Social Security is my Roman Empire

But if you want actual *sources* check here

It’s so hard for me to write about Social Security because I want to go so far in the weeds but at the same time the things I accept as facts so obvious they don’t need citations other people might be surprised to hear. In this companion piece, I put out some backstory, some sources, and generally more detail.

The Bane of Conservative’s Existence

Social Security: (with citations in red)

• collects an absolutely massive amount of taxes (check out specifics from SSA)

• pays out an absolutely massive amount in benefits (here’s OASI and DI)

• is the largest social program in the world (I’m pretty sure!) (our economy is so large and we have such a big population, even though other countries spend a higher share of their economy on social welfare spending, dollar for dollar Social Security will be the largest)

• is incredibly, indisputably, without doubt very good at its job (one way to see this is to look at the number of people who are kept above poverty because of the program’s benefits—it’s 23 million people, including 1 million children; or you can look at this figure, that shows per capita Social Security spending and elderly poverty over time; or you can compare elderly poverty to adult and child poverty and notice which one falls consistently over time and is insulated from recessions).

• has virtually no waste, fraud, or abuse (you can read more about fraud from this summary or you can read the Office of Inspector General report; people who work on Social Security fraud will tell you that most fraud is that a beneficiary dies and someone (a spouse, a kid) try to keep collecting; the program has multiple ways of checking this and when it happens it claws the money back)

• has the lowest administrative costs of any public program in US history (it’s 0.4%, and in fact past commissioners of Social Security have argued this is too low, they need more staff)

• is wildly popular, across party lines, across races, across genders, across education, across income, across generations (here’s a history of its polling as well as a big poll from its 90th anniversary)

• it’s so popular even its taxes are popular (indeed! Americans have said pretty consistently that they view the taxes as their contributions and they would prefer tax increases to benefit cuts, which you can read about here or scroll through Gallup polls here).

• it ran a massive surplus for so many years that the federal government (read: Congress) is actually indebted to Social Security and owes it over $2 trillion (the social security trust fund is held in Treasury bonds which can be redeemed at face value at any time, and those bonds, which represent a safe investment from Social Security’s perspective is a small loan from the Treasury’s perspective; this is a source of a common myth that Congress has stolen from Social Security, which it hasn’t, but you can read about that and other myths at AARP; latest trust fund balance is $2.5 trillion)

Why Did Privatization Fail in 2005?

The best account I have read of Bush’s failed effort to privatize Social Security is this one from 2007, which cites a mix of issues: Bush wasn’t as popular as most re-elected presidents are, it was fairly expensive, but most importantly people didn’t want it.

Are Demographics Really not a Problem for Social Security?

They are and aren’t. The program’s underlying strength is a function of economics and demographics, which means that either can worsen or improve the program’s finances. Since 1983, detractors have been running the same story of the Baby Boomers are too big or people are living too long or people are having fewer kids. But all of that was reasonably well predicted in the 1983 reform. As in, reformers knew that people would live longer and have fewer kids and balanced the program around that prediction. Over the past 43 years, the two biggest hits the program took were economic, namely:

1. Low or no wage growth among the bottom 90% of workers in the 1980s-1990s.

2. The Great Financial Crisis and Recession

The chief actuary of Social Security testified in front of the Senate Budget Committee in 2023 and he explained as much. He first explained that in terms of the demographics, the 1982 projections basically nailed it:

“So why are we now facing a need for action to avert trust fund reserve depletion in the mid-2030s, 20 years sooner than expected in 1983? The age distribution of the population has followed expectations with continued low birth rates and modest increases in life expectancy at age 65. (Note that the increase in life expectancy at age 65 projected in the 1982 Trustees Report through 2015 matched the actual outcome.)”

But they did have a big miss:

“The primary unexpected change was the large relative increase in earnings for the highest earners.”

He goes on to explain that in 1983, the tax cap—the earnings above which there is no Social Security tax—was set to cover 90% of all wages earned. About 6% of people earn above the cap. Well, fast forward to today, and it’s still 6% of people who earn above the cap, but now the cap only covers 82% of all wages earned. Earnings for the 6% who earned above the cap grew much faster than earnings for 94% who earned below it. The way that the cap was adjusted every year essentially undershoots the growth among the richest.

