Social Security Fundamentals: A Fact-Based Foundation

Social Security Fundamentals: A Fact-Based Foundation

Statement of
Barry F. Huston
Analyst in Social Policy
Before
Committee on Ways and Means
Subcommittee on Social Security
U.S. House of Representatives
Hearing on
“Social Security Fundamentals: A Fact-Based
Foundation”
April 26, 2023
Congressional Research Service
https://crsreports.congress.gov
TE10083

Congressional Research Service
1
Chairman Ferguson, Ranking Member Larson, and Members of the Subcommittee:
Thank you for inviting me to testify on Social Security Fundamentals: A Fact-Based Approach. My name
is Barry Huston and I am an analyst in social policy with the Congressional Research Service (CRS).
Background on Social Security
Old-Age, Survivors, and Disability Insurance (OASDI), or Social Security, is a federal social insurance
program that provides monthly cash benefits to eligible retired or disabled workers and their dependents,
and to the eligible survivors of deceased insured workers.1 Workers obtain insurance protection by
earning a minimum number of work credits during their careers in jobs covered by Social Security. Cash
benefits are computed using a progressive formula and are based on a worker’s wage-indexed career-
average earnings in covered employment and adjusted for inflation through annual cost-of-living
adjustments (COLAs). In 2023, Social Security covers approximately 183 million workers (about 94% of
the workforce) and provides monthly cash benefits to over 66 million beneficiaries.2 The program is
authorized under Title II of the Social Security Act and administered by the Social Security
Administration (SSA).
Social Security is financed primarily by dedicated payroll taxes, which are credited to the program’s Old-
Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust funds. The total Social Security
payroll tax rate is 12.4% (6.2% for employees and employers, each) and levied on the earnings of covered
workers, up to an annual limit (or contribution and benefit base).3 In 2023, the contribution and benefit
base—the maximum annual amount of earnings subject to the Social Security payroll tax and that can be
used in calculating benefits—is $160,200.4 The two trust funds also receive income from the taxation of a
portion of Social Security benefits and from interest earned on U.S. securities held by the trust funds (i.e.,
funds accumulated from years in which total income exceeded total cost). The OASI and DI trust funds
are overseen by a Board of Trustees (trustees), which is tasked with reporting to Congress annually on the
current and projected financial status of the trust funds.
Historical Overview of the Program
Although the program’s original purpose of providing economic security for older workers remains, the
Social Security program experienced by Americans today is different from the one that was initially
enacted in 1935. In fact, many of the most recognizable elements of the current program did not become
law until the 1970s. Over time, Congress has acted to change nearly all aspects of the program, such as
benefit levels, contribution levels, coverage, and eligibility.
This section begins by briefly highlighting notable legislative milestones during the early years of the
program, with a focus on key program provisions and financing practices. It then examines in somewhat
more detail Social Security’s financing difficulties during the 1970s and early 1980s and Congress’
efforts to improve the long-term solvency of the program.5

1 CRS Report R42035, Social Security Primer.
2 Social Security Administration (SSA), Office of the Chief Actuary (OCACT), Fact Sheet on the Old-Age, Survivors, and
Disability Insurance Program, January 24, 2023, https://www.ssa.gov/oact/FACTS/index.html, and SSA, “Monthly Statistical
Snapshot, February 2023, released in March 2023, https://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/.
3 The contribution and benefit base is often referred to as the taxable maximum, or tax max.
4 SSA, OCACT, “Contribution And Benefit Base,” https://www.ssa.gov/oact/cola/cbb.html.
5 For more information on the history of the program, see CRS Report RL30920, Social Security: Major Decisions in the House
and Senate Since 1935, and Larry DeWitt, “The Development of Social Security in America,” Social Security Bulletin, 2010, at
CRS TESTIMONY
Prepared for Congress —————————————————————————————————

