|
The Problem of Economic Security
"Security was attained in the earlier days through the interdependence of members of families
upon each other and of the families within a small community upon each other. The complexities of great communities
and of organized industry make less real these simple means of security. Therefore, we are compelled to employ
the active interest of the Nation as a whole through government in order to encourage a greater security for each
individual who composes it . . . This seeking for a greater measure of welfare and happiness does not indicate
a change in values. It is rather a return to values lost in the course of our economic development and expansion
. . ."
Franklin D. Roosevelt: Message of the President to Congress, June 8, 1934. |
Social Security works because it speaks to a universal human need. All people throughout human history have
faced the uncertainties brought on by death, disability and old age. Prior to the turn of the 20th century, the
majority of people in the United States lived and worked on farms and economic security was provided by the extended
family. However, this arrangement changed as America underwent the Industrial Revolution. The extended family and
the family farm as sources of economic security became less common. Then, the Great Depression triggered a crisis
in the nation's economic life. It was against this backdrop that the Social Security Act emerged.
The Committee on Economic Security (CES)
On June 8, 1934, President Franklin D. Roosevelt, in a message to the
Congress, announced his intention to provide a program for Social Security. Subsequently, the
President created by Executive Order the Committee on Economic Security, which was composed of five
top cabinet-level officials. The committee was instructed to study the entire problem of economic insecurity
and to make recommendations that would serve as the basis for legislative consideration by the Congress.
The CES assembled a small staff of experts borrowed from other federal agencies and immediately set to work.
In November 1934 the CES sponsored the first-ever national town-hall forum on Social Security.
The CES did a comprehensive study of the whole issue of economic security in America, along with an analysis of
the European experience with these perennial problems. Their full report was the first comprehensive attempt at
this kind of analysis in many decades and it stood as a landmark study for many years. In slightly more than six
months, the CES developed a Report to the Congress and drafted a detailed legislative proposal.
The Social Security Act
In early January 1935, the CES made its report to the President, and on January 17 the President introduced
the report to both Houses of Congress for simultaneous consideration. Hearings were held in the House Ways &
Means Committee and the Senate Finance Committee during January and February. Some provisions made it through the
Committees in close votes, but the bill passed both houses overwhelmingly in the floor votes. After a Conference
which lasted throughout July, the bill was finally passed and sent to President Roosevelt
for his signature.
The Social Security Act was signed into law by President Roosevelt on August 14, 1935.
In addition to several provisions for general welfare, the new Act created a social insurance program designed
to pay retired workers age 65 or older a continuing income after retirement. (Full
Text of President Roosevelt's Statement At Bill Signing Ceremony.)
"We can never insure one hundred percent of the population against one hundred percent of the
hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to
the average citizen and to his family against the loss of a job and against poverty-ridden old age."--
President Roosevelt upon signing Social Security Act |
Major Provisions Of The Act
The Social Security Act did not quite achieve all the aspirations its supporters had hoped by way of providing
a "comprehensive package of protection" against the "hazards and vicissitudes of life." Certain
features of that package, notably disability coverage and medical benefits, would have to await future developments.
But it did provide a wide range of programs to meet the nation's needs. In addition to the program we know think
of as Social Security, it included unemployment insurance, old-age assistance, aid to dependent children and grants to the states to provide various forms of medical care.
(Full text of 1935 Act)
The two major provisions relating to the elderly were Title I- Grants to States for Old-Age Assistance, which
supported state welfare programs for the aged, and Title II-Federal Old-Age Benefits. It was Title II that was
the new social insurance program we now think of as Social Security. In the original Act benefits were to be paid
only to the primary worker when he/she retired at age 65. Benefits were to be based on payroll tax contributions
that the worker made during his/her working life. Taxes would first be collected in 1937 and monthly benefits would
begin in 1942. (Under amendments passed in 1939, payments were advanced to 1940.)
The significance of the new social insurance program was that it sought to address the long-range problem of
economic security for the aged through a contributory system in which the workers themselves contributed to their
own future retirement benefit by making regular payments into a joint fund. It was thus distinct from the welfare
benefits provided under Title I of the Act and from the various state "old-age pensions." As President
Roosevelt conceived of the Act, Title I was to be a temporary "relief" program that would eventually
disappear as more people were able to obtain retirement income through the contributory system. The new social
insurance system was also a very moderate alternative to the radical calls to action that were so common in the
America of the 1930s.
