminations are due to legal technicalities. The problem does not lie with the applicants, who are fully occupied with meeting basic survival needs. The problem lies in the government’s misuse of the system. Privatization, although it may become necessary, will not fix this system. Just as we currently have a private medical system and our most vulnerable citizens lack heath care, a private social security system will leave these (and more) citizens vulnerable to abject poverty, along with all the associated societal ills.

To learn more about the problems facing the Social Security system and what you can do to change it, go to socialsecurityreform.org