Congressional Research Service
2
1935: Establishment of the Program
The Social Security program was established in 1935 as part of the original Social Security Act.6 The
legislation was rooted in an economic security bill proposed by President Franklin D. Roosevelt earlier
that year, which was based on recommendations from the President’s Committee on Economic Security.
The Social Security Act was designed to improve the economic security of certain groups affected by the
Great Depression, including older adults, unemployed workers, and dependent children. Lawmakers
viewed older adults as being in need of support because many of them had lost their lifetime savings
during this period and their families were less likely to be able to support them given the adverse
economic conditions of the time.7
For those older adults who were already retired and unlikely to be able to work again, the Social Security
Act established federal grants to help states finance the cost of providing means-tested cash assistance to
low-income seniors.8 However, to reduce poverty and the need for means-tested cash assistance among
retired persons in the future,9 the Social Security Act created the Social Security program to allow current
workers to contribute to their retirement security through a system of social insurance and receive
amounts “which will insure not merely subsistence but some of the comforts of life.”10
Under the 1935 law, monthly cash benefits were payable to retired persons aged 65 or older who worked
for a minimum period in jobs covered by Social Security. Coverage under the program was limited to
wage and salary workers in industry and commerce, which was about 56% of the workforce.11 Benefits
were based on a worker’s total cumulative wages and structured so that benefit amounts were greater for
high-wage workers compared to low-wage workers. However, the benefit formula was weighted to
replace a greater percentage of pre-retirement earnings for low-wage workers than for high-wage workers.
The 1935 law did not provide any mechanism to automatically adjust (index) the factors used in the
benefit formula or the benefits themselves following a worker’s entitlement. Absent future legislation,
retirees would receive the same benefit amount for the rest of their lives.
The program was financed by payroll taxes paid by workers and their employers. The 1935 law
established a payroll tax schedule in which the tax rate would gradually increase over time (from 1% to
3% for employees and employers, each). It also established a limit on the annual amount of earnings
subject to the payroll tax ($3,000), which also served to limit the amount of benefits that were payable. As
with the benefits, the legislation did not provide any mechanism for automatically adjusting the annual
limit on the amount of earnings subject to the payroll tax. Payroll taxes were first levied in 1937, with
monthly benefits scheduled to be paid beginning in 1942. The program was structured so that the ratio of
workers to beneficiaries would be relatively large during the early years of the program and then would
gradually decline as the system matured over the long term.

https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p1.html (hereinafter cited as “DeWitt 2010”).
6 P.L. 74-271.
7 U.S. Congress, House Committee on Ways and Means, The Social Security Bill, report to accompany H.R. 7260, 74th Cong., 1st
sess., April 5, 1935, H.Rept. 74-615, p. 4.
8 The federal grants to states for old-age and certain other assistance were replaced by the Supplemental Security Income
program in the 50 states and D.C. in 1974.
9 H.Rept. 74-615, p. 3.
10 Ibid., p. 5.
11 William J. Nelson, Jr., “Employment Covered Under the Social Security Program, 1935–84,” Social Security Bulletin, vol. 48,
no. 4 (April 1985), p. 34, https://www.ssa.gov/policy/docs/ssb/v48n4/v48n4p33.pdf.
CRS TESTIMONY
Prepared for Congress —————————————————————————————————

Congressional Research Service
3
1939-1972: Expansion of the Program
The period 1939-1972 witnessed a notable expansion of the program. Congress established new types of
benefits for dependent family members and disabled workers, extended coverage to more groups of
workers, and increased benefits to account for the rising cost of living. To finance these changes,
lawmakers raised tax revenues, reduced benefits for certain groups of workers, or both. One of the
primary objectives of lawmakers during this period was to ensure that the program’s income would be
reasonably sufficient to cover its cost over the long term.
1939: Creation of Family Benefits, the OASI Trust Fund, and the Trustees
Before the program was in full operation, Congress modified Social Security to expand its scope. In 1939,
Congress passed legislation that extended benefits to certain dependent family members of insured
workers, namely, wives and minor children of retired workers and widows and surviving minor children
of deceased workers.12 Lawmakers shifted the focus of the program from single persons to families
because workers with families were considered likely to have greater financial need than workers without
dependents.13 Relatively few married women or widows worked at the time, and the loss of income to a
family due to a worker’s retirement or death was presumed to cause financial hardship for the worker’s
spouse and minor children.14 Benefits for dependents and survivors were based on a specified share of the
worker’s basic benefit, subject to a family limit on the total amount of benefits that were payable.
(Benefits were later extended to dependent male family members.)
In addition, Congress revised the benefit formula to increase benefits levels for most workers and to
compute benefits based on average monthly wages rather than total cumulative wages. This change in the
computation of benefits made it possible to start paying monthly benefits sooner in 1940 (originally
1942).15 Congress also established the OASI trust fund and the trustees to oversee it. The OASI trust fund
became effective at the beginning of 1940, and the trustees submitted their first annual report to Congress
on the current and projected financial status of the trust fund in 1941.
1950: Extension of Coverage, Ad-Hoc Benefit Increases, and Financing on a Self-
Supporting Basis
In 1950, Congress passed legislation that shaped the program in a number of notable ways.16 First, it
extended mandatory coverage to more groups of workers, including certain self-employed individuals,
farm workers, and domestic workers. It also provided voluntary coverage to employees of state and local
governments and nonprofits under certain conditions. These and subsequent extensions increased
coverage under the program to about 86% of the workforce by 1957.17

