President Franklin Delano Roosevelt signed the Social Security Act into law on August 14, 1935, and the Social Security Board (the precursor to the Social Security Administration) was officially established on October 14, 1936.
The Board, and subsequently, the Social Security Administration, operates under the terms outlined under Title 42 of the U.S.C.
Widely referred to as the Economic Security Bill during the drafting stages, the Social Security Act came into being in the wake of the Great Depression and the resulting economic turmoil, which saw more than half of the nation's 7.8 million senior citizens living below the poverty line. The bill was designed to prevent a similar recurrence through the creation of a federally mandated insurance program that would provide income to retirees age 65 and above.
The Act initially faced fierce resistance from Republican legislators, who felt that the program was inherently socialistic in nature. However, the proposal proved to be popular with Americans at large, leading to a swift passage through both the House (371-33) and Senate (77-6).
The Act was amended to expand its coverage in 1939 (spouses and children), 1956 (the disabled and their beneficiaries), 1965 (Medicare, for twelve years before it fell under the jurisdiction of the Centers for Medicare and Medicaid Services) and 1972 (Supplemental Security Income, but funded by federal tax revenues, not Social Security taxes).
Social Security is funded principally through the Federal Insurance Contributions Act (FICA), a compulsory form of employment tax legislated according to the stipulations contained within Title 26 of the U.S.Code. Deposits are managed by the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund, under the supervision of the Board of Trustees of the Trust Funds, as outlined in Title 42, Chapter 7, Subchapter II, Section 401 (c) of the U.S.Code.
The Board of Trustees "shall be composed of the Commissioner of Social Security, the Secretary of the Treasury, the Secretary of Labor, and the Secretary of Health and Human Services... and of two members of the public (both of whom may not be from the same political party), who shall be nominated by the President for a term of four years and subject to confirmation by the Senate."
The six-man board is mandated to present an annual report to the Congress no later than the first day of April each year.
As of 2009, 453.7 million Americans have been registered with the Social Security Administration.
Since 1937, the agency has received contributions amounting to $13.87 trillion and disbursed $11.33 trillion.
Today, more than 30 million retirees, five million disabled Americans and about ten million beneficiaries receive support from the Social Security Administration.
There are concerns that Social Security, in its current form, is unsustainable.
The imminent and ongoing retirement of the baby boomers' generation is expected to outpace the entry of young Americans into the workforce.
Further, the consistently rising life expectancy of average Americans entails a longer coverage period.
As it is now, there have been an almost 25% growth of Americans aged 60 years and above in the last decade alone.
Under these circumstances, it is feared that the Administrations' two and a half trillion dollars surplus will rapidly diminish.
Empty Trust Funds
In its 77 year history, the Social Security Administration has stashed away a surplus amounting to $2,540,348,000,000, a figure that easily ensures its solvency for at least two decades. The $2.5 trillion surplus is deposited into a trust fund held by, wait for it, the federal government - the very same federal government that is currently almost $16 trillion in debt.
Analysts have been speculating since the early 1990s that the federal government has been dipping their hands into the Old-Age and Survivors Insurance Trust Fund (OASI) and the Disability Insurance Trust Fund (DI), despite repeated denials from four consecutive American administrations.
Dr. Allen W. Smith's 2003 book, The Looting of Social Security: How the Government is Draining America's Retirement Account, accused the George H. W. Bush and Bill Clinton administrations of spending the entire trust fund on government programs. Dr. Allen also charged that the federal government's "$2.5 trillion debt to Social Security is the real reason that so many politicians want to cut benefits. They are trying to find a way to avoid having to repay the looted money."
The Associated Press also ran a critical piece on March 14, 2010, which accused Congress "of raiding the Social Security trust funds to pay for other programs, masking the size of the budget deficit."
Washington Post's Charles Krauthammer perhaps explained the situation best in a March 11, 2011 article.
"When your FICA tax is taken out of your paycheck, it does not get squirreled away in some lockbox in West Virginia where it's kept until you and your contemporaries retire. Most goes out immediately to pay current retirees, and the rest (say, $100) goes to the U.S. Treasury - and is spent. On roads, bridges, national defense, public television, whatever - spent, gone.
"In return for that $100, the Treasury sends the Social Security Administration a piece of paper that says: IOU $100. There are countless such pieces of paper in the lockbox. They are called "special issue" bonds. Special they are: They are worthless."
The ruse finally came into the open during the debt ceiling crisis in 2011. Speaking to CBS' Scott Pelley on July 12, 2011, President Obama indicated that failure to increase the federal debt ceiling may prevent the government from mailing out Social Security checks. The implication was obvious; the federal government could only meet its obligation (to Social Security, among others) if it was allowed to borrow.
SCOTT PELLEY: Can you tell the folks at home that no matter what happens, the Social Security checks are gonna go out on August the third? There are about $20 billion worth of Social Security checks that have to go out the day after the government is supposedly gonna go into default?
PRESIDENT OBAMA: Well, this is not just a matter of Social Security checks. These are veterans' checks, these are folks on disability, and their checks. There are about 70 million checks that go out each month.
PELLEY: Can you guarantee, as president, those checks will go out on August the third?
OBAMA: I cannot guarantee that those checks go out on August 3rd if we haven't resolved this issue. Because there may simply not be the money in the coffers to do it.