452 CHAPTER 14|ECONOMIC AND SOCIAL POLICY
SOCIAL POLICY TODAY
In the 2013 fi scal year Social Security, Medicare, and Medicaid constitute nearly
half of all federal spending. With an aging population and health care costs that
are rising as a percentage of the economy, these policies will continue to take an
even greater share of the budget. Here we explain the nature of these important
programs and discuss recent eff orts to reform them.SOCIAL SECURITY
Social Security is the most popular social program in the United States. Conse-
quently, it has developed a reputation as the “third rail” of politics (like the dan-
gerous, power-conducting rail on electrifi ed train tracks) because a politician who
dares to touch Social Security risks political death. Despite serious problems con-
cerning its long-term solvency, Social Security has proven remarkably immune to
any steps that could be taken to shore up its fi nancial health, such as cutting ben-
efi ts or raising the Social Security tax.
One reason that Social Security is so popular is its universal quality—that is,
nearly every working American participates in the program, from Bill Gates to the
teenager fl ipping burgers at McDonald’s. Once people retire, they are all entitled to
Social Security checks without regard to how much income they have from other
sources, such as dividends, interest, or other pensions. Thus Social Security does
not pit citizens from diff erent classes or ethnic groups against one another. The
program is also popular because it works. Fewer than 10 percent of the nation’s
elderly are in poverty today. Census data show that nearly half of the elderly
(46.2 percent) would be in poverty today without their Social Security payments.^37
(See Nuts and Bolts 14.3.)
However, Social Security faces long-term problems. The source of the problem
is changes in the nation’s demographic profi le. The Baby Boom generation, born
between 1946 and 1964, is just starting to retire, and between 2000 and 2030 theBaby Boom generation Ameri-
cans born between 1946 and 1964,
who will be retiring in large num-
bers over the next 20 years.
SOCIAL SECURITY
Number of recipients for old-age, survivors, and disability insurance:
¾ Old-age insurance (the basic retirement program) 37,123,000
¾ Survivors insurance (retirement program for widows, widowers, and the children
of deceased primary wage earners) 6,325,000
¾ Disability insurance (payments for people and their families who cannot work
because of a disability and are not yet retired) 9,942,000
Monthly Retirement Benefi ts:
¾ Individual: Average = $1,171, maximum = $2,346
¾ Couple: Average = $1,902, maximum = $3,539 (if one spouse does not work and
the other earns the maximum)Source: All fi gures are from the U.S. Social Security Administration Offi ce of Policy,
“Monthly Statistical Snapshot, July 2012,” available at http://www.ssa.gov/policy/docs/
quickfacts/stat_snapshot/ (accessed 9/24/12).NUTS & bolts