12 Social Security Act Amendments of 1939 (P.L. 76-379). Benefits were also extended to dependent parents of insured workers
under certain conditions.
13 U.S. Congress, House Committee on Ways and Means, Social Security Act Amendments of 1939, report to accompany H.R.
6635, 76th Cong., 1st sess., June 2, 1939, H.Rept. 76-728, p. 11.
14 About 15% of married women and 30% of widowed or divorced women were in the labor force in 1940. See U.S. Department
of Labor, Women’s Bureau, Employment of Women in the Early Postwar Period with Background of Prewar and Ware Data,
October 1946, Table 7, p.11, https://fraser.stlouisfed.org/files/docs/publications/women/b0211_dolwb_1946.pdf.
15 Lyle L. Schmitter and Betti C. Goldwasser, “The Revised Benefit Schedule Under Federal Old-Age Insurance,” Social Security
Bulletin, vol. 2, no. 9 (September 1939), https://www.ssa.gov/policy/docs/ssb/v2n9/v2n9p3.pdf.
16 Social Security Act Amendments of 1950 (P.L. 81-734).
17 Saul Waldman, “Coverage Extension Under Old-Age, Survivors, and Disability Insurance,” Social Security Bulletin, vol. 24,
no. 6 (June 1961), Table 3, p. 7, https://www.ssa.gov/policy/docs/ssb/v24n6/v24n6p3.pdf.
CRS TESTIMONY
Prepared for Congress —————————————————————————————————

Congressional Research Service
4
Second, lawmakers increased benefits for the first time since the program began paying them in 1940.
This ad-hoc benefit increase, which averaged about 77%, was enacted because some of the purchasing
power of monthly benefits had declined due to price increases in the intervening years. The ad-hoc benefit
increase was financed by increases in both the scheduled payroll tax rate and the contribution and benefit
base, as well as changes to the benefit formula for long-term workers. This approach for providing and
financing ad-hoc benefit increases would be used by Congress over the next several decades.
Third, lawmakers expressed the sense that Social Security should be financed on a “completely self-
supporting basis” from the payroll taxes paid by covered workers and their employers.18 Congress also
established a practice of evaluating proposed Social Security changes in terms of their impact on the
program’s long-term solvency and crafting reform legislation so that Social Security’s payroll tax
schedule would be more or less sufficient to cover the program’s cost over the long term.19
1956: Creation of Disability Benefits, the DI Trust Fund, and Early Retirement
Benefits
In 1956, Congress extended benefits to disabled workers aged 50 to 64 who are unable to perform a
minimum level of work due to a qualifying impairment.20 (Disability benefits were later extended to
disabled workers under age 50.) To address concerns that disability benefits would pose a risk to the
solvency of the OASI trust fund, Congress established a separate DI trust fund from which disability
benefits are paid.21 The extension of benefits to disabled workers was financed by an increase in the
payroll tax rate, with a portion of the overall payroll tax rate allocated to the DI trust fund.
Lawmakers also reduced the minimum retirement age for women from age 65 to age 62 in recognition
that women tend to be younger than their husbands and job openings for women at the time were more
likely to impose age limits.22 To control costs, Congress specified that early retirement and spousal
benefits for women be actuarially reduced to account for longer expected duration of benefit receipt over
their lifetimes.23 (Actuarially reduced early retirement and spousal benefits were later extended to men.)
1972: Establishment of Automatic COLAs and Increases in the Taxable Maximum
In 1972, Congress passed legislation that made three major changes to the program.24 First, the legislation
provided a 20% ad-hoc increase in benefits. Second, it provided for future automatic increases in benefits
(COLAs) under certain conditions (effective in 1975).25 This was done to preserve the purchasing power

18 U.S. Congress, House Committee on Ways and Means, Social Security Act Amendments of 1949, report to accompany H.R.
6000, 81st Cong., 1st sess., August 22, 1949, H.Rept. 81-1300, p. 31.
19 Robert J. Myers, Social Security (McCahan Foundation, 1993), p. 725.
20 P.L. 84-880. The 1956 legislation also extended benefits to the disabled adult children of retired or deceased insured workers
(and later disabled workers). For more information on the history of Social Security disability benefits, see John R. Kearney,
“Social Security and the ‘D’ in OASDI: The History of a Federal Program Insuring Earners Against Disability,” Social Security
Bulletin, vol. 66, no. 3 (August 2006), https://www.ssa.gov/policy/docs/ssb/v66n3/v66n3p1.html.
21 For more information on the congressional rationale for establishing a separate DI trust fund, see Appendix A in CRS Report
R43318, The Social Security Disability Insurance (DI) Trust Fund: Background and Current Status.
22 U.S. Congress, House Committee on Ways and Means, Social Security Amendments of 1955, report to accompany H.R. 7225,
84th Cong., 1st sess., July 14, 1955, H.Rept. 84-1189, p. 7.
23 U.S. Congress, Conference Committee, Social Security Amendments Act of 1956, report to accompany H.R. 7225, 84th Cong.,
2nd sess., July 26, 1956, H.Rept. 84-2936, p. 25.
24 P.L. 92-336. The COLA provision, along with the indexation of the contribution and benefit base, was included in H.R. 1,
which would eventually become the Social Security Amendments of 1972 (P.L. 92-603). But the provisions were split off from
the main text and enacted under P.L. 92-336 instead.
25 At the time, the COLA was measured from the average CPI of the first quarter of the previous year in which a benefit increase
CRS TESTIMONY
Prepared for Congress —————————————————————————————————

