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Some Straight Talk for Younger People on Social Security (and Medicare too)

As the scaremongering begins, this is your fight too!

None of this spending has made the US more secure. Meanwhile, if we cut that spending in half and applied even a fraction of that saved sum, Social Security could be vastly improved and funded into the indefinite future without raising taxes. A superior national healthcare system free to all Americans could also be established, freeing us of insurance premiums, health care co-pays, and of indentured servitude to our employers for underwriting at least part of our health insurance bill. Those are things that would really provide security to Americans.

A Little History

Looking back, Social Security, established in 1935, was a central element of President Franklin Roosevelt's New Deal attack on the Great Depression and the widespread poverty it had caused. It remains one of the most successful social programs in the history of the United States, massively reducing poverty not just among the elderly, but among the children of the elderly who no longer had to bear the dual burden of supporting a young family as well as aging parents and grandparents.

It remained that way until the late 1970s, when it became increasingly apparent that a greatly improved standard of living, thanks to social programs like Social Security, Aid to Families with Dependent Children, supplemental food programs like WIC and Food Stamps, and especially better medical care with the 1965 establishment of Medicare, Medicaid and federal health clinics, as well as advances in medical science, had combined with the advancing age of a huge population bulge known as the "Baby Boom" generation born to parents who started families after the end of World War II, to create a huge strain on the retirement system -- a strain that would show up as he Boomer generation began retiring in 2007, the year that the first post-WWII babies would start turning 62.

This is because, contrary to the myth perpetrated by critics of Social Security, and widely believed today by most Americans, Social Security is not a government "annuity" where you put money into the system, it grows with interest, and then you get it back in monthly payments at retirement age. Rather, while benefit amounts are calculated by a complicated formula based upon a person's top 35 years of work, the actual funds to pay those benefits from day one of the program on have been paid not by the FICA taxes you paid over your lifetime, but by the FICA taxes forked over that year by current workers and their employers.

Once it was clear that there would simply not be enough FICA tax revenue coming in from a relatively smaller workforce to fund the benefits due to Baby Boomer generation Social Security beneficiaries (like me next April!) a plan was hatched between President Reagan and Democratic House Speaker Rep. Tip O'Neill to solve the shortfall by a combination of higher FICA taxes beginning in 1983, gradually raised from a then 5.4% for both employees and employers to the current 6.2% rate.(The Reagen-O'Neill plan raised it substantially more for the self-employed, who in the past had paid only part of what would be the employer share, but since '83 have had to pay double what employees were paying in FICA taxes on their income.) The so-called "full retirement age" was also gradually raised from a then 65 to an eventual 67 in 2024. That's the age at which a person who retires no longer gets penalized for continuing to work by having some share of wages deducted and paid as taxes to the IRS.

story | by Dr. Radut