The Social Security Board
Another provision of the Act established a Social Security Board (SSB) comprised of three members appointed by
the President, with the chairman reporting directly to the President. The original members were John G. Winant,
Chairman; Arthur J. Altmeyer; and Vincent M. Miles.
During the first year, SSB was faced with the tasks of providing employers, employees and the public with information
on how earnings were to be reported, what benefits were available and how they were to be provided. In addition,
sites for field installations had to be chosen and personnel to staff these offices had to be selected and trained. |
|
|
| First meeting of the Social Security Board, September 14, 1935. Left to right: Arthur J. Altmeyer,
John G. Winant (Chairman), and Vincent M. Miles. |
|
Operation of the new program was hampered for several months when the budget bill for the
Act was killed by a Senate filibuster at the end of August 1935. The new Social Security Board had to borrow
money from other federal agencies to operate until January 1936 when the Congress reconvened and passed an appropriation
to fund the programs and operations under the Social Security Act.
The Social Security Board begin as an independent agency of the federal government. In
1939 it became part of the cabinet-level Federal Security Agency, and in 1946 the SSB was abolished and replaced
by the current Social Security Administration.
Early Work- Social Security Numbers
The monumental first task was the need to register employers and workers by January 1, 1937, when workers would
begin acquiring credits toward old-age insurance benefits. Since the new Social Security Board did not have the
resources available to accomplish this, they contracted with the Post Office Department
to distribute the applications. The first application forms were distributed in late November 1936. The numbers
were assigned in the local post offices. There is no record of who received the first Social Security number (SSN).
Over 30 million SSN cards were issued through this early procedure, with the help of the post offices. By June
30, 1937, the SSB had established 151 field offices, with the first office opening on October
14, 1936, in Austin, Texas. From that point on, the Board's local office took over the task of assigning SSNs.
Trust Funds
After Social Security numbers were assigned, the first Federal Insurance Contributions Act (FICA) taxes were
collected, beginning in January 1937. Special Trust Funds were created for these dedicated revenues. Benefits were
then paid from the money in the Social Security Trust Funds. Over the years, more than
$4.5 trillion has been paid into the Trust Funds, and more than $4.1 trillion has been paid out in benefits.
The remainder is currently on reserve in the Trust Funds and will be used to pay future benefits.
First Payments
From 1937 until 1940, Social Security paid benefits in the form of a single, lump-sum payment. The purpose of
these one-time payments was to provide some "payback" to those people who contributed to the program
but would not participate long enough to be vested for monthly benefits. Under the 1935 law, monthly benefits were
to begin in 1942, with the period 1937-1942 used both to build up the Trust Funds and to provide a minimum period
for participation in order to qualify for monthly benefits.
The earliest reported applicant for a lump-sum benefit was a retired Cleveland motorman named Ernest
Ackerman, who retired one day after the Social Security program began. During his one day of participation
in the program, a nickel was withheld from Mr. Ackerman's pay for Social Security, and, upon retiring, he received
a lump-sum payment of 17 cents.
The average lump-sum payment during this period was $58.06. The smallest payment ever made was for 5 cents! |
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Ernest Ackerman
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| "Long before the economic blight of the depression descended on the Nation, millions of our
people were living in wastelands of want and fear. Men and women too old and infirm to work either depended on
those who had but little to share, or spent their remaining years within the walls of a poorhouse . . .The Social
Security Act offers to all our citizens a workable and working method of meeting urgent present needs and of forestalling
future need . . . One word of warning, however. In our efforts to provide security for all of the American people,
let us not allow ourselves to be misled by those who advocate short cuts to Utopia or fantastic financial schemes.
