People Walking

Social Insurance

Our Nations social insurance programs are vast and encompass everything from education and housing to income support, health, nutrition and workforce development. CAUS  is focused on the federal and state programs that support retirement income and health insurance amongst our nations vulnerable populations. Social Security, Medicare and Medicaid are all financed through income tax with entitlements (Social Security and Medicare) undergoing an annual appropriations process to determine budgets and funding.  The importance laying out a proper financial framework for these programs cannot be stressed enough. We are at a critical juncture given the looming commitments that have been made to plan participants without any viable grasp as to the financial insolvency of these programs.  

Social Security

Social Security and the Cost of Delay

The need to make changes in the U.S. healthcare system is in line for top billing in 2022 and 2023. However, we must not fail also to make needed changes to our OASDI (Social Security) system, as well.


The last significant reform of the Social Security system occurred in 1983 when, on the verge of “bankruptcy,” the system embraced reforms that increased taxes and decreased benefits.  These reforms resulted in taxes exceeding payments from 1984 through 2009. Since 2010, however, payments have exceeded revenues and, absent corrections will continue to exceed revenues every year going forward, eventually exhausting the retirement and disability trust fund. Current estimates according to the actuaries of the Social Security Administration are that the combined fund declines to zero by the year 2035 under their so-called intermediate assumptions.

The excess taxes collected between 1984 and 2009 were used to purchase Treasury Bonds. Interest earned on the Treasury Bonds is projected to cover the deficits through 2021. At that point, however, it will be necessary to start selling the Treasury Bonds to cover the annual deficits. At the current rate of annual contributions and payments, the Social Security reserve funds will be spent by 2033. Unless action is taken, from that year forward there will not be sufficient revenues to pay for the benefits promised.

This Social Security shortfall is driven by demographic realities, encouraged by voting behavior, and sustained by political budgeting gimmicks. 

On the demographic side of the ledger, there are three problems. The consumers of benefits, particularly the baby boomers, are retiring in large numbers. Moreover, they are living longer; so, more people are receiving benefits and will be depending on them for longer than ever in history. On the other side of the ledger, the birth rate has dropped significantly and the number of people in the workforce is dropping, which means fewer working taxpayers left to make good on someone else’s promises to the increasing number of retirees. The decline in the number of workers per retiree has been well documented. In 1965 there were 4 workers for every retiree. By the year 2010 that number had declined to 2.9, and the estimate for 2019 (prior to the pandemic, it was 2.8).

The political budgeting gimmicks are a little harder to explain, but the heart of the problem centers on two “stranger than fiction” facts that obscure the cash flow issues confronting Social Security. First, when the federal government calculates the size of the annual federal budget deficit, it does not include either the social security taxes we pay in or the benefits paid out. As a result, billions of dollars of Social Security taxes and expenditures do not register in Congressional budget discussions because - on paper – they do not affect the federal budget’s bottom line. The money the government owes the Social Security Trust fund for the bonds and the interest earned are, however, included in the calculation of the national debt that appears in the federal government’s other budget, the “unified budget.” This budget is the one that calculates the national debt and triggers Congressional discussions about the “debt ceiling.”

In this Alice In Wonderland world, during budget considerations, Congress is encouraged to believe that Social Security is a fiscal “wash,” essentially money in and out with no positive or negative impact on cash flow. During discussions about the national debt, Social Security appears simply as fixed amounts owed to “investors.” As a result, Congress is never required to engage with the short or long-term funding dynamics affecting the sustainability of the system. In fairness, we need to acknowledge that the reluctance to grapple with the harsh financial realities confronting the nation is driven and sustained by the fact that older citizens (i.e., beneficiaries) vote in considerably higher percentages than younger citizens (i.e., working taxpayers).

