US Social Security

Factual Questions
1

I’m in a discussion on another board, and a person has claimed that:

  • the US’s social security/welfare system is widening the gap between the rich and poor
  • the system is increasing poverty
  • the poverty increase will increase crime and fear

Before I can discuss this, I need to have a basic understanding of the US Social Security System. If this is anything like Australia’s system, which is very complex, I will never understand it.

(I did do a search and cannot find a thread about this.)

I have looked at the SSA site, but it is too thorough. If anyone knows of any sites that would assist, please tell!

I realise this is a very broad question, this is generally what I would like to know.

What are the basic principles of the system?
What sorts of payments are there?
Can anyone get free medical aid?
Is it race related at all?

Thank you in advance.
Can you tell I don’t normally post in here? I’m all nervous!

2

Oh, my!

Basic principles: Social Security in the U.S. started in 1935. (One of FDR’s “alphabet soup” creations) The basic idea is that workers “contribute” (pronounced “tax”) to the system and build a “retirement account” that will be available to them upon retiring. SS is generally assumed to be a kind of insurance program, and is set up that way – sorta.

What sorts of payments? Well, I don’t know the exact percentages and cutoffs, but in general, a certain portion of earnings are deducted from each wage-earner and shipped off to the SSA. If wages exceed a certain gross amount, the deductions stop. (Or so I’m told; never happened to me…)

Can anyone get free medical aid? Not if you work for a living. However, if you DON’T work for a living, i.e. you are on the dole, collecting welfare, etc., yeah! You get the finest medical care available on the planet, and it won’t cost you a dime! But that has little to do with SS… The medical insurance part of SS is called Medicare, and it is the subject of much hot debate these days. The cost of health care in the U.S. has been increasing at rates that are many multiples of the inflation rate for decades, and right now, providing health care to retirees and those on the public teat is a cost that is becoming very difficult to bear.

And no, SS is not “race related,” other than you have to be of the human race to participate legally.

3

  • Race plays no part.

  • Medical coverage is handled through separate systems called Medicaid and Medicare. (Medicaid is paid through the states and is generally needs based. Medicare is related to SS and is age based, not specifically needs based, but I do not know the particulars that you might be interested in.)

  • Payments are based on a schedule predicated on how much you (or your spouse) put in during your pre-retirement work history. They provide a nice supplement to any investments or pension you may have accrued, but alone they provide only a little more than subsistence living.

  • The basic system requires that employees and employers contribute a certain percentage of their wages toward the fund. Those collected taxes are used to pay out the benefits to the currently retired people. When you retire, the people then working will provide your benefits. (When the system was first devised, it is possible that people would get out just about what they put in, but life expectancies have dramatically improved in the ensuing 60+ years, and most people withdraw more than they put in, the meager amount disbursed, notwithstanding.)

In some ways it is a regressive tax on the poor and lower middle class. There is a cap on the tax, annually, so that people above a certain income level stop contributing at the point where they reach that cap, but there is no means testing on withdrawal, so they are able to withdraw the maximum, regardless of their current economic position. The fairness of that structure (when contrasted to the “contract” that everyone would benefit) is one of the points that people argue over at length.
While means testing (regarding actual wealth) has always been a taboo subject regarding SS, the government does reduce disbursements if you continue to work and receive a paycheck.)

Theoretically, the SS fund is “off the books” for the Federal budget, but in reality, the government typically “borrows” against the fund each year, obscuring the actual cost of running the government and reducing the amount of money that is actually available to fund the system.

4

Let me add that “free medical aid” is a misnomer… there is no such thing as free medical aid. It always costs something - most systems just raise taxes for everyone to cover the expenses, so you’re still doing the same as paying insurance, though most likely less than a good insurance plan. Obviously, this means that someone with a large income is paying a lot more money to the program, which pisses them off, since they’re probably on a private insurance plan and are footing the bill for the po’ folk.

5

There is an argument against SS I’ve seen on other boards relating (indirectly) to race. Something about because the lifespan of the average black American is shorter than that of the average white American, black Americans end up paying more than their fair share into Social Security considering what they get out of it.

Note: This is not my argument or opinion, in either direction. I have no opinions about anything. That’s a nice shirt you have on.

6

That’s great so far, thank you. :slight_smile:

I would also like to know some about the welfare system- as in what kind of payments can you receive from the government if you don’t have job.

Does it matter how long you haven’t had a job?
How long can you get welfare for?
How much money do you get?
etc.

Thanks again. :slight_smile:

7

Another thing about Social Security is that it’s known as “the third rail” of American politics, ie you try to touch it and you’re dead. For a program that’s been in existence for only a couple of generations, it’s become very very important politically, and any candidate who proposes to tinker with it by privatizing it, borrowing against the fund, or means-testing it (many rich older folks don’t need it) had better be ready for a tirade of criticism.

Pravnik,, I see the point of that but in that case, our male citizens would have the same case.

