Ronald Reagan and his social security reforms during his presidency and the impact it had

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Introduction

Social Security is an important part of the government as taxes
have to be controlled and people have to enjoy their benefits
when they are due.

Before President Ronald Reagan came into office, the Social
Security system in America was flawed.

There were many errors, many misconceptions and unfairness in
computation of benefits and taxes.

Together with the Speaker of the House of Representatives,
Thomas O’Neill and the Senate Majority Leader, Howard Baker,
President Reagan named a 15-member Commission that made
recommendations on Social Security Reforms. They were
debated, passed and signed into law on April 20, 1983.

What was contained in the reforms

Universal Coverage provisions

The reforms provided universal coverage to:

All Federal employees (except reemployed Civil Service annuitants) hired
on or after January 1, 1984. These included executive, legislative and
judicial service employees.

Current employees of the legislative branch who are not participating in
the Civil Service Retirement System on December 31, 1983 (Reagan,
United States & United States, 1990).

All Members of Congress, the President, the Vice President, Federal
Judges and most executive-level political appointees of the Federal
Government effective January 1, 1984.

The reforms also covered current and future employees of private
tax-exempt nonprofit organizations.

2. Computation of benefits

The Social Security Reforms shifted the cost of living
adjustments (COLA’S) to calendar year basis.

The increases in the cost of living were to be based on lower of
wage or price increase if OASDI trust funds were low. This
brought in a stabilizer in the Social Security benefits.

All windfall benefits to persons receiving pensions from
noncovered employment were eliminated(Gill, Packard & Yermo,
2012).

The delayed retirement credit was increased by ½ of one
percent.

The impact of these computations was that all those who
contributed and were eligible to Social Security benefits received
them.

3. Income tax treatment of benefits

Under the new law, Social Security and Railroad Retirement
Tier 1 benefits would be included as part of taxable income.

For the elderly and the disabled, they were to receive
income tax credits and income tax exclusion.

The impact of this provision is that the elderly and the
disabled would receive special treatment when it came to
income tax (Brooks, 2009).

4. Surviving, divorced and disabled
   spouse benefits

Under the new Social Security Reforms, surviving divorced
spouses and disabled widows and widowers who remarried
would receive Social Security benefits.

Divorced spouses would also receive independent entitlement
while worker’s deceased earnings would be eligible to widows
and widowers (Marmor & Jong, 2018).

The benefits for disabled widows and widowers would be
increased.

The impact of this provision was that the spouses of surviving,
divorced and disabled citizens would receive Social Security
benefits.

5. Revenue measures

The Social Security Reforms made changes in Social
Security tax rates and allocation of tax income.

Social Security tax credits and deductions would also be
available for OASDI at a rate of 6.7 percent (United
States, 1983).

The impact of this provision is that the government
would be able to collect taxes areas that were not
remitting them while at the same time providing credits
and deductions to the old aged, survivors and the
disabled.

6. Assurance of continued Social
   Security benefits

The Social Security Reforms ensured that the Social Security tax
incomes for the OASDI were normalized.

Inter-fund borrowing among OASI, DI and HI was also reinstated.

Responsibility was given to the Board of Trustees to monitor
balances in the Trust Funds and give recommendations and
remedies for inadequate trust fund balances (Greenspan &
United States, 1983).

The impact of this provision was to ensure the continued
sustainability of the trust funds and that none of them would be
insolvent. Inter-fund borrowing would allow the trust funds to
support each other.