Moving forward, Congress, seniors, and young workers across this nation would be well-served to heed the wise counsel offered by Bradley Smith, a past Chairman of Milliman and former CAUS board member when he wrote:

“Social Security must be reformed, not because it provides temporary relief for a flawed measurement system that is the unified budget, but in order that working Americans can be assured that Social Security will be in place across generations and viable.  It is inherently unfair that one generation of taxpayers (those retiring in and around the 2030s) be disproportionately burdened with the eventual shortfall of tax revenue over benefit payments.  Rather, all generations should bear a proportionate piece of this burden through a combined reduction in benefits and an increase in taxes paid.  The sooner this happens the more the burden will be spread out and the negative impact on any one generation will be reduced.  The sooner this occurs the uncertainty with respect to future benefit payments will be reduced and Americans can start planning for their retirement knowing that Social Security will be there for them.”

Social Insurance

Great Expectations
W. Rulon Williamson

Mr. Williamson is a former Actuarial Consul­tant to the Social Security Board. This article is reprinted with permission from Christian Economics, May 12, 1959.

The recent average increase of about 7 per cent in monthly bene­fit payments to more than 12 mil­lion persons under the federal pro­gram officially designated as Old Age and Survivors Insurance is an­other step taken by the camel into the "social security" tent. Over the years the camel has been deliberate in following his head into the tent, but he is relentlessly moving in. The tax burden has increased and the program broadened and liber­alized tremendously.

In 1937, the first year of opera­tion of the system now known as OASI, the income from the tax was $500 million, and the outgo only $1 million.

In 1958, the Social Security tax and interest payments amounted to $8.1 billion, and the outgo $8.6 billion.

The first year’s income was 1/16th of the 22nd year’s income, and the first year’s outgo was 1/8600th of the 22nd year’s outgo. By 1950, the outgo had reached 1,000 times the outgo of 1937, while 60 per cent of tax collected was added to the Trust Fund.

In 1958, the Social Security tax receipts were six times those of 1950, but 1958 was the second year in succession when the Social Se­curity taxes plus the interest on the reserve together were less than the outgo for benefits and adminis­trative costs.

In the early years of the pro­gram the Social Security tax col­lections above the outgo require­ments were mighty reassuring and averaged a billion dollars a year for the first 22 years. This Trust Fund of $22 billion at the end of 1958 included cash of $1 billion and funded interest-bearing fed­eral debt of $21 billion, or approxi­mately 7 per cent of the total federal debt.

The 12 million beneficiaries of the 1958 year end were receiving $700 million a month, and they could anticipate aggregate future receipts of $70 billion, all accrued by completed service. Comparing the Trust Fund of $22 billion with the potential aggregate payments to existing claimants, the Trust Fund is less than one-third of such payments.

Furthermore, there are 100 mil­lion nonretired covered individuals who look forward to later benefit status for themselves, dependents, and survivors. It is a calculated guess-estimate that their past service accrual could be over $600 billion. So, against this total past service accrual of $670 billion, the Trust Fund bulks some 3 per cent. Big as $22 billion is, against de­mands of this magnitude it is just peanuts.

We cannot know to what gigan­tic sum these payments will here­after expand. But we do know that in 1955 the outgo was some 6 times the 1935 prospectus for 1955; we do know that Congress has expanded the system 5 times in the 9 year period of 1950-1958; we do know that the 86th Congress gives advance evidence of even less financial prudence than recent former Congresses; we do know that the already determined up-trend in benefits is so high as to call for an advance in tax rates from 41/2 per cent in 1958 to 81/2 per cent in 1969; and we do know that the taxable wage base has ad­vanced 60 per cent from 1937 to 1959.

It will become steadily clearer that OASI taxpayers contribute the funds for the current benefi­ciary classes rather than for them­selves and their dependents, and thus the benefits become more doles to the recipients than anything else.     


Medicare was enacted in 1965  to provide health insurance to individuals age 65 or older. It also provides coverage to younger people with certain disabilities including permanent kidney failure. The federal government serves as both the trustee and executor of the funds which are collected primarily through taxes and Medicare premiums.  The Center for Medicare and Medicaid (CMS) is the federal agency tasked with overseeing the program. 

Currently, Medicare outlays exceed $500 billion annually. The excess of estimated liabilities over available revenues is currently estimated to be at least $40 trillion.