Congressional Research Service
5
of Social Security benefits without the need for beneficiaries to periodically petition Congress to legislate
ad-hoc benefit increases.26 Third, it established automatic increases in the contribution and benefit base to
finance the automatic COLAs (effective in 1975). The House report accompanying the 1972 legislation
explicitly indicated that the automatic increase in the contribution and benefit base would be based on the
rise in average covered wages if wage levels have gone up sufficiently, and such increases were intended
to finance automatic increases in benefits and would happen only for years in which a COLA is
effective.27
Mid 1970s-Early 1980s: Financial Difficulties and Efforts to Improve
Long-Term Solvency
The Social Security program experienced significant financial difficulties during the mid-1970s through
the early 1980s. A combination of high inflation, high unemployment, and slow real wage growth during
this period caused the program’s costs to exceed its income, which eroded the balances of the Social
Security trust funds. To address these challenges, Congress passed a series of legislative measures aimed
at mitigating program costs and increasing revenues.
1977: Revisions to Benefits and Taxes
The adverse economic conditions of the 1970s presented the Social Security program with unforeseen
challenges. In 1972, inflation was at relatively low rates and expected to decline, but by 1973, inflation
had surpassed expectations and the trust funds began to run cash-flow deficits (i.e., the program’s costs
exceeded its non-interest income).28 Cost to the program increased due to a series of relatively high ad-
hoc and later automatic COLAs, and changes in the relationship between prices and wages during this
period caused new groups of retirees to receive higher-than-intended initial benefits relative to their
career-average earnings. As Larry Dewitt, Daniel Beland, and Edward Berkowitz note in Social Security:
A Documentary History:
As the economics of the 1970s produced disruptions in the historic relationship between prices and
wages, this had an adverse effect on Social Security benefits. In a period of stagflation, overall
program costs soared and initial benefit levels for future beneficiaries rose much higher than
planned.29
In response to the financial pressures on Social Security, Congress passed legislation in 1977 that focused
on program financing.30 To address the unintended increase in benefit levels from prior legislation,

was provided to the average of the first quarter of the current year. In addition, no COLA was provided in any year in which the
increase in the CPI was less than 3%. (There was a 3% trigger.) The Omnibus Budget Reconciliation Act of 1986 (P.L. 99-509)
eliminated the 3% trigger for Social Security COLAs, requiring instead that inflation (or wage growth in certain cases) be greater
than 0% during the specified base period for a COLA to be payable. This requirement effectively allowed for a COLA smaller
than 3% to be paid while continuing to protect benefits from being decreased during periods of declining prices (i.e., the Social
Security COLA cannot be negative and thus cannot reduce benefit levels).
26 U.S. Congress, House Committee on Ways and Means, Social Security Amendments of 1971, report to accompany H.R. 1, 92nd
Cong., 1st sess., May 26, 1971, H.Rept. 92-231, p. 41.
27 Ibid., pp. 7 and 41.
28 James Kelley and Joseph Humphreys, Final Report on the Social Security ‘Notch’ Issue, Commission on the Social Security
“Notch” Issue, Appendix, 1994, https://www.ssa.gov/history/notchbase.html.
29 Larry Dewitt, Daniel Beland, and Edward Berkowitz, Social Security: A Documentary History (2008), p. 20. Stagflation exists
when an economy experiences both high inflation and high unemployment; the U.S. economy experienced such conditions
during the 1970s. For more information on stagflation, see CRS Report R41656, Changing the Federal Reserve’s Mandate: An
Economic Analysis.
30 Social Security Amendments of 1977 (P.L. 95-216).
CRS TESTIMONY
Prepared for Congress —————————————————————————————————

