Social Security (United States)

[18] The Act was an attempt to limit unforeseen and unprepared-for dangers in modern life, including old age, disability, poverty, unemployment, and the burdens of widow(er)s with and without children.

"[22][23] The provisions of Social Security have been changing since the 1930s, shifting in response to economic worries as well as coverage for the poor, dependent children, spouses, survivors and the disabled.

[26] Changes in Social Security have reflected a balance between promoting "equality" and efforts to provide "adequate" and affordable protection for low wage workers.

Because wages typically grow faster than prices, the PIAs for workers turning 62 in the future will tend to be higher in real terms but similar relative to average earnings in the economy at the time age 62 is attained.

To minimize the Social Security payments to those who have not contributed to FICA for 35+ years and are eligible for federal, state and local benefits, which are usually more generous, the U.S. Congress passed the Windfall Elimination Provision (WEP).

[43] The WEP provision does not eliminate all Social Security or Medicare eligibility if the worker has 40 quarters of qualifying income, but calculates the benefit payments by reducing the 90% multiplier in the first PIA bendpoint to 40–85% depending on the number of Years of Coverage.

Depending on the state of residence, a claimant whose initial application for benefits is denied can request reconsideration or a hearing before an Administrative Law Judge (ALJ).

In some states, SSA has implemented a pilot program that eliminates the reconsideration step and allows claimants to appeal an initial denial directly to an ALJ.

In addition, both workers and employers pay Tier II taxes (about 6.2% in 2005), which are used to finance railroad retirement and disability benefit payments that are over and above social security levels.

Others argue that it has specific legal significance because the Treasury securities it holds are backed by the "full faith and credit" of the U.S. government, which has an obligation to repay its debt.

[92] The SSA authority to make benefit payments as granted by Congress extends only to its current revenues and existing Trust Fund balance, i.e. redemption of its holdings of Treasury securities.

This unfunded obligation is expressed in present value dollars and is a part of the Fund's long-range actuarial estimates, not necessarily a certainty of what will occur in the long run.

The current Social Security formula used in calculating the benefit level (primary insurance amount or PIA) is progressive vis-à-vis lower average salaries.

The progressive nature of the PIA formula would in effect allow these workers to also get a slightly higher Social Security Benefit percentage on this low average salary.

When the costs of the Social Security program started to exceed income in 2018, the trust fund began to empty and, without changes made to the system, will be fully depleted in the future.

In a survey of 210 members of the American Economics Association published in November 2006, 85 percent agreed with the statement: "The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged.

One projection illustrates the relationship between the two programs: From 2004 to 2030, the combined spending on Social Security and Medicare is expected to rise from 8% of national income (gross domestic product) to 13%.

[182] Private sector Ponzi schemes are also vulnerable to collapse because they cannot force new entrants to contribute, whereas participation in the Social Security program is usually mandatory upon beginning one's first job in the United States.

The purpose is to protect the workers from corporate mismanagement and outright bankruptcy of the plan, although in practice many private pension funds have fallen short in recent years.

"[203] "The hope behind this statute is to save men and women from the rigors of the poor house as well as from the haunting fear that such a lot awaits them when journey's end is near.

"[204] The constitutionality of Social Security is intricately linked to the evolving nature of U.S. Supreme Court jurisprudence on federal power (the 20th century saw a dramatic increase in allowed congressional action).

When Social Security was first passed, there were significant questions over its constitutionality as the Court had found another pension scheme, the original Railroad Retirement Act, to violate the due process clause of the Fifth Amendment.

Despite this, no serious challenges regarding the system's constitutionality are now being litigated, and Congress's spending power may be more coextensive, as shown in cases like South Dakota v. Dole[208] during the Reagan Administration.

"Whether on our online website or by phone, Social Security will never ask you for your credit card information or your PIN," Commissioner Jo Anne B. Barnhart reported.

[209] In August 2024, a class-action lawsuit was filed against National Public Data, claiming that the company permitted hackers to steal sensitive private information, including Social Security Numbers, covering millions of individuals.

In addition, when investigating fraud in other SSA programs, the Social Security Administration may request investigatory assistance from other law enforcement agencies including the Office of the Inspector General as well as state and local authorities.

[215] Because of the importance of Social Security to millions of Americans, many direct-mail marketers packaged their mailings to resemble official communications from the SSA, hoping recipients would be more likely to open them.

In 2023, total income and interest earned on assets were projected to no longer cover expenditures for Social Security, as demographic shifts burden the system.

The bequest effect occurs when a taxpayer recognizes a decrease in resources stemming from the Social Security tax and compensates by increasing personal savings to cover future expected costs of having children.

The Bureau of Labor Statistics routinely checks the prices of 211 different categories of consumption items in 38 geographical areas to compute 8,018 item-area indices.