We have come a long way. But we still have a long way to go. There is still today a frontier that remains unconquered--an
America unclaimed. This is the great, the nationwide frontier of insecurity, of human want and fear. This is the
frontier--the America--we have set ourselves to reclaim." -- President Franklin
Roosevelt August 14, 1938, Radio address on the third anniversary of the Social Security Act |
1939 Amendments
| "It is impossible under any social insurance system to provide ideal security for every individual. The practical
objective is to pay benefits that provide a minimum degree of social security—as a basis upon which the worker,
through his own efforts, will have a better chance to provide adequately for his individual security." --
From the Report of the Social Security Board recommending the changes which were embodied in the 1939 Amendments. |
The original Act provided only retirement benefits, and only to the worker. The 1939 Amendments made a fundamental
change in the Social Security program. The Amendments added two new categories of benefits: payments to the spouse
and minor children of a retired worker (so-called dependents benefits) and survivors benefits paid to the family
in the event of the premature death of a covered worker. This change transformed Social Security from a retirement
program for workers into a family-based economic security program.
The 1939 Amendments also increased benefit amounts and accelerated the start of monthly benefit payments to
1940.
Monthly Benefits
|
|
| In 1950 all Social Security beneficiaries received a general "cost-of-living" increase--for
the first time since benefits began in 1940. Ida May Fuller is seen here receiving her first increased benefit
check on October 3, 1950. |
|
Payment of monthly Social Security benefits began in January 1940, and were authorized not only for aged retired
workers but for their aged wives or widows, children under age 18, and surviving aged parents.
On January 31, 1940, the first monthly retirement check was issued to Ida May Fuller
of Ludlow, Vermont, in the amount of $22.54. Miss Fuller, a Legal Secretary, retired in November 1939. She started
collecting benefits in January 1940 at age 65 and lived to be 100 years old, dying in 1975.
(Examining the first batch of checks)
| Ida May Fuller worked for three years under the Social Security program. The accumulated taxes on her salary during
those three years was a total of $24.75. Her initial monthly check was $22.54. During her lifetime she collected
a total of $22,888.92 in Social Security benefits. |
|
The Atlantic Charter
In mid-August, 1941, Winston Churchill and Franklin Roosevelt met secretly aboard a
warship off the coast of Newfoundland in the North Atlantic. On the sixth anniversary of the Social Security
Act, they announced a joint-declaration known as the Atlantic Charter. The 383-word Charter
was an expression of "certain common principles in the national policies of their respective countries on
which they base their hopes for a better future for the world." This brief charter would be the founding document
of the United Nations and among its eight principles was a call for social insurance. Former Social Security Board
Chairman John Winant was then serving as the U.S. Ambassador to Great Britain. Although Winant did not attend the
Conference, the social insurance provision was a suggestion he made from London which was instantly accepted by
Churchill and FDR.
Although social insurance began in Germany in the 19th century, in the years following World War II the United
States was the leading model for nations around the world who were interested in designing Social Security systems.
This movement toward the internationalization of Social Security can be symbolically fixed with the issuance of
the Atlantic Charter in 1941.
1950 Amendments
From 1940 until 1950 virtually no changes were made in the Social Security program. Payment amounts were fixed,
and no major legislation was enacted. There was a significant administrative change in 1946, however, when the
three-person Social Security Board was abolished and replaced by the Social Security
Administration, headed by a single Commissioner.
Because the program was still in its infancy, and because it was financed by low levels of payroll taxation,
the absolute value of Social Security's retirement benefits were very low. In fact, until 1951, the average value
of the welfare benefits received under the old-age assistance provisions of the Act were higher than the retirement
benefits received under Social Security. And there were more elderly Americans receiving old-age assistance than
were receiving Social Security.
Because of these shortcomings in the program, in 1950 major amendments were enacted.
These amendments increased benefits for existing beneficiaries for the first time (see The Story of COLAs), and
they dramatically increased the value of the program to future beneficiaries. By February 1951 there were more
Social Security retirees than welfare pensioners, and by August of that year, the average Social Security retirement
benefit exceeded the average old-age assistance grant for the first time.
The Story of COLAs
Most people are aware that there are annual increases in Social Security benefits to offset the corrosive effects
of inflation on fixed incomes. These increases, now known as Cost of Living Allowances (COLAs), are such an accepted
feature of the program that it is difficult to imagine a time when there were no COLAs. But in fact, when Ida May
Fuller received her first $22.54 benefit payment in January of 1940, this would be the same amount she would receive
each month for the next 10 years. For Ida May Fuller, and the millions of other Social Security beneficiaries like
her, the amount of that first benefit check was the amount they could expect to receive for life. It was not until
the 1950 Amendments that Congress first legislated an increase in benefits. Current beneficiaries had their payments
recomputed and Ida May Fuller, for example, saw her monthly check increase from $22.54 to $41.30.
