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Is the safety net in the US so strong that it couldn't benefit from more funding? Social security is not just for retirement benefits. It's supposed to be a na

Is the safety net in the US so strong that it couldn't benefit from more funding? Social security is not just for retirement benefits. It's supposed to be a national insurance.

bdcravens 8y ago
You're probably right. The point is, SS is taxed separately for a reason: it goes into a trust fund, to be used only by the SSA. However, even if you never changed that (meaning you remove the cap but still keep all payments in the trust fund) they would have to fundamentally change how benefits are paid out. The SS trust fund is used for SS retirement. SSI, while administered by the SSA, comes from the general fund.
wahern 8y ago
Insurance for what? Social Security is primarily a pension fund for retirees and survivors, and only incidentally for severely disabled workers (though what counts as disability has grown somewhat). As suggested, beneficiary benefits are a function of what was paid in. It's basically structured like a life insurance annuity--what economists consider the best retirement savings vehicle from a private market perspective. Even in the 1930s the specter of socialism made such a compromise necessary. Nobody was supposed to get unearned benefits except that survivors (widows and children) and the aged could receive a minimum, starvation benefit that exceeded contributions. The specter of socialism is still with us so it's not very reasonable to expect Social Security to become any more progressive. Simply maintaining the status quo will be difficult. Federal payroll taxes also include a separate Medicare tax. Medicare benefits aren't pegged to contributions which is why Medicare is a large and fast growing burden on the general fund, especially considering the apparent political infeasibility of raising tax revenue. Most states also impose separate disability and unemployment insurance payroll taxes.
- DVassallo 8y ago
  Why is it called "social security" then? It's meant to be a form of life, disability, health, and income insurance: https://www.ssa.gov/benefits/ https://www.ssa.gov/benefits/
  - wahern 8y ago
    Because it does provide social security, just a particular kind of social security. Like a company pension or life insurance annuity (and unlike a 401k or IRA), you can't outlive your monthly benefit. The contribution and benefit formulas use actuarial tables so that contributions from beneficiaries who die earlier than expected are used to pay beneficiaries who live longer than expected. (And if you look at actuarial tables from the 1920s and 1930s, they literally nailed life expectancies up to, at least, the 1990s. What they didn't do was bake those actuarial tables into the legislation, instead expecting Congress to periodically adjust age limits.) Because it's mandatory, you don't end up with a large population of people who chose not to save for retirement living on the streets and otherwise being a burden on society--by their presence if not because of actual welfare payments. Disability and survivors benefits are a form of income insurance, they're just predicated on the head of the household having actually worked and made minimal contributions. The income cap and benefit formulas are just progressive enough to bridge the gap between providing minimal benefits and what could be reasonably funded through contributions, considering political realities. Back then healthcare wasn't much of a concern. Medical science was nascent, care was much more affordable, and expectations were generally very different. Medicare was passed decades later, and of course we're still trying to figure out how healthcare should work. To reiterate, the specter of socialism meant it was all tied to having actually worked and it was not intended to substantially address wealth inequity. Social security and social justice are not synonymous. You and I may think they mostly overlap, but at least half the country votes otherwise--today and 90 years ago. In any event, we have other programs to address those issues.
- DVassallo 8y ago
  If I die tomorrow at 35, what will happen to the $52K I paid in social security tax? It's not a fund; It's an insurance.
  - wahern 8y ago
    Insurance describes properties of the system. A fund is simply an account for settling liabilities. A private insurance company also has a fund for settling liabilities, regulated by law to ensure there are enough assets to cover expected liabilities according to very conservative risk formulas. An entity that assumes liabilities without maintaining such a conservative fund isn't an insurance company--it's just a business venture (high risk) or a bank (low to moderate risk). It's not worth nit-picking because Social Security is a hybrid system. Though structured much like a private insurer, it has a significant progressive element (certainly for its time) and is backed by the full faith and credit of the U.S. in the sense that it only holds U.S. bonds and also in the sense that the national government is expected to either cover funding gaps or adjust the benefits formula. And there are other programs, like SSI, created later and administered by the same departments. It's a complex picture. But if the question is why isn't Social Security better--more progressive, funded differently, etc--you have to look at the history.
  - bdcravens 8y ago
    Pensions work the same way.

