A lot of us only think about Social Security in terms of the monthly check we get. Of course, that is the main reason the Social Security Administration (SSA) was created: to help the weakest parts of the American population stay out of poverty and provide for them.
But sending money to more than 70 million people every month takes a lot of different things. Technology, staff, and money are some of the things that this government institution needs to run every day.
People often think that the SSA gets its money from the same insurance funds that get your Social Security taxes. The SSA instead divides its money needs into two groups. One group has money for SSA benefits, and the other group has money for running the agency.
What matters here is that the money you give each month from your salary does not help the SSA run the residence. The budget for the government is therefore the real force behind the machine. To be more specific, a budget line item called the Limitation on Administrative Expenses (LAE).
What does the LAE have to do with Social Security?
In general, the LAE is a part of the process of drawing up federal budgets every year. This means that Congress writes appropriation bills that tell the federal agencies how much money they can have based on what they do.
One line in the government budget is the LAE. The problem is that the SSA can not spend more than the money it has been given to run for the next fiscal year and send checks to people who are eligible for Social Security.
Why Is Social Security Struggling?
This seems like a strong argument from a financial point of view because it limits what each agency can use and gives us a better handle on the costs of providing the public services Americans need.
The SSA used to spend 1.2% of all the money it got in Social Security benefits on the operational budget. But after the Omnibus Budget Reconciliation Act (OBRA) was signed by President George H.W. Bush that year, the process started to be spelled out in the discretionary budget, and the increase is now close to 1%.
The main issue is that 1% is not enough. Looking at inflation data from 1990 to the present, only one year (2009 in this case) has seen inflation below 1%. What does this mean? This means that for more than 33 years, the SSA’s operating budget has been cut.
In fact, the nominal value goes up, but not enough to keep up with inflation. This means that the SSA budget goes down every year, which is not enough to cover the difference between the increase and inflation, which changes how Social Security payments are made.
The SSA’s work is limited by the ongoing cut to the operating budget. Without funding, it is hard to make sure that people get their SSA benefits because it is hard to pay people, improve processes, and even start new IT projects.
This problem has been going on for a while now with the SSA. In September, Vice President Biden tried to make things better by asking for a “budget anomaly” that would raise the SSA’s budget from $14.2 billion to $15.4 billion, or 8.4%.
However, his plan was turned down. Because of this, the SSA had to stop hiring people. If there is not a big rise by March 2025, the SSA will have to do more extreme things, like limiting the call centers’ ability to work, closing down field offices, and putting in place furlough days.
In the end, the money would only be used for necessary tasks like Social Security checks. However, customer service would definitely get worse, and the time it takes to get things done would go through the roof.
Even though former Commissioner Martin O’Malley cut the time it takes to help customers from 42 minutes to 16, there is only so much that can be done with the resources that are available.
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