These recomputations were effective for September 1950 and appeared for the first time in the October 1950 checks.
A second increase was legislated for September 1952. Together these two increases almost doubled the value of Social
Security benefits for existing beneficiaries. From that point on, benefits were increased only when Congress enacted
special legislation for that purpose.
In 1972 legislation the law was changed to provide, beginning in 1975, for automatic
annual cost-of-living allowances (i.e., COLAs) based on the annual increase in consumer prices. No longer do beneficiaries
have to await a special act of Congress to receive a benefit increase and no longer does inflation drain value
from Social Security benefits.
|
Social Security Benefit Increases 1950-2000
|
|
EFFECTIVE DATE
|
PERCENT
INCREASE
|
|
9/50
9/52
9/54
1/59
|
77.0
12.5
13.0
7.0
|
|
1/65
2/68
|
7.0
13.0
|
|
1/70
1/71
9/72
3/74*
6/74
6/75
6/76
6/77
6/78
6/79
|
15.0
10.0
20.0
7.0*
11.0
8.0
6.4
5.9
6.5
9.9
|
|
6/80
6/81
6/82
12/83
12/84
12/85
12/86
12/87
12/88
12/89
|
14.3
11.2
7.4
3.5
3.5
3.1
1.3
4.2
4.0
4.7
|
|
12/90
12/91
12/92
12/93
12/94
12/95
12/96
12/97
12/98
12/99
12/00
12/01
|
5.4
3.7
3.0
2.6
2.8
2.6
2.9
2.1
1.3
2.5**
3.5
2.6
|
* The increase in 3/74 was a special, limited-duration increase. It was effective for only 3/74-5/74.
In June 1974 all payment levels reverted to their 2/74 level and the 11% increase was permanently applied on this
base.
** The COLA for December 1999 was originally determined as 2.4 percent based on CPIs published by the Bureau of
Labor Statistics. Pursuant to Public Law 106-554, however, this COLA is effectively now 2.5 percent. |
Disability
The Social Security Amendments of 1954 initiated a disability insurance program which provided the public with
additional coverage against economic insecurity. At first, there was a disability "freeze", (here
being signed by President Eisenhower) of a worker's Social Security record during the years when they
were unable to work. (First application for disability freeze being filed.) While
this measure offered no cash benefits, it did prevent such periods of disability from reducing or wiping out retirement
and survivor benefits. On August 1, 1956, the Social Security Act was amended to provide benefits to disabled workers
aged 50-64 and disabled adult children. In September 1960 President Eisenhower signed a law amending the disability
rules to permit payment of benefits to disabled workers of any age and to their dependents. By 1960, 559,000
people were receiving disability benefits, with the average benefit amount being around $80 per month.
Medicare & Other Changes
The decade of the 1960s brought major changes to the Social Security program. Under
the Amendments of 1961, the age at which men are first eligible for old-age insurance was lowered to 62, with
benefits actuarially reduced (women previously were given this option in 1956). This created an additional workload
for the Agency as more beneficiaries entered the rolls. The number of people receiving disability benefits more
than doubled from 1961 to 1969, increasing from 742,000 to 1.7 million.
The most significant administrative change involved the signing of the Medicare bill on July 30, 1965, by President Lyndon Johnson In the presence of former President Truman, who received
the first Medicare card at the ceremony,Lady Bird Johnson, Vice-President Hubert Humphrey, and Mrs. Truman. With
the signing of this bill, SSA became responsible for administering a new social insurance program that extended
health coverage to almost all Americans aged 65 or older. Nearly 20 million beneficiaries
enrolled in Medicare in the first 3 years of the program.
President Johnson Regarding Medicare:
"Thirty years ago, the American people made a basic decision that the later years of life should not be years
of despondency and drift. The result was enactment of our Social Security program. . . . Since World War II, there
has been increasing awareness of the fact that the full value of Social Security would not be realized unless provision
were made to deal with the problem of costs of illnesses among our older citizens. . . . Compassion and reason
dictate that this logical extension of our proven Social Security system will supply the prudent, feasible, and
dignified way to free the aged from the fear of financial hardship in the event of illness." -January 7, 1965 |
SSI
In the 1970s, SSA became responsible for a new program, Supplemental Security Income (SSI). In the original
1935 Social Security Act, programs were introduced for needy aged and blind individuals and, in 1950, needy disabled
individuals were added. These three programs were known as the "adult categories" and were administered
by State and local governments with partial Federal funding. Over the years, the State programs became more complex
and inconsistent, with as many as 1,350 administrative agencies involved and payments varying more than 300% from
State to State.
