Social Security and the Ramen Noodle Generation
Elected officials looking to trim the fat of American government, and tea partiers in particular, have found their easy target: Social Security. But, for being 75 years old, Social Security is in pretty good shape. For one, less than one penny of every dollar is spent on administrative costs.
The biggest problem with Social Security isn’t that it faces an imminent collapse (which, by the way, it doesn’t), but that it is largely misunderstood. Social Security advocates are working to educate and mobilize people, including younger generations, to save Social Security as it currently exists and to expand the program.
And they’re targeting students in particular. Already warned that they’ll be the ones to shoulder any shortfalls but buried under rising tuition costs, loans and cuts in educational funding, students are being urged to make Social Security a priority, and not just because it affects their retirement. It could improve their current predicament.
In 1935, in response to the Great Depression, President Franklin D. Roosevelt signed into law and established Social Security, fully known as Old Age, Survivor and Disability Insurance (OASDI). In its current form, Social Security functions as income insurance in the event that a household loses a breadwinner due to old age, injury or death. K-12 dependents and spouses of those breadwinners who are no longer able to work can also claim benefits.
"It's more than just money old people get from the government," said Kathryn Ann Edwards, a 26-year-old researcher at the Economic Policy Institute (EPI) and author of A Young Persons Guide to Social Security. In fact, in 2009, about one in six Americans received a Social Security benefit of one form or another, and 31 percent of beneficiaries were non-retirees.
Edwards’ book, co-authored by two other 20-somethings, was released last week at a forum hosted by EPI titled “Engaging younger generations in Social Security debates."
But even though young whippersnappers seemingly know less about how Social Security is financed and paid out (covered in chapter three of A Young Person’s Guide to Social Security), Lake’s research overwhelmingly shows they are aware of its importance and the looming debt crisis makes people, particularly young ones, more defensive of the program.
“They’re saying, ‘It belongs to us, not the government. We can’t let Congress use Social Security as a piggy bank,’ ” Lake said.
Social Security is not funded by the federal government but by contributions from working Americans and their employers (via the FICA payroll tax), as well as interest on Social Security’s $2.5 trillion(as of 2010) trustfund and the tax on high-income beneficiaries. In fact, Social Security has its own U.S. Treasury accounts.
“Social Security has not contributed to the federal deficit, and should not be on the table for cuts to address the deficit,” said Jonathan Voss, Lake’s associate.
So the question is not whether young people support Social Security, Lake said, but rather: “How do we tap into that agreement? How do we solidify it? How do we mobilize it?”
And that’s precisely what Edwards hopes A Young Person’s Guide to Social Security will do. The book, less than 60 pages, comes as a free download and covers everything from the history and intent of the program to a chapter titled "If it ain't broke, don't break it," which includes policy solutions for increasing and expanding the viability of the program.
The most provocative expansion the book proposes is to restore the student benefit. Yes, back in 1965 when gas was 31 cents per gallon and Grandpa was lamenting your mother’s decision to burn her bras and run away to California to protest the war, Social Security extended benefits to college students.
The 1965 amendment established a student benefit program for the dependents of OASDI beneficiaries, widening the definition of a “dependent” to include full-time students younger than 22 who were pursuing a post-secondary education. Congress’ rationale for the extension was that most young adults enrolled in post-secondary institutions were largely dependent on their parents’ income.
By 1981, at the height of its spending, the student benefit program accounted for 20 percent of federal spending on student assistance for higher education.
Like survivor and disability beneficiaries today, student beneficiaries were more likely to come from low-income and minority families and students reported that they could not afford to stay in school without Social Security benefits. Improved college enrollment and completion rates among minority and low-income students during that time support those claims.
But then in the early 1980s, Social Security found itself in the worst financial shape of its then 50-year history. Congress phased out the student benefit program by 1985, arguing that college had become more affordable, and the payments were a nonessential burden on the trust fund. Furthermore, the Social Security Administration (SSA) did not have the infrastructure to verify the full-time school enrollment of student beneficiaries, resulting in overpayments.
Today, with some legislators suggesting throwing Pell Grants onto the chopping block during recent debt ceiling negotiations, the history of Social Security’s student benefit program seems haunting.
In fact, the United States Student Association (USSA), which provided testimony at a recent Congressional hearing to “Save Pell,” also offered testimony at a 1981 Congressional hearing in support of saving Social Security’s student benefits.
Eduardo Wolle, the then-USSA Legislative Director, told Congress that year: “Eliminating these benefits for students is unjust, and an inhumane act directed at those families who might otherwise not be able to meet college costs.”
But what if axing Social Security student benefits wasn’t foreshadowing possible cuts to the Pell Grant program? Instead, why not look at the uncertain fate of the Pell Grant as a key reason to restore student benefits?
Economists, policy experts and others calling for the reinstatement of Social Security coverage for post-secondary students cite the program as a way to both assist struggling college students and reduce shortfalls in Social Security’s eroding tax base
These experts acknowledge Congress’ dated reasoning for phasing out student benefits, but point out today’s higher education landscape, which is much different than it was in 1981. The price of higher education has soared and financial aid, particularly for those in need, has not risen accordingly.
When bringing back the Social Security benefit program, verification of a beneficiary’s full-time enrollment at a post-secondary institution could rely on the existing infrastructure of the Free Application for Federal Student Aid (FAFSA), virtually eliminating overpayments. After graduating from a post-secondary institution, student beneficiaries would join the work force with a college education. Earning a larger paycheck, they would be paying more into Social Security than if they had only completed high school. In fact, estimates indicate that the cost of the student benefit would be outweighed by a much higher revenue from student beneficiaries-turned-workers – a solid argument for reinstating student benefits.
Never mind that Larry Kotlikoff, a professor of Economics at Boston University, called Social Security “fiscal child abuse.” Facts be told, a young dependent can benefit from Social Security as much as a retiree, if not more. So download your copy of A Young Person’s Guide to Social Security, Tweet it, Facebook it, and, if you’re feeling old-fashioned, make a sign about it and march. The time to mobilize is now.