Social Security and Corporate Welfare
'Social Security—the nation's largest, costliest, and most successful domestic program has reached a critical juncture in its development. As its creators anticipated, nearly every wage earner now pays taxes into the system. In principle, all citizens may be eligible for "entitlements" at some point in their lives. Yet...senior citizens worry that their benefits will be cut; younger Americans are skeptical—if not cynical—about their own benefits upon retirement.'
— W. Andrew Achenbaum
This summation of the state of Social Security was written more than a twenty years ago. Looking back, it seems as though the Social Security system frequently reaches a state of crisis in which predictions of its end arise. Since it was enacted in 1935, Social Security has been amended often, most recently in 1983, when Congress imposed a tax on the benefits of high-income retirees, raised the retirement age, and revised the tax-rate schedule.
Today, the future of Social Security is in the news again. The reason Social Security is of such concern is that the extremely large group of citizens born in the post-World War II period—the much-discussed baby-boom generation—is retiring. The generation that will take its place in the workforce is far smaller in proportion to the number of retirees, raising fears about the sustainability of Social Security. In the past, proposed solutions to the various problems facing Social Security aroused great debate. Each time, however, the arguments were stilled, repairs were made, and the system continued to fulfill its mandate. That uncertainty about the future has resulted in suggestions for change that range from minor adjustments to complete privatization of the system.
What is Social Security?
Social Security is a contributory social insurance program providing benefits to millions of Americans. Workers contribute financially to the system during their careers and earn entitlement to family benefits upon retirement, disability, or death. Currently, nearly 44 million Americans receive benefits under the Old Age and Survivors Insurance and Disability Insurance (OASDI) programs that make up Social Security. This group includes some 30 million elderly retirees and their dependents, 6 million disabled workers and their dependents, and more than 7 million survivors of deceased workers.
The Way Social Security is Financed
About 96 percent of workers in the United States contribute to Social Security, paying a flat tax of 6.2 percent of their wage income up to $68,400; their employers contribute an equal amount. If, however, as many economists believe, employers shift the cost of Social Security taxes onto workers in the form of lower wages, workers in effect may actually bear a substantially larger share of the tax burden than employers. Self-employed people pay both their own and their "employer's" share; their tax rate is 12.4 percent, half of which is tax deductible for...