In 1969, President Nixon identified a need to reform these and related welfare programs
to "bring reason, order, and purpose into a tangle of overlapping programs." In 1971, Secretary of Health,
Education and Welfare, Elliot Richardson, proposed that SSA assume responsibility for
the "adult categories." In the Social Security Amendments of 1972, Congress federalized the "adult
categories" by creating the SSI program and assigned responsibility for it to SSA.
SSA was chosen to administer the new program because of its reputation for successful administration of the
existing social insurance programs. SSA's nationwide network of field offices and large-scale data processing and
record-keeping operations also made it the logical choice to perform the major task of converting over 3 million
people from State welfare programs to SSI.
The 1972 & 1977 Amendments
In 1972 two important sets of amendments were enacted. These amendments created the SSI program and introduced
automatic Cost-of-Living-Adjustments (COLAs).
The bill creating the SSI program also contained important provisions for increasing Social Security benefits
for certain categories of beneficiaries (primarily aged widows and widowers). It also provided: a minimum retirement
benefit; an adjustment to the benefit formula governing early retirement at age 62 for men, in order to make it
consistent with that for women; extension of Medicare to those who have received disability benefits for at least
two years and to those with Chronic Renal Disease; liberalized the Retirement Test; and provided for Delayed Retirement
Credits to increase the benefits of those who delayed retirement past age 65.
| The separate bill creating automatic COLAs also provided for automatic increases in the earnings subject to Social
Security taxes and an automatic adjustment in the wage-base used in calculating benefits. This second adjustment
was put in the law as a sort of companion to the COLA. The COLA adjusts for increases in prices, whereas
the wage-base adjustment corrects for increases in wages. The purpose of the COLA was to maintain the purchasing
power of benefits already awarded. The purpose of the automatic adjustment in the wage base was to maintain the
relative value of Social Security benefits for future applicants. Unfortunately, the procedure for adjusting for
price and wage increases contained a flaw which resulted in future benefit levels soaring out of control. Indeed,
it became apparent that if the trends of the mid-1970s continued, future Social Security beneficiaries could end
up receiving more in their monthly retirement benefit than their gross salaries while working. This problem was
corrected in the 1977 Amendments. However, the correction led to the appearance of what came to be known informally
as "The Notch." |
The Notch spawned a political protest movement of aggrieved "Notch Babies" who believe they have been
the victims of unfair treatment.
|
The main purpose of the 1977 Amendments was to address the financing of the program.
Shortly after passage of the 1972 legislation, it became apparent that Social Security faced a funding shortfall,
both in the short-term and in the long-term. The short-term problem was caused by the bad economy, and the long-term
problem by the demographics associated with the baby boom. By their 1975 report the Trustees said the Trust Funds
would be exhausted by 1979. This financing shortfall was addressed by the 1977 Social Security Amendments. These
amendments raised the payroll tax slightly (from 6.45% to the current 7.65%), increased the wage base; reduced
benefits slightly; and "decoupled" the wage adjustment from the COLA adjustment. These fixes restored
the long-term balance of the program for the next 50 years (but not the full 75 years used by the actuaries). It
was hoped the amendments would prevent an expected short-term financing problem in the early 1980s. This hope would
prove elusive as the major amendments in 1983 would be needed to avoid the short-term problem, and to address the
remaining long-range program deficit.
Disability In The 1980s
The Social Security Amendments of 1980 made many changes in the disability program. Most of these changes focused
on various work incentive provisions for both Social Security and SSI disability benefits.
The 1980 Amendments also required SSA to conduct periodic reviews of current disability beneficiaries to certify
their continuing eligibility. This was to become a massive workload for SSA and one that was highly controversial.
By 1983, the reviews had been halted, and in 1984, Congress passed the Disability Benefits Reform Act modifying
several aspects of the disability program.