Congressional Research Service
6
Congress revised the benefit formula in an effort to stabilize the ratio of initial benefits to career-average
earnings for new groups of retirees. By reducing this ratio to previously expected levels, the legislation
was expected to relieve some financial pressure on the system.31 It was projected that, without this
change, a worker’s future benefits could exceed his or her pre-retirement earnings.32 The 1977
amendments designed the current-law benefit formula by establishing a formula that indexes workers’
initial benefit levels to wage growth and then indexes their future benefits to price growth.33
Among other things, the 1977 legislation also provided for an increase in payroll tax revenues. First, the
legislation increased the payroll tax rate and set a schedule for future increases. Second, the legislation
increased the contribution and benefit base to higher-than-projected levels for 1979, 1980, and 1981.34
After 1981, the contribution and benefit base would return to the automatic (i.e., wage-indexed)
adjustments. As projected in 1977, this change in financing would have resulted in about 91% of all
payroll to be subject to the payroll tax and about 95% of all covered workers having their full earnings
credited for benefit purposes.35
Early 1980s: Near Depletion of the OASI Trust Fund and Establishment of the
Modern Program
At the time, the 1977 legislation was projected to correct the financial imbalances of the Social Security
system for about 50 years. Initially, this seemed to be the case. The 1978 and 1979 annual trustees reports
indicated an improving financial situation.36 However:
In 1980, price inflation hit 13.5 percent, while wage growth declined by 4.9 percent—producing a
double blow to the program’s financing by simultaneously increasing costs as revenues declined.
By the time the 1980 Trustees Report was released, the trustees were calling for stop-gap financing
changes.37
The 1980 annual trustees report highlighted that the OASI trust fund would be depleted by early 1982
under the most optimistic set of assumptions.38 Although the balance of the DI trust fund was projected to
continue to increase, its rate of growth was not projected to be great enough to offset the decline in the

31 For instance, before the 1977 legislation, the replacement ratio for average workers was projected to grow from 44% in 1980 to
60% in 2020. After the 1977 legislation, the replacement rate for average workers was projected to be 43% for all average
workers retiring after 1980. John Snee and Mary Ross, “Social Security Amendments of 1977: Legislative History and Summary
of Provisions,” Social Security Bulletin, vol. 41, no. 3 (March 1978), pp. 3-20,
https://www.ssa.gov/policy/docs/ssb/v41n3/v41n3p3.pdf (hereinafter cited as “Snee and Ross 1978”).
32 Larry Dewitt, Daniel Beland, and Edward Berkowitz, Social Security: A Documentary History (2008), pp. 298-321.
33 “The new benefit formula was designed by Congress in such a way that, eventually, replacement ratios for retiring workers at
age 62 will be about 5 percent lower (relatively) than they would have been in 1979 under the old benefit formula.... The revised
method of computing benefits eliminated about one-half of the deficit that had been projected over the next 75 years.” A.
Haeworth Robertson, “Financial Status of Social Security Program After the Social Security Amendments of 1977,” Social
Security Bulletin, vol. 41, no. 3 (March 1978), pp. 21-30, https://www.ssa.gov/policy/docs/ssb/v41n3/v41n3p21.pdf.
34 Ibid. “Under the old law, approximately 85 percent of the total payroll in covered employment was subject to tax. Under the
new law, after 1980 about 91 percent of the total payroll will be subject to tax.... The net effect will be to reduce the future
deficits by approximately 0.5 percent of taxable payroll.” The actuarial deficit in 1977 was projected at 8.20 percent of taxable
payroll. After the passage of the 1977 amendments, the actuarial deficit was projected to be 1.46 percent of taxable payroll (see
https://pensionresearchcouncil.wharton.upenn.edu/wp-content/uploads/2019/05/Chapter-10.pdf#page=62).
35 Snee and Ross 1978, p. 17.
36 DeWitt 2010.
37 Ibid.
38 The Board of Trustees, Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds, 1980 Annual Report,
June 19, 1980, https://www.ssa.gov/OACT/TR/historical/1980TR.pdf, p. 3.
CRS TESTIMONY
Prepared for Congress —————————————————————————————————

