As we heard a few weeks ago from the Public Trustees, unless Congress acts, in 2036 Social Security revenues will only cover 77 percent of promised benefits. Congress must act and the sooner we do so, the sooner we can protect those who are most vulnerable.
Republicans and Democrats agree on this much: current benefits should not change for those in or near retirement. All their lives they have worked hard and played by the rules. They deserve the peace of mind knowing that Social Security will be there for them. But young people deserve peace of mind too.
At our last hearing the Subcommittee looked at options to raise payroll taxes to address these challenges and heard that these options do not promote savings, reward work, or permanently fix Social Security’s shortfall. With chronic unemployment, falling incomes and so many young people unable to find work, nothing we do should make it harder for Americans to find good paying jobs.
Today we will learn more about Social Security’s benefits, proposed changes to benefits and their impacts on future beneficiaries, workers, Social Security’s finances and economic growth.
Since the beginning of the program, benefits have been based on workers’ lifetime earnings. The formula that determines benefits is designed to replace a higher percentage of career earnings for low earners. Benefits are increased almost every year, to keep pace with inflation, through cost of living adjustments.
Social Security first paid monthly benefits in 1940 to Ida May Fuller, who worked for just three years under the Social Security program and paid taxes on her salary totaling $24.75. Her first monthly check was for $22.54, but her check was not indexed for inflation and her lifetime benefits for her and her age group were soon supported by a surge of young workers. During her lifetime she collected almost $23,000 in Social Security benefits.
Today, nearly 55 million Americans receive benefits averaging $1,078 per month. By 2035, over 90 million will receive benefits. Benefits are more generous, but the number of beneficiaries will rise much more rapidly than the number of workers, now struggling in today’s economy, who will need to support them. The reality is that there are simply not enough young workers to support the Baby Boomers who are retiring at a rate 10,000 a day for the next 19 years.
Social Security also provides essential income to workers’ families. Spouses, children and survivors are all eligible for benefits. In fact, 1 out of every 13 beneficiaries receives family benefits.
Many of our witnesses will review how America and Social Security have changed over the past 76 years. Today, people are just living longer. When Social Security was created Americans lived on average until 64 and Social Security’s retirement age was 65. According to the Social Security actuaries, had Congress tied Social Security’s full retirement age to increases in life expectancy from the beginning, instead of being 66 today, it would be close to 71. It’s no wonder Members on both sides of the aisle have expressed support for raising the retirement age.
In 1935, Social Security was born amidst that last great economic crisis this country faced: the Great Depression. Then none other than FDR said that “… Social Security can furnish only a base upon which each one of our citizens may build his individual security through his own individual efforts.” In other words, Social Security’s benefits were intended to provide a modest income safety net.
In these challenging economic times, FDR’s statement still rings true. While everyone who pays into Social Security long enough should receive a benefit, not everyone relies on Social Security the same way in retirement. Whatever solutions Congress may ultimately consider, we must protect those who depend on Social Security the most.
In the meantime, until Congress acts, workers and their families are challenged to plan for their retirement. An important tool in their planning is the Social Security Statement, which includes a worker’s earnings history and estimated future Social Security benefit. It is the main document Social Security uses to communicate with over 150 million workers about their future benefits.
Earlier this year the Agency suspended the statement. Given the importance of this planning tool, I asked the Government Accountability Office or GAO to examine Social Security’s plans for making the statement available electronically and the steps they have taken to improve the usefulness of the statement. Today we will hear from the GAO regarding the results of their review.
Americans want, need, and deserve the certainty that Social Security will be there for them. I’m confident that by working together, we can provide that certainty.
I thank all our witnesses for joining us today and look forward to hearing their expert advice on ways to move forward to make sure that Social Security is safe, secure and sustainable.