75 Years of Social Security – Happy Anniversary?

- "Social Security has provided at least some measure of economic security to those who pay into the system, much as President Roosevelt envisioned when he signed the Social Security Act into law 75 years ago."
- "At the time of Social Security’s inception in 1935, there existed very few public programs to provide Americans insurance against old age or disability. Only about 3% of the elderly were receiving benefits under state plans, and only about 5% were receiving company retirement pensions."
- "Social Security has always been a pay-as-you-go system – the US Treasury can’t tell the difference between a dollar of Social Security tax revenue and a dollar from any other tax. The accounting convention of a Trust Fund reflects the fact that Social Security tax revenues have exceeded contemporaneous benefit payments, with the excess funding other government spending."
- "This year, however, Social Security is expected to fall into deficit, and it is likely to remain in the red through 2011, mainly because of high unemployment curtailing tax inflows. The Social Security Administration then expects three years of renewed surpluses (i.e., it assumes significant renewed job growth)."
- "In a few years, the program goes into deficit for the foreseeable future, mainly because of the surge in benefit payments to retiring (but not shy) baby boomers."
- "To cover these structural shortfalls, higher payroll taxes, reduced benefits, increased retirement ages, or some combination will be required. And in the aftermath of the 2007-09 financial crisis, it is hard to envision a groundswell of support for the George W. Bush-era privatization option."

CreditSuisse US Economics Digest 20100819

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