Congressional Research Service
7
OASI trust fund.39 Under the program’s financing structure at the time, the trustees cautioned that the
system would be unable to pay full scheduled benefits on time within a relatively short period.
In the fall of 1980, Congress had reallocated Social Security tax revenues from the DI trust fund, which
was relatively financially sound at the time, to the OASI trust fund during 1980 and 1981.40 The purpose
was to maintain adequate reserves in both funds at least through the end of 1981 and allow Congress more
time to consider options to improve the system’s finances.41 However, the financial situation of the OASI
trust fund continued to deteriorate and lawmakers were forced to act.
In December 1981, President Ronald Reagan established the bipartisan National Commission on Social
Security Reform—commonly referred to as the Greenspan Commission due to its chairmanship by Alan
Greenspan—to review options and come up with a plan to restore financial balance to the Social Security
system and ensure that beneficiaries would continue to receive their full benefits. Also in December 1981,
as the financial situation of the OASI trust fund continued to deteriorate, Congress passed legislation that,
among other things, allowed the OASI trust fund to borrow from the DI trust fund and Medicare’s
Hospital Insurance (HI) trust fund, both of which were in a relatively better financial position at the
time.42 The OASI trust fund was required to repay the borrowed amounts with interest and could not
borrow more than what was required to pay full benefits through June 30, 1983.43
The 1982 annual trustees report, which was released in April of that year, stated that in the absence of
legislative action, the OASI trust fund would soon be insolvent.44 With the Greenspan Commission’s
work underway, projections in the 1982 report showed that Social Security would no longer be able to pay
full benefits on a timely basis starting in mid-1983.45 By November 1982, the balance of the OASI trust
fund had fallen to zero, and continuing tax revenues were insufficient to pay in full the OASI benefit
checks that had been delivered at the beginning of the month.46 To cover the shortfall, the Secretary of the
Treasury authorized a $581 million loan from the DI trust fund to the OASI trust fund. Additional loans
from the DI and HI trust funds to the OASI trust fund were made before the temporary interfund
borrowing authority expired at the end of December 1982. These loans gave lawmakers a short six-month
window to address the financial imbalance of the OASI trust fund.47
In January 1983, the Greenspan Commission submitted its report to the Administration and Congress on
recommendations to improve the short- and long-range financial condition of Social Security.48 The
commission’s final recommendations followed the principle of balancing tax increases with benefit
reductions. The commission also recommended unanimously that Congress not alter the fundamental

39 Ibid.
40 P.L. 96-403.
41 John A. Svahn and Mary Ross, “Social Security Amendments of 1983: Legislative History and Summary of Provisions,”
Social Security Bulletin, vol. 46, no. 7 (July 1983), p. 5, https://www.ssa.gov/policy/docs/ssb/v46n7/v46n7p3.pdf (hereinafter
cited as “Svahn and Ross 1983”).
42 P.L. 97-123.
43 For more information, see Bruce D. Schobel, “Interfund Borrowing Under the Social Security Act,” Social Security Bulletin,
vol. 46, no. 9 (September 1983), https://www.ssa.gov/policy/docs/ssb/v46n9/ (hereinafter cited as “Schobel 1983”).
44 The Board of Trustees, Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds, The 1982 Annual
Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds,
April 1, 1982, p. 2, https://www.ssa.gov/OACT/TR/historical/1982TR.pdf.
45 Ibid.
46 Schobel 1983. See also Edward Cowan, “Leaders of Both Parties Facing Tough Choices on Social Security Problems,” The
New York Times, November 7, 1982, http://www.nytimes.com/1982/11/07/us/leaders-of-both-parties-facing-tough-choices-on-
social-security-problems.html.
47 The 1982 loans from the DI and HI trust funds to the OASI trust fund were repaid in full by the end of April 1986.
48 Report of the National Commission on Social Security Reform, January 1983, http://www.ssa.gov/history/reports/gspan.html.
CRS TESTIMONY
Prepared for Congress —————————————————————————————————

Congressional Research Service
8
structure of the Social Security program or undermine its fundamental principles in its deliberations on
financing proposals.49 Key recommendations, roughly balanced between revenue increases and benefit
reductions, were to: make Social Security coverage mandatory for newly hired federal civilian employees
and employees of nonprofit organizations; prohibit state and local governments from terminating Social
Security coverage; delay the annual 1983 COLA for six months; make up to one-half of Social Security
benefits subject to federal income taxes for certain beneficiaries and credit the revenues to the Social
Security trust funds;50 establish a “windfall elimination provision” to reduce Social Security benefits for
workers who also receive pensions from employment that was not covered by Social Security;51 increase
the Social Security payroll tax rate for self-employed workers, making it equal to the combined
employer/employee payroll tax rate; accelerate scheduled increases in the Social Security payroll tax rate;
and authorize interfund borrowing by the Social Security trust funds from the Medicare HI trust fund for
1983-1987.
The commission’s full package of recommendations was estimated to address Social Security’s projected
short-term financing deficit as well as about two-thirds of its projected long-range actuarial deficit.
However, the commission could not agree on recommendations to address the other one-third of the
projected long-range actuarial deficit, deferring to lawmakers to come up with proposals to do so.
After the commission released its final report, President Ronald Reagan and Speaker of the House Tip
O’Neil—and other members of House and Senate leadership—endorsed the report.52 All provisions
suggested in the commission’s final report were included in legislation that eventually became the Social
Security Amendments of 1983.53 In early March 1983, the House Ways and Means Committee reported
its bill, H.R. 1900, to the House, which incorporated the commission’s recommendations, along with
additional provisions to resolve the remaining one-third of the system’s projected long-range actuarial
deficit.54 The House report accompanying the legislation stated, “the primary focus of [the legislation] is
on restoring the financial soundness of the old age and survivors’ insurance (OASI) program, which is
facing severe cash shortfalls over the next 7 years.”55
During debate on the bill, the House proceeded to consider two amendments under a modified closed rule
that would strike the long-range financing provisions in the committee bill and replace them with either
(1) a proposal to eliminate the remaining projected long-range actuarial deficit solely by gradually
increasing the full retirement age from 65 to 67 by 2022 or (2) a proposal to eliminate the remaining
projected long-range actuarial deficit solely by increasing Social Security payroll tax rates beginning in
2010.56 Of these two amendments, the House approved the one to gradually raise the full retirement age
from 65 to 67, which was included in the House-passed version of the bill.57