The 1983 Amendments
In the early 1980s the Social Security program faced a serious short-term financing crisis. President Reagan
appointed a blue-ribbon panel, known as the Greenspan Commission, to study the
financing issues and make recommendations for legislative changes. The final bill, signed
into law in 1983, made numerous changes in the Social Security and Medicare programs, including the taxation
of Social Security benefits, the first coverage of Federal employees under Social Security and an increase in the
retirement age in the next century. (Summary of the provisions of the '83 Amendments)
Program Growth
From its modest beginnings, Social Security has grown to become an essential facet of modern life. One in seven
Americans receives a Social Security benefit, and more than 90 percent of all workers are in jobs covered by Social
Security. From 1940, when slightly more than 222,000 people received monthly Social Security benefits, until today,
when over 44 million people receive such benefits, Social Security has grown steadily. The SSI program has grown
as well from its inception in 1974.
| Beneficiaries over the years |
| Social Security |
SSI ** |
| 1937 |
53,236*
|
1974 |
3,996,064
|
| 1938 |
213,670*
|
1975 |
4,314,275
|
| 1939 |
174,839*
|
1980 |
4,142,017
|
| 1940 |
222,488
|
1985 |
4,138,021
|
| 1950 |
3,477,243
|
1990 |
4,817,127
|
| 1960 |
14,844,589
|
1995 |
6,514,134
|
| 1970 |
26,228,629
|
1996 |
6,613,718
|
|
1980
|
35,584,955
|
1997
|
6,494,985
|
| 1990 |
39,832,125
|
1998
|
6,566,069
|
| 1995 |
43,387,259
|
1999
|
6,556,634
|
|
1996
|
43,736,836
|
*Recipients of one-time lump-sum payments.
** Recipients of federally-administered payments. |
| 1997 |
43,971,086
|
| 1998 |
44,245,731
|
| 1999 |
44,595,624
|
| For more detailed statistics, see "SSA's Annual Statistical Supplement" |
| Annual Payments |
| Social Security* |
SSI** |
| 1937 |
$1,278,000
|
1974
|
$5,096,813,000
|
| 1938 |
$10,478,000
|
1975
|
$5,716,072,000
|
| 1939 |
$13,896,000
|
1980
|
$7,714,640,000
|
| 1940 |
$35,000,000
|
1985 |
$10,749,938,000
|
| 1950 |
$961,000,000
|
1990 |
$16,132,959,000
|
| 1960 |
$11,245,000,000
|
1995 |
$27,037,280,000
|
| 1970 |
$31,863,000,000
|
1996 |
$28,252,474,000
|
|
1980
|
$120,511,000,000
|
1997
|
$28,370,568,000
|
|
1990
|
$247,796,000,000
|
1998
|
$29,408,208,000
|
|
1995
|
$332,553,000,000
|
*Cash benefits only.
** Federally-administered benefits only. Includes both federal payment and State
supplementation payments. |
|
1996
|
$347,088,000,000
|
| 1997 |
$361,970,000,000
|
| 1998 |
$374,990,000,000
|
| 1999 |
$385,768,000,000 |
| For more detailed statistics, see "SSA's Annual Statistical Supplement" |
Independence For SSA
The Social Security Board (SSB) began its life in 1935 as one of the federal government's "independent
agencies." This means that it was not part of a larger cabinet-level organization. In 1939 this status changed
when the SSB became part of the new cabinet-level Federal Security Agency. Ultimately, the Social Security Board
became the Social Security Administration and it would finally become an operating component of the Department
of Health & Human Services. (See SSA Organizational History.)
Throughout the 1980s and 1990s, there was growing bipartisan support for removing SSA from under its departmental
umbrella and establishing it as an independent agency. Finally, in 1994 the Social Security Independence and Program
Improvements Act of 1994 (P.L. 103-296) was passed unanimously by Congress and, in a ceremony in the Rose Garden
of the White House, on August 14, 1994, President Bill Clinton signed the act into law.
Legislative Changes in 1996 & 1997
Contract With America Advancement Act of 1996 (P.L. 104-121).
