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The Social Security Act is a United States law passed in 1935, which was during the presidency of Franklin Roosevelt. The primary purpose of the law was to help retired individuals by creating a pension fund that the government would coordinate. This law was passed partially in response to the difficulties people were suffering during the Great Depression. It has always been funded by taxing the payroll of workers.
A man names Francis Townsend was largely responsible for fostering a movement for some kind of national pension program. He made a club in the 1930s that people could join if they favored a pension. He ended up with millions of members, and they signed a petition, which he gave to the president. The government responded by creating social security, but Townsend was actually very unhappy with the final product.
The taxation level and benefits of the Social Security Act have been constantly adjusted over time, mostly in response to inflation. In some cases, these adjustments have not been fast enough, and they’ve left the fund in a deficit situation. Adjusting the level of benefits and taxation is often a politically-charged issue, and it can be difficult for lawmakers to make changes depending on the political climate. The fact that seniors are often the most active block of voters makes the issue especially difficult to handle from a political perspective.
One thing which has often caused imbalances in the structure of the Social Security Act is the life expectancy of the average American. Over time, medical technology has generally improved the overall life expectancy of individuals. Sometimes the taxation levels for Social Security have been collected with a much lower assumption about the senior population level, which leads to deficits and requirements for tax hikes to keep things even.
There has been some doubt about the ability of the Social Security Act to meet the growing population of seniors going forward. One major problem is that the government has often used Social Security funds on an emergency basis for other programs, and then they often fail to replace those funds. Many experts think that there will need to be some sort of serious correction to keep the program functional. Some ideas include raising the retirement age, raising taxes, or lowering benefits. Many experts expect some kind of combination of multiple options, while others think some other solution will be required.
Interesting. At a recent Social Security presentation, a representative of Social Security stated that it was never meant to be a retirement fund. Then what was it meant to be?