49 Ibid., ch. 2. At the time, the system’s projected long-range actuarial deficit was equal to 1.80% of taxable payroll. Estimates
showed that the consensus package would eliminate two-thirds of the projected funding shortfall, an amount equal to about
1.22% of taxable payroll.
50 For more information, see CRS Report RL32552, Social Security: Taxation of Benefits.
51 For more information, see CRS Report 98-35, Social Security: The Windfall Elimination Provision (WEP) .
52 Svahn and Ross 1983, p. 7.
53 P.L. 98-21.
54 David Stuart Koitz, Social Security Financing Reforms: Lessons from the 1983 Amendments, CRS Report 97-741, July 24,
1997. This report is out of print. It is available from CRS to congressional clients upon request.
55 U.S. Congress, House Committee on Ways and Means, Social Security Act Amendments of 1983, report to accompany H.R.
1900, 98th Cong., 1st sess., March 4, 1983, H.Rept. 98-25, Part 1 (Washington, DC: GPO, 1983), p. 1.
56 Svahn and Ross 1983, p. 14.
57 Ibid., p. 16.
CRS TESTIMONY
Prepared for Congress —————————————————————————————————

Congressional Research Service
9
In the Senate, the Committee on Finance reported out its bill, S. 1. As with the House bill, the committee
adopted long-term financing measures along the lines of the recommendations of the Greenspan
Commission. The committee bill included provisions to address the remaining long-range actuarial deficit
by, among other things, gradually increasing the full retirement age from 65 to 66 beginning in 2015 and
gradually reducing initial benefit levels by about 5% over the period 2000-2007.58 These provisions were
included in the Senate-passed version of the bill.59
In conference, the conferees agreed to the House provision to address the remaining projected long-range
actuarial deficit solely by gradually raising the full retirement age by two years from 65 to 67. Other
provisions that were not part of the commission’s final report include: “fail-safe” financing mechanisms,
speeding up the crediting of Social Security tax receipts to the trust funds and extending authority for
interfund borrowing on a broader basis than recommended by the commission; provisions affecting
dependents and survivors; and provisions with relatively small impact on revenues or expenditures,
including limitations on Social Security benefit payments to certain noncitizens residing outside the
United States and convicted felons, expanded use of death certificates in verifying benefit eligibility, and
others.60
Also included in the 1983 amendments were provisions to eliminate remaining gender-based distinctions
and modify the Government Pension Offset, which reduces Social Security spousal and survivor benefits
for people who also receive pensions from employment that was not covered by Social Security.
Provisions to eliminate remaining gender-based distinctions had been passed by the House in 1977 but
were not included in the final version of the 1977 amendments. The Greenspan Commission did not
include these provisions in their final report. The House bill included these provisions and these were also
adopted in the Senate bill. With their inclusion in the 1983 amendments, Social Security program rules
have been gender-neutral.
On April 20, 1983, President Ronald Reagan signed H.R. 1900 into law (P.L. 98-21).61 The 1983 annual
trustees report, issued months after the enactment of the 1983 amendments, acknowledged that even with
the interfund borrowing that Congress had approved, the program would have not been able to pay
benefits on time after June of 1983 were it not for enactment of the 1983 amendments.62 The trustees
further noted that the report marked the first time in a decade that the program showed a projected 75-year
actuarial balance between costs and income. The 1984 and 1985 annual trustees reports projected a small
actuarial deficit but projected cost and income rates to remain in relatively close balance.63