This bill, signed by the President on March 29, 1996, made a change in the basic philosophy of the disability
program. Beginning on that date, new applicants for Social Security or SSI disability benefits could no longer
be eligible for benefits if drug addiction or alcoholism is a material factor to their disability. Unless they
can qualify on some other medical basis, they cannot receive disability benefits. Individuals in this category
already receiving benefits, are to have their benefits terminated as of January 1, 1997. Previous policy has been
that if a person has a medical condition that prevents them from working, this qualifies them as disabled for Social
Security and SSI purposes--regardless of the cause of the disability. Another significant provision of this law
doubled the earnings limit exemption amount for retired Social Security beneficiaries, on a gradual schedule from
1996 to 2002. In 2002, the exempt amount will be $30,000 per year in earnings, compared to $14,760 under previous
law.
The Personal Responsibility and Work Opportunity Reconciliation Act of 1996.
This "welfare reform" legislation, signed by the President on 8/22/96, ended
the categorical entitlement to AFDC (Aid to Families with Dependent Children) that was part of the original 1935
Social Security Act by implementing time-limited benefits along with a work requirement. The law also terminated
SSI eligibility for most non-citizens. Previously, lawfully admitted aliens could receive SSI if they met the other
factors of entitlement. As of the date of enactment, no new non-citizens could be added to the benefit rolls and
all existing non-citizen beneficiaries would eventually be removed from the rolls (unless they met one of the exceptions
in the law.) Also effective upon enactment were provisions eliminating the "comparable severity standard"
and reference to "maladaptive behavior" in the determination of disability for children to receive SSI.
Also, children currently receiving benefits under the old standards were to be reviewed and removed from the rolls
if they could not qualify under the new standards.
Omnibus Consolidated Rescissions and Appropriations Act of 1996.
Requires that all federal payments (including Social Security and SSI) be made by electronic funds transfer
(no more paper checks) effective January 1, 1999, unless a waiver is granted by the Secretary of the Treasury.
The Department of Defense Appropriations Act, 1997
This massive omnibus spending bill contained SSA's budget as well as numerous legislative changes relating to
the SSI program and to issues involved in fighting fraudulent documents in connection with obtaining Social Security
numbers. The major SSI provision makes sponsorship agreements legally enforceable for the first time. In the area
of identification-related documents, the law requires the establishment of federal standards for state-issued birth
certificates and requires SSA to develop a prototype counterfeit-resistant Social Security card.
The Balanced Budget Act of 1997
This bill passed the House on 7/30/97 by a vote of 346 to 85, and passed the Senate the next day on a vote of
85 to 15. This law restored SSI eligibility to certain cohorts of non- citizens whose eligibility otherwise would
be terminated under the "welfare reform" of 1996. It also extended for up to one year the period for
redetermining the eligibility of certain aliens who may ultimately not be eligible for continued benefits.
SSI & Children
The Welfare Reform legislation enacted in 1996 changed the rules for assessing disability in the cases of children
seeking to qualify for SSI benefits, and the law required SSA to review the status of some children already on
the rolls. These reviews proved to be difficult and somewhat controversial, leading SSA Commissioner Kenneth Apfel
to call for a comprehensive review of the entire childhood disability determination process.
On December 17, 1997 Commissioner Apfel announced the results of his "top to bottom" review. While expressing
overall confidence in the quality of the determinations, some problems were found. The Commissioner directed a
new review of approximately 45,000 of the 135,000 cases where benefits had been ceased, and offered a second opportunity
to appeal for all ceased beneficiaries who did not choose to appeal initially. In addition, all 15,000 new claims
filed since the August 1996 passage of the "welfare reform" changes in the law were to be reviewed again.
The Social Security Advisory Board
From the very beginning, the Social Security program has had the services of periodic Advisory Councils composed
primarily of non-government members whose function was to represent the public at large in advising government
officials on Social Security policy. The first such Advisory Council was convened in 1934 in support of the work
of the Committee on Economic Security. Over the years, the Advisory Councils have been very influential in setting
the agenda for changes in Social Security. The Councils were especially influential in shaping the pivotal 1939
and 1950 amendments. Eventually, the tradition of periodic Social Security Advisory Councils was made a standard
provision of the law, with a requirement that such a Council be appointed every four years. This law stayed in
effect until 1994, when it was repealed as part of the legislation which made SSA an independent agency. The 1994-1996 Advisory Council was thus the final Council, signaling the end
of a long tradition in Social Security. Under that 1994 law, the Councils are abolished and a permanent 7-member
Advisory Board was formed to serve many of the same functions.