In a separate presentation, he gets to the specifics: in 1983, the actuaries predicted that average wages would grow 24% between 1983 and 2000. In reality, they grew 28%. Not bad! But, wages for the 6% who earn above the cap grew 62%. Wages for the 94% of workers who earn below the cap grew just 17%. Very bad!

Social Security is collecting less in taxes because of wage inequality.

The second hit was the Great Recession. It earned it’s title. The US shed jobs for over two years, took another four to recover those lost, and in the meantime applications into Social Security spiked. Fewer people earning wages, wage growth low—that’s the worst combination for Social Security.

BUT, I think going forward, demographics pose a much bigger problem than they have in the past because the birth rate is falling more than expected and the US is starting to lose immigrants. Immigrants have sustained our population growth for the past 30 years. Social Security assumes a stable immigration rate based on historical averages. This year and last have been historical in the worst way. If immigration truly falls, Social Security is in a much worse state.

The 1935 Social Security Act didn’t cover every worker?

Here were the excluded industries:

• Domestic workers

• Agricultural workers

• Self-employed individuals (including farm proprietors)

• Persons working in the nonprofit sector

• Professionals such as self-employed doctors, lawyers, and ministers

• Seamen in the merchant marine

• Employees of charitable or educational foundations

• Employees of the American Society for the Prevention of Cruelty to Animals

• Persons aged 65 or older

• Casual laborers

• Members of Congress

• Employees of federal, state, and local governments—everyone from the president of the United States to post office clerks

The first two were particularly controversial, as that meant the majority (65%) of Black workers were excluded.

How does paid leave work?

In most states that have paid leave, they run a social insurance model on top of their unemployment system, essentially building off of the administrative infrastructure that they already have. Some states, on the other hand, instead have private insurance that employers have to buy. The Bipartisan Policy Center has a summary of the programs.

I don’t think any state goes far enough as the bare minimum that we need—13 weeks at 100%—but that’s because states don’t have the same resources that the federal government does and states still compete with each other over employers, meaning they can’t be too ambitious.

I feel like calling Social Security ‘insurance’ is just messaging and doesn’t matter.

We know Social Security because it won—there were numerous proposals to help workers and the elderly that were swimming about during the years leading up to and during the Depression, but Social Security became law and those became largely forgotten. The appeal of Social Security at the time was its insurance structure. You can read about the development of the program and the competing plans on Social Security’s Historian’s website.

And here’s a bit of history I’ve always loved: America’s first champion of social insurance was Teddy Roosevelt. He made it part of his Progressive Party platform that supported his unsuccessful presidential run in 1912.

I think risk is a powerful notion because it is the counterpoint to personal fault. Why is someone poor in retirement, is it because the capitalist, cyclical economy we live in creates hardship and loss as much as success and excess, or because some people are too lazy or stupid to save? Risk comes from without, personal fault comes from within. Risk requires response, personal fault may elicit charitable help. Risk is inefficient if left uninsured, personal fault is unfortunate but doesn’t hurt the economy per se.

Has Social Security really never missed a benefit?

The Social Security Administration was on card tables in the Superdome in the hours after Hurricane Katrina getting the sheltered residents their checks. It had workers combing the flight manifests after 9/11 to get survivors their checks as soon as possible. It’s not that it doesn’t miss, it’s that the job of the agency is to get every American their benefit no matter the circumstance.

The 9/11 actions you can still read about from an old copy of OASIS, the internal staff magazine. A blog post that gave a ten-year retrospective about the agency during Katrina is not available any more on the SSA blog. I linked to it in the Spring of last year, and even found the muckrack page of the author, but no piece. You can still read about their first response in a press release from 2005.

For what it’s worth, Trump made the promise over and over again that he wouldn’t cut Social Security, but he lied. The DOGE cuts and policy changes have resulted in long wait times to process applications, especially for survivors and disability claims. A delay in benefits is also a cut. Chabeli Carrazana from the 19th news has great and heartbreaking reporting on how processing delays is hurting families.

I have more questions!

Drop them into a comment here and I’ll try to respond.

Photo by Wesley Tingey on Unsplash