Is the safety net in the US so strong that it couldn't benefit from more funding? Social security is not just for retirement benefits. It's supposed to be a national insurance.

bdcravens 8y ago

You're probably right. The point is, SS is taxed separately for a reason: it goes into a trust fund, to be used only by the SSA. However, even if you never changed that (meaning you remove the cap but still keep all payments in the trust fund) they would have to fundamentally change how benefits are paid out. The SS trust fund is used for SS retirement. SSI, while administered by the SSA, comes from the general fund.

wahern 8y ago

Insurance for what? Social Security is primarily a pension fund for retirees and survivors, and only incidentally for severely disabled workers (though what counts as disability has grown somewhat). As suggested, beneficiary benefits are a function of what was paid in. It's basically structured like a life insurance annuity--what economists consider the best retirement savings vehicle from a private market perspective. Even in the 1930s the specter of socialism made such a compromise necessary. Nobody was supposed to get unearned benefits except that survivors (widows and children) and the aged could receive a minimum, starvation benefit that exceeded contributions. The specter of socialism is still with us so it's not very reasonable to expect Social Security to become any more progressive. Simply maintaining the status quo will be difficult. Federal payroll taxes also include a separate Medicare tax. Medicare benefits aren't pegged to contributions which is why Medicare is a large and fast growing burden on the general fund, especially considering the apparent political infeasibility of raising tax revenue. Most states also impose separate disability and unemployment insurance payroll taxes.

DVassallo 8y ago
Why is it called "social security" then? It's meant to be a form of life, disability, health, and income insurance: https://www.ssa.gov/benefits/ https://www.ssa.gov/benefits/
- wahern 8y ago
  Because it does provide social security, just a particular kind of social security. Like a company pension or life insurance annuity (and unlike a 401k or IRA), you can't outlive your monthly benefit. The contribution and benefit formulas use actuarial tables so that contributions from beneficiaries who die earlier than expected are used to pay beneficiaries who live longer than expected. (And if you look at actuarial tables from the 1920s and 1930s, they literally nailed life expectancies up to, at least, the 1990s. What they didn't do was bake those actuarial tables into the legislation, instead expecting Congress to periodically adjust age limits.) Because it's mandatory, you don't end up with a large population of people who chose not to save for retirement living on the streets and otherwise being a burden on society--by their presence if not because of actual welfare payments. Disability and survivors benefits are a form of income insurance, they're just predicated on the head of the household having actually worked and made minimal contributions. The income cap and benefit formulas are just progressive enough to bridge the gap between providing minimal benefits and what could be reasonably funded through contributions, considering political realities. Back then healthcare wasn't much of a concern. Medical science was nascent, care was much more affordable, and expectations were generally very different. Medicare was passed decades later, and of course we're still trying to figure out how healthcare should work. To reiterate, the specter of socialism meant it was all tied to having actually worked and it was not intended to substantially address wealth inequity. Social security and social justice are not synonymous. You and I may think they mostly overlap, but at least half the country votes otherwise--today and 90 years ago. In any event, we have other programs to address those issues.
DVassallo 8y ago
If I die tomorrow at 35, what will happen to the $52K I paid in social security tax? It's not a fund; It's an insurance.
- wahern 8y ago
  Insurance describes properties of the system. A fund is simply an account for settling liabilities. A private insurance company also has a fund for settling liabilities, regulated by law to ensure there are enough assets to cover expected liabilities according to very conservative risk formulas. An entity that assumes liabilities without maintaining such a conservative fund isn't an insurance company--it's just a business venture (high risk) or a bank (low to moderate risk). It's not worth nit-picking because Social Security is a hybrid system. Though structured much like a private insurer, it has a significant progressive element (certainly for its time) and is backed by the full faith and credit of the U.S. in the sense that it only holds U.S. bonds and also in the sense that the national government is expected to either cover funding gaps or adjust the benefits formula. And there are other programs, like SSI, created later and administered by the same departments. It's a complex picture. But if the question is why isn't Social Security better--more progressive, funded differently, etc--you have to look at the history.
- bdcravens 8y ago
  Pensions work the same way.