Social Security Reform in the Clinton Administration
With the 1983 Amendments, the short-range financing problems Social Security faced in the late 1970s and early
1980s were resolved, and some part of Social Security's long-range financing challenge was also addressed, but
not completely. Due to changing demographic patterns (primarily the passage of the "baby boom" generation
into their retirement years) the Social Security program is not currently in long-range actuarial balance. (This
means it is not projected to have sufficient income to pay all promised benefits over the next 75 years.)
A major impetus to the public debate on Social Security reform came in January 1998 when President Clinton announced
in his State of the Union Address that we should save any budget surpluses until
we have resolved the long-term financing of Social Security--his call was to "save Social Security first."
The President also announced a series of town-hall forums around the country during the course of the year to engage
the citizenry in an informed public debate. Various private groups are participating in these forums, and in other
forums of their own sponsorship, and the Congress is supporting similar efforts.
In his 1999 State of the Union Address, the President provided more detail regarding his proposal to "save
Social Security first." He called for using 62% of any surplus over the next 15 years to save Social Security;
saving 15% of the surplus to shore up Medicare; and devoting 12% of the surplus to the creation of new Universal
Savings Accounts (USAs) which would provide additional retirement savings in addition to the base of Social Security
protection.
Work Incentives
On December 17, 1999 President Clinton signed the "Ticket to Work and Work Incentives
Improvement Act of 1999"--one of the most significant changes in disability policy in the last 20 years. This
law creates a Ticket to Work and Self-Sufficiency Program which will provide disability beneficiaries with a ticket
they may use to obtain vocational rehabilitation services, employment services, and other support services from
an employment network of their choice. In addition to allowing beneficiaries to purchase vocational services, the
law provides incentive payments to providers for successful rehabilitation in which the beneficiary returns to
work. The new provisions also provide a number of safeguards to the beneficiaries to protect their benefits and
health Taken together, the Ticket to Work initiative seeks to shift the emphasis in the disability program away
from mere maintenance of benefits more toward rehabilitating the disabled and assisting them in returning to productive
work.
Repeal of the Retirement Earnings Test (RET)
On April 7, 2000 President Clinton signed into
law H.R. 5, "The Senior Citizens' Freedom to Work Act of 2000," eliminating the
Retirement Earnings Test (RET) for those beneficiaries at or above Normal Retirement Age (NRA). (The RET still
applies to those beneficiaries below NRA.)
The legislation began its swift march through Congress on March 1, 2000 when the full House of Representatives passed H.R. 5 by a vote of 422 to 0. The
Senate, on March 22, 2000 then passed the bill by a vote of 100-0
(with a technical amendment). On March 28, 2000 The House agreed to the Senate amendment by a vote of 419-0 and
cleared the measure for transmission to the President.
This was a historic change in the Social Security retirement program. From the beginning
of Social Security in 1935, retirement benefits have been conditional on the requirement that the beneficiary be
substantially retired. This requirement was carried out by the provisions of the RET. The
RET has changed considerably over the years. The requirement was first scaled-back in the
1950 Amendments, which exempted workers age 75 and older from the RET. The exempt age was reduced to 72 in 1954,
and to age 70 and older in 1977. With the new legislation, starting at the NRA, Social Security retirement benefits
will be paid to beneficiaries who are still working. Effectively, for those who have reached full retirement age,
this repeals the requirement that the beneficiary be substantially retired in order to receive full Social Security
retirement benefits.
Social Security Reform in the Bush Administration
In his Inaugural Address, President
George W. Bush announced his intentions to reform Social Security and Medicare. Throughout the early months of
his presidency the President made many speeches and addresses in which this was a major recurring theme. In his
first speech to a joint-session of Congress
in February 2001, the President announced his intention to appoint a Presidential Commission to recommend ways
to address Social Security reform. The President stated the Commission would operate under three broad principles:
- It must preserve the benefits of all current retirees and those nearing retirement.
- It must return Social Security to sound financial footing.
- And it must offer personal savings accounts to younger workers who want them.
On May 2, 2001 the President announced the appointment of his Social Security Commission, the "President's Commission to Strengthen Social Security."
The Commission was to issue its final report by late 2001.
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