8

I realise this. I meant (which you probably understood, I’m just clarifying) free as in you could go to hospital or the doctor for necessary procedures and either not pay anything or receive a rebate.

9

First of all, let me wrewrite my last sentence, which is horrible:

“Pravnik, I see the point of that argument, but in that case our male citizens could say the same thing, as men’s lifespans are also usually shorter.”

Thanks.

Ah, the welfare is going to be a lot more difficult. We have fifty states and they all have their own welfare laws.

10

Not so. The “welfare” medical program is Medicaid, which is funded by general tax revenue and has nothing to do with Social Security. The medical program for retired people, Medicare, is similar to Social Security in that it is funded by payroll taxes and benefits kick in upon retirement, but it also is technically separate. There is a “disability insurance” program within Social Security which will pay you if you are disabled, but it is designed to cover lost wages, not medical costs.

11

Who is entitled to medicaid? Only people on welfare?

Does everyone receive the same amount (per month or whatever) when they retire? Or is it scaled in some way?

I’m sorry, I don’t understand what you mean by that. I thought you get the money over time when you retire? :confused:

12

Usually that is true. But people who are permanently disabled also receive money from SS. Also, if a parent dies before a child has reached the age of 18, the surviving parent will receive SS for the care and upkeep of the child.

Medicare pays for about 50% of the medical bills. (Doctors lower their fees for people on SS and Medicare pays 50% of the lowered fee.) Medicare doesn’t pay for medicine. That is disasterous for some who have higher perscription costs than they do income. Some medical procedures aren’t covered at all. Medicare can be obnoxiously picky.

13

Actually, SS is a much better deal for low and middle income earners than for upper income earners.

You see, they all pay the same percentage of their income into the system, up to a certain cap(which I believe is currently about 80,000 dollars. However, when they start drawing benefits, the low and middle income earners will have a much higher percentage of their previous incomes replaced than a high income worker.

For an example, take three hypothetical workers. One earns an average 20,000 dollars over his lifetime, another earns an average 40,000 dollars over his lifetime, and the last earns 80,000 dollars over his lifetime. Over their working lifes, they all have the same percentage of their respective incomes taken by the government for SS

When they come to retire, the lower income person will get probably 70% of their income replaced with SS, the middle income person will get maybe 50% of their incomes replaced, and the high income earner may only get 30% of their incomes replaced. Once again, these are not exact figures, of course.

So you see that it is the high income retirees who are subsidising the lower income retirees. In essence, SS is a welfare program for many, if not most of the recipients.

And then on top of that, many Americans who earn less than 30,000 dollars per year get a refund of all their SS taxes which were withheld for the year. Its called the Earned Income Tax Credit. So in essence, a large chunk of American workers don’t even pay into the system, but they will be able to draw out.

14

Hey, Blue Curls, it seems that the more you learn, the less you know, eh? There are a lot of us here in the U.S. that are trying to figure it out too.

15

Where do you come by this information.EIC,I was lead to believe,only affected *FI * tax,not SS payroll tax.

The only line I’ve ever seen on a 1040 re SS,was the refund of SS taxes above the income cap.

16

The IRS says

17

Of course. I just felt like politicizing it. :smiley:

mumbleThe bottle of wine helpedmumble

18

Social Security is now a pyramid scheme here in the US. It is dependant on people continuing to pay into the system to pay off those who are receiving it. Any accounts are purely on paper and have NO money backing them. It is a horrible implemtation of a good idea. I personally don’t expect it to be there in any meaningful form when I retire - more and more Americans are understanding this and a push it forming at the grass roots level to reform this system.

There was a loophole back in the early 80’s that allowed one town (Galveston, TX) to opt out and form a private SS system. On average a person getting SS from the Gov’t will get about $900 per month, Those who opted out will get $9000 per month. Perhaps people living in Galveston contributed more into their SS system (perhaps they made more) but that alone could not explain the huge difference.

19

Do you have a cite for that ** K2Dave?**?

That sounds completely off the wall.Unless all the funds were in the dotcom boom and withdrawn before March '2000,it doesn’t sound possible.Unless of course,they were investing seperately about 7k or so a month.

20

Tomdebb: “(When the system was first devised, it is possible that people would get out just about what they put in, but life expectancies have dramatically improved in the ensuing 60+ years, and most people withdraw more than they put in, the meager amount disbursed, notwithstanding.)”

Actually, the very first Social Security recipient (Ida Mae Fuller) pulled in over $20,000 on paid taxes of $44. Therefore, from the very start it paid far more than what the recipients put in.

Also, I should note that the retirement age of 65 that was set in the mid 1930’s was then higher than the life expectancy of the average American, and even higher than the life expectancy of a white female (who tend to live the longest in the USA). In short: it was a scam to start out with, and wasn’t really designed to pay out billions of dollars to millions of retirees.

US Life expectancy chart, 1900-1999.