SOCIAL SECURITY REFORM

1. SOCIAL SECURITY REFORM A.J. Elzey Derek Miller Chris Ambrose Joe Schoffstall Alan Wathen

2. Development • Great Depression made Federal action involving economic relief necessary • Neither the States nor local communities had the ability to cover the needs of the desperate American people

3. History • Initially signed into law in 1935 by President Franklin D. Roosevelt • Signed as part of the New Deal • Part of FDR’s sweeping economic legislation to help bring the country out of the Great Depression

4. Intention • Law established two Federal insurance programs • Federal system of old-age benefits for retired workers who worked in industry and commerce • This is what is commonly referred to as “Social Security” today • Federal-State system of benefits for the unemployed

5. Intention • Provide Federally-insured social insurance • Specifically designed for retirees and the unemployed • Funded by the Federal Insurance Contributions Act (FICA) • Still in place to this very day

6. FICA • Funded via dedicated payroll taxes • Payments distributed on a monthly basis to retirees • In addition, a lump-sum benefit payment to eligible recipients’ families upon death. • FICA tax paid half by workers, and half by employees.

7. Implementation • The taxes used to fund the Social Security program were first collected in 1937 • First monthly payments were issued beginning in January of 1940

8. Early Controversy • Two Supreme Court decisions in 1937 upheld the constitutionality of the program • Steward Machine Company v. Davis • Affirmed the notion that the Federal Government had the authority and power to implement the program • Helvering v. Davis • Court confirmed that the FICA tax was constitutional, as it was part of Congress’ power to levy taxes

9. Expansions • Medicare (1965) • Part of President Lyndon Johnson’s “Great Society” and his “War on Poverty” • Annual Cost-of-Living adjustments • These don’t require legislation, and have been in place since 1975

10. Social Security for different ethnicities • Does not discriminate • Same for all races and ethnicities • If a black and a white have made the same then they will have the same social security benefits • Social Security is progressive

11. African Americans • 2006 statistics • Full-time African American workers earned around $31,000 • African American men made $11,956 • African American women made $9,504 • 33% of elderly married African Americans and 54% of single elderly African Americans relied on Social Security for 90% of their income

12. African Americans • African American child rely heavily on survivor benefits • 21% of all children receiving survivor benefits from Social Security are African American • Disability insurance • 13% of population in 2006 was African American • 17% of all disabled workers receiving these benefits were African Americans

13. American Indians • American-Indians made $11,000 less then the national average • American Indians live longer than the national average • More money from Social Security • At age 65, the average man can expect to live to 81, while the American Indian can expect to live until 84 • American Indian women at age 65 can expect to live until 88, while the national average is 85

14. American Indians • 2006 statistics • American Indian men received $10,963 • American Indian women received $8,718 • 25% of married couples relied on Social Security for 90% of their income • 61% of unmarried persons relied on Social Security for 90% of their income

15. Asian Americans and Pacific Islanders • Tend to have higher life expectancies • Men • Made $12,354 in Social Security • Women • $9,854

16. Asian Americans and Pacific Islanders 27% of married couples rely on social security for 90% of their income 55% of unmarried people rely on Social Security for 90% of their income Population of Asian Americans and Pacific Islanders is expected to grow over the course of the next couple of years

17. Hispanics Working Hispanics make just over $26,000 a year compared to the national average of $38,000 Like American Indians and Asian Americans, Hispanics have longer than average life expectancies Hispanic men make $11,426 on average Hispanic women make $8,680 on average

18. Hispanics 37% of married Hispanics rely on Social Security for 90% of their income 62% of unmarried Hispanics rely on their Social Security for 90% of their income

19. Social Security (Aust.) • Benefits are dependent on a means test, which separates those who need help from those who do not. • Available to males and females above the age of 65. • “Youth Allowance” is a stipend given to students or young persons seeking a job to allow for basic necessities.

20. National Insurance (U.K.) • Taxes levied on weekly earnings by workers in the country of England. • Four different tax classes with several sub-classes that determine what type of taxes are paid into system. • System is evaluated every five years by government .

21. Social Security (Sweden) • System was challenged in the 1990’s by high unemployment , the same as welfare in the in the U.S. • Born out of a national pension system in the late 1930’s. • There is a guaranteed pension if you earn little or no income during your life.

22. Problems with Social Security Just like any other self-sustaining system, every issue revolves around money and distribution

23. Distribution of Funds throughout the Federal Budget

25. U.S. Labor Force Annual Growth

27. Cash Flow

29. With less personal savings, people are not in great place for retirement and heavily rely on social security when they are eligible.

30. Gender Inequalities • A woman who has never worked a day in her life is currently titled to half of her husbands payments. • e.g. Husband receives $500/month, wife will also receive $250/month • A single woman receives full payment at eligible age • Women make on average 80% of men’s salaries • A stay at home wife can receive the same amount and sometimes more than the lady who worked her entire life.

32. Then and Now 1935 Today Social Security Act signed into law $21,000 avg. income $42,000 40 workers paying into one check 3 workers Life Expectancy: 58 years 76 years Retirement Age- 65 ½ population lived to be 65 or older 74% live over

33. Possible Solutions Currently, the UK, Sweden, and Chile have Private accounts paying compulsory payroll taxes left people out of high rates of return in the US stock market Debate put on backburner after 2000-2002 stock market downturn

34. Privatization Cont. 40 year old person with an income just under $60,000, will contribute $284,360 in payroll taxes to the Trust Fund over their working life, and can expect to receive $2208 per month under the current program. The same 40 year old person, investing the same $284,360 equally weighted into treasuries and high-grade corporate bonds over his working life, would own a PRA at retirement worth $904,982 and paying an annuity of up to $7372 per month.

35. Personal Retirement Accounts (Partial Privatization) would let Americans save some of their Social Security taxes in personal retirement accounts (PRAs) that they own and that Congress can never legislate away. PRAs would strengthen Social Security by helping all Americans to increase their retirement income and pass on a nest egg to build a better economic future for their families.

36. Social Security Debate • Considered “third rail of politics” • Have been attempts to change, but modest thus far • 2008 Presidential Election S.S Debate: • http://www.youtube.com/watch?v=Skf4xwCxEEs • http://www.youtube.com/watch?v=gaG8VLG8lpU

37. The Future of Social Security? -By the year 2027, the government will somehow have to come up with an extra $200 billion a year to keep the system afloat. By 2033, the annual shortfall will be more than $300 billion a year. By 2041, when workers in their mid-20s begin to retire, the system will be bankrupt – unless we act now to save it.