Social Security: Good Intentions, Unintended Consequences

Social Security: Good Intentions, Unintended Consequences

Posted by Adam Kazda on 05/22/2017

FDR, Social Security“The information encoded in your DNA determines your unique biological characteristics, such as sex, eye color, age and Social Security number.”

The Pulitzer Prize winning author, Dave Barry, was obviously joking, but his joke brings up some interesting questions - was the Social Security number supposed to be used as a universal identifier, and where does the number come from?

In short, the Social Security Administration and those close to the program did not expect the Social Security number to be our universal identifier. According to the Social Security Administration, “the Social Security number was created in 1936 for the sole purpose of tracking the earnings histories of U.S. workers, for use in determining Social Security benefit entitlement and computing benefit levels.”

Nowadays it is impossible to call your bank without giving the last four digits of your Social Security number.

Social Security CardA Social Security number is made up of nine digits. The first three digits (area number) are assigned to a geographical region. For example, Missouri has an area number range of 486-500. So if you were born in Missouri, your area number falls in this range. The second two numbers are group numbers within your state, and the last four are a numerical series within the group number within your state.

The pervasive usage of the Social Security number as a universal identifier was not the only outcome that was unforeseen by the program's designers.  In fact, the first recipient of a Social Security check provides one example of the unintended consequences of the program that landed someone a return a Wall Street banker could only dream of.

Ida May FullerHer name was Miss Ida May Fuller, and she was the first beneficiary of recurring Social Security payments. According to the Social Security Administration, “Miss Fuller filed her retirement claim on November 4, 1939, having worked under Social Security for a little short of three years. While running an errand she dropped by the Rutland Social Security office to ask about possible benefits. She would later observe: "It wasn't that I expected anything, mind you, but I knew I'd been paying for something called Social Security and I wanted to ask the people in Rutland about it."

Miss Fuller received the first Social Security check for $22.54 on January 31, 1940 having only worked three years under the Social Security system. In total, during those three years, Miss Fuller paid $24.75 in taxes to the Social Security program, but would go on to live until she was 100 years old collecting a total of $22,888.92 in Social Security benefits.

When Miss Ida May Fuller stopped receiving Social Security, she would boast a return of over 92,000%! An incredible return on investment to say the least, and one the crafters of Social Security did not intend on. Rather, Social Security was originally established to provide general welfare benefits for old-age persons as well as “blind persons, dependent and crippled children, maternal and child welfare, public health, and the administration unemployment compensation.”

If the program’s designers could not predict the flaws in the first payout ever made, it is a near certainty that they did not predict the massive problems associated with the retirement of the Baby Boomer Generation. According to the Social Security Board of Trustees, “Under the intermediate assumptions, the Trustees project the OASDI [Social Security] cost rate will rise rapidly between 2017 and 2035, primarily because the number of beneficiaries rises much more rapidly than the number of covered workers as the baby-boom generation retires.”

Worker to Beneficiary RatioThis means there are simply too few workers to cover the number of Social Security beneficiaries. According to the earliest historical data, in 1945 there were almost 42 workers per beneficiary. Now there are only about 2.8 workers per beneficiary, and that number is expected to decrease. In addition, when President Franklin Delano Roosevelt signed Social Security into law in 1935, average life expectancy was 64 and the earliest retirement age in Social Security was 65.2636. Today, Americans on average live 14 years longer, retire three years earlier, and spend 20 years in retirement.

While many Americans depend on Social Security, the continuation of the program is dependent on Congress updating how it functions to the current reality. Reform is the only way to save the program from failing.  

According to the Social Security Board of Trustees, “Under the Trustees’ intermediate assumptions, projected OASDI cost will exceed total income by increasing amounts starting in 2020, and the dollar level of the combined trust fund reserves declines until reserves become depleted in 2034.”

In other words, on its current path, Social Security funds will run out in 2034 and the available benefits will be significantly reduced for everyone.

Many in Washington and beneficiaries of the program say Social Security is working fine. That may be true to beneficiaries that receive checks every month, but saying Social Security is fine is like saying a truck heading 100 miles per hour works well, but just ahead is a broken bridge. Throughout the years Congress has made insignificant reforms to extend the pavement on this broken bridge, but soon that truck is destined to reach the bridge, and if no serious reforms are implemented, that truck may be headed for disaster. If nothing is done soon, the pavement will run out, and then, all Americans will feel the crash.  

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Adam KazdaAdam Kazda
Digital Content Creator
Adam joined Restore Accountability in 2016 and manages the Foundation's day to day creative operations. Previously, he spent two years on Capitol Hill working for Senator Tom Coburn and Senator Jeff Flake...FULL BIO