Social Security Administration overview and functions

Social Security Administration (SSA) is an agency of the federal government of the United States charged with administering the Social Security. The Social Security is a social insurance program that consists of retirement, disability, and survivors benefits. For a person to qualify for the program benefits, they must remit Social Security taxes. The employees' contributions determine all benefits. The SSA was established in August 14, 1935 as the Social Security Board. SSB was renamed to SSA in July 16, 1946. SSA was an independent agency when it was established, but in 1939, it became a sub-cabinet agency. It remained in this status until 1995 when it regained its independent status. The current commissioner for the SSA is Carolyn W. Colvin (Acting) who succeeded Michael J. Astrue. She was sworn in on February 14, 2013. Social Security is considered the largest social welfare program that constitutes of 37% of the United States government expenditure and 7% of GDP. Before the establishment of the Social Security Act, support for the elderly fell on states, towns and families.

Social Security current situation

The trust fund for Social Security is estimated to become exhausted in 2033 (Evans, Perdue and Phillips). This was the same prediction in the previous year. 59 million people receive Social Security benefits each year, and each day around 10,000 baby boomers are eligible. According to administration officials, if the trust funds are depleted they can pay three-fourths of the benefits from payroll taxes and other revenues. It is reported that the contributions made to the Social Security Trust Fund increased by $32 billion in 2013. The trustees are anticipating another surplus for 2014, which has allowed them to project some increases in Social Security benefits starting in 2015. This would increase the total reserves by end of 2014 to $2.8 trillion. The Social Security benefits are sustainable for the coming two decades. The number of baby boomers beneficiaries is increasing, which is having a hge effect on the trust funds. The deficit faced by the trust fund amounts to $3.7 trillion, which is spreads over 75 years. It is evident that the number of aging people is increasing, and the workforce numbers are decreasing. This places a huge burden on the workforce to sustain the trust fund. Ensuring that the reserves are fully funded will reduce the gaps and ensure that the trust fund is more sustainable. The projections of trust fund depletion are based on the individual earnings remaining the same. With changes to the law, it is possible that the fund can increase its reserves, which would guarantee its viability into the future.

Economic impact of the funds depletion

The elderly would not be able to provide for themselves, which would mean they would have to rely on their families. Depending on their families would result in hardships for the providers as their responsibilities would increase. In order for the government to cater for the retiree's benefits, the working groups would be highly taxed, which would reduce their overall earning, and spending would be reduced. The retirement would be increased, which would mean the country has an older workforce and productivity would decrease. Increasing the retirement age would result in less hiring taking place, and the younger generation would not have work. The rate of crime could increase, and this would affect the economy negatively. The number of baby boomers attaining retirement age is increasing each day and raising the retirement age would reduce the number of people dependent on the Social Security benefits. Since the cost of Social Security is increasing faster than the tax income collected, it is vital that the retirement age be increased.

If the funds were depleted, there would be less spending, which would in turn reduce the amount of tax collected by the government. When Social Security beneficiaries spend the money, they receive it stimulates economic activity, which results in more taxes being paid. In 2012, it is estimated that Federal, state, and local taxes generated from Social Security spending amounted to $175.3 billion. Without the funds, the government would lose this amounts, and this would reduce economic activity within the country. Social Security spending ensures that 9.2 million Americans can keep their jobs. There are ten sectors that are directly affected by Social Security benefits namely drinking places, food services, wholesale, retail, health care, and residential care facilities. Without Social Security benefits, the employees working in these industries would rely on the employed who are fewer than the retirees. Jobs loss would result in reduced revenues for individuals and business would have fewer revenues. Social Security ensures that 22 million people are kept out poverty. This is a huge number considering the effect that such a population would have if they do not receive the benefits. Increasing poverty levels would result in more people relying on others for their daily upkeep. Household expenditures would increase, and some families would opt to do without some necessities. The economy would deteriorate because families would be spending more on vital services and commodities. The number of employees would reduce, and this would decrease the income levels of individuals.

Avoiding insolvency

Gradually raising the retirement age would save money without affecting the benefits received. Raising the retirement age would lead to less money being paid out to individuals who take their benefits early (Behaghel and Blau). People who take their benefits before they reach their retirement age receive less amount, which is calculated depending on the current retirement age. The sustainability of the Social Security program is viable when people retire later. Early retirement results in fewer benefits, but for longer periods. The people who mostly need Social Security are the ones aged 80 and above. People aged 62 to 67 still have alternate sources of income, which they can use until they reach the retirement age. Reducing the benefits received across the board. If the benefits paid out were cut by say 15%, then the reduced amounts would go to the Trust Fund. This would increase the amount held in the Fund and increase the overall timelines for depletion. Cutting the benefits would be beneficial to all individuals since it would be spread over all generations. The current beneficiaries would continue to receive their benefits, but at reduced levels and the future beneficiaries would be guaranteed of benefits when they retire.