58 Ibid., p. 18.
59 Ibid., p. 21.
60 At passage, the 1983 amendments included two provisions related to the Social Security COLA: (1) a 6-month delay in the
1983 COLA and a shift of subsequent COLAs to a calendar year basis, and (2) a trust fund stabilizer provision.
61 At the time of enactment, the change in payroll taxes was projected to increase the actuarial balance by 0.86 percent of taxable
payroll over a 75-year period. Changes in benefits were projected to account for an increase in the balance by 0.79 percent of
taxable payroll (the increase in retirement ages, alone, provided an increase in the balance by 0.71 percent of taxable payroll).
Coverage changes increased the actuarial balance by 0.44 percent of taxable payroll (see Table 7, at
https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p1.pdf).
62 The Board of Trustees, Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds, 1983 Annual Report,
June 24, 1983, p. 2, https://www.ssa.gov/OACT/TR/historical/1983TR.pdf.
63 At the time, this relationship was defined as close actuarial balance. That is, the program was said to be in close actuarial
balance over the long-range period if the estimated average income rate is between 95% and 105% of the estimated average cost
rate. The Board of Trustees, Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds, 1985 Annual
Report, March 25, 1985, p. 26, https://www.ssa.gov/OACT/TR/historical/1985TR.pdf.
CRS TESTIMONY
Prepared for Congress —————————————————————————————————

Congressional Research Service
10
Post-1983 and Concluding Remarks
The Social Security program has evolved from where it began in 1935. Most changes up to and including
the 1972 law were expansions of the program. Legislation passed in 1972 started automatic adjustments
for cost-of-living and increases in the contribution and benefit base. Legislation passed in 1977 created
the current benefit formula that links initial benefit calculation to wage growth. The 1983 amendments,
which included raising the full retirement age from 65 to 67, are commonly referred to as the last major
Social Security-related legislation and mark the last time Congress made changes to the benefit and
payroll tax structure and coverage of the program. The 1983 legislation was seen as solving the short-term
and medium-term financing issues that had pressured Social Security for the prior 10-year period.
After the 1983 legislation, the program’s projected cost and income rates were relatively close over the
long-term. However, in the ensuing years the program has moved farther out of actuarial balance. The
Committee on Ways and Means’ 2004 Green Book summarized this transition:
“The longer range picture for Social Security has been worsening gradually since 1983. By gradually
raising Social Security's age for receiving full benefits from 65 to 67, subjecting benefits to income
taxes, and making new Federal and nonprofit workers join the system, Congress had attempted in
1983 to eliminate the long-run problem. In fact, projections made then showed that Congress had
stemmed the red ink, at least on average, for the following 75 years. However, the average condition
of the two trust funds did not represent their condition over the entire period. The funds were not
shown to be insolvent at any point, but their expenditures were expected to exceed their income by
2025 and to remain higher thereafter. Simply [s]tated, 40 years of surpluses were to be followed by
an indefinite period of deficits. With each passing year since 1983, the Trustees’ 75-year averaging
period has picked up 1 deficit year at the back end and dropped a surplus year from the front end.
This, by itself, would cause the average condition to worsen. However in recent reports, assumptions
about birth rates, economic growth, and wages have been lowered, causing further deterioration in
the long-term outlook.”64
Since 2010, Social Security has operated with cash deficits (i.e., expenses exceed tax revenues) and the
trustees project cash deficits for the remainder of the 75-year projection period. In 2021, Social Security
experienced its first annual deficit since 1982. In 2021, tax revenues plus interest income fell short of total
expenses. Thus, in 2021, the redemption of asset reserves held in the trust funds provided the additional
$56 billion that was needed to pay scheduled benefits. In 2022, the program redeemed $22 billion. As
currently projected, some amount of trust fund assets would be redeemed each year until the projected
depletion date (2034). The projected rising cost of the program suggests that successively more assets
would be redeemed each year to pay scheduled benefits until depletion.
Once asset reserves are depleted, barring any congressional action, the program can pay out in benefits
only the amount it receives in income from tax revenues. The trustees project that in 2034—the projected
date of combined trust fund depletion—tax revenues will be sufficient to pay about 80% of scheduled
benefits. The percentage of benefits supported by revenues from payroll taxes and the taxation of Social
Security benefits will gradually decrease to about 74%, by 2097.

64 U.S. Congress, House Committee on Ways and Means, Background Material and Data on the Programs within the
Jurisdiction of the Committee on Ways and Means (Green Book), 108th Cong., 2nd sess., March 1, 2004, WMCP 108-6, pp. 1.11-
1.12, https://www.govinfo.gov/content/pkg/GPO-CPRT-108WPRT108-6/pdf/GPO-CPRT-108WPRT108-6-2-1.pdf.
CRS TESTIMONY
Prepared for Congress —————————————————————————————————

Congressional Research Service
11

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff
to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of
Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role.
CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United
States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However,
as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the
permission of the copyright holder if you wish to copy or otherwise use copyrighted material.

CRS TESTIMONY
Prepared for Congress —————————————————————————————————
TE10083