Social Security Primer

Dawn Nuschler
Specialist in Income Security

The Social Security program began in the 1930s and has been modified by Congress many times over the past seven decades. Today, Social Security provides monthly cash benefits to retired or disabled workers and their family members, and to the family members of deceased workers. Among the beneficiary population, approximately 80% are retired or disabled workers, and 20% are the family members of retired, disabled, or deceased workers. In April 2013, 57.3 million Social Security beneficiaries received a total of $66 billion in benefit payments for the month.

Workers become eligible for Social Security benefits for themselves and their family members by working in Social Security-covered employment. An estimated 94% of workers in paid employment or self-employment are covered, and their earnings are subject to the Social Security payroll tax. In 2013, employers and employees each pay 6.2% of covered earnings, up to the annual limit on taxable earnings ($113,700 in 2013).

To be eligible for a Social Security retired-worker benefit, a person generally needs at least 40 earnings credits, or 10 years of Social Security-covered employment (among other requirements). Fewer earnings credits are needed for a disabled-worker benefit, depending on the worker’s age. A worker’s initial monthly benefit is based on his or her career-average earnings in covered employment. Social Security retired-worker benefits are first payable at the age of 62, subject to a permanent reduction for early retirement. Full (or unreduced) retirement benefits are first payable at the full retirement age (FRA), which is increasing gradually from 65 to 67 under a law enacted by Congress in 1983. The FRA will reach 67 for persons born in 1960 or later (i.e., persons who become eligible for retirement benefits at the age of 62 in 2022 or later).

In addition to payroll taxes, Social Security is financed by federal income taxes that some beneficiaries pay on a portion of their benefits and by interest income that is earned on the Treasury securities held by the Social Security trust funds. In 2012, the Social Security trust funds had receipts totaling $840 billion, expenditures totaling $786 billion, and accumulated assets (in the form of Treasury securities) totaling $2.7 trillion. Projections by the Social Security Board of Trustees show that, based on the program’s current financing and benefit structure, benefits scheduled under current law can be paid in full and on time until 2033. The projections also show that Social Security expenditures will exceed income by about 20% on average over the next 75 years. Restoring long-range trust fund solvency and other policy objectives have made Social Security reform an issue of ongoing congressional interest and debate.

This report is designed to provide an overview of Social Security financing and benefits under current law. Specifically, the report covers the origins and a brief history of the program; Social Security financing and the status of the trust funds; how Social Security benefits are computed; the types of Social Security benefits available to workers and their family members; the basic eligibility requirements for each type of benefit; the scheduled increase in the Social Security retirement age enacted in 1983; and the federal income taxation of Social Security benefits. For other CRS products on Social Security, please see Issues Before Congress (Social Policy / Social Security).


Date of Report: June 17, 2013
Number of Pages: 18
Order Number: R42035
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Job Creation in the Manufacturing Revival

Marc Levinson
Section Research Manager

The health of the U.S. manufacturing sector is of intense interest to Congress. Numerous bills aimed at promoting manufacturing have been introduced in Congress, often with the stated goal of creating jobs. Implicit in many of these bills is the assumption that the manufacturing sector is uniquely able to provide well-paid employment for workers who have not pursued advanced education.

U.S. manufacturing output has risen significantly over the past four years as the economy has recovered from recession. This upswing in manufacturing activity, however, has resulted in negligible employment growth. Although a variety of forces seem likely to support further growth in domestic manufacturing output over the next few years, including higher labor costs in the emerging economies of Asia, higher international freight transportation costs, and increased concern about disruptions to transoceanic supply chains, evidence suggests that such a resurgence would lead to relatively small job gains within the manufacturing sector.

The past few years have seen important changes in the nature of manufacturing work. A steadily smaller proportion of manufacturing workers is involved in physical production processes, while larger shares are engaged in managerial and professional work. These changes are reflected in increasing skill requirements for manufacturing workers and severely diminished opportunities for workers without education beyond high school. Even if increased manufacturing output leads to additional employment in the manufacturing sector, it is likely to generate little of the routine production work historically performed by workers with low education levels.

As manufacturing processes have changed, factories with large numbers of workers have become much less common than they once were. This suggests that promotion of manufacturing as a tool to stimulate local economies is likely to meet with limited success; even if newly established factories prosper, few are likely to require large amounts of labor.


Date of Report: June 19, 2013
Number of Pages: 17
Order Number: R41898
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Foreign Holdings of Federal Debt

Marc Labonte
Specialist in Macroeconomic Policy

Jared Conrad Nagel
Information Research Specialist

This report presents current data on estimated ownership of U.S. Treasury securities and major holders of federal debt by country. Federal debt represents the accumulated balance of borrowing by the federal government. To finance federal borrowing, U.S. Treasury securities are sold to investors. Treasury securities may be purchased directly from the Treasury or on the secondary market by individual private investors, financial institutions in the United States or overseas, and foreign, state, or local governments. Foreign investment in federal debt has grown in recent years, prompting questions on the location of the foreign holders and how much debt they hold.


Date of Report: June 24, 2013
Number of Pages: 10
Order Number: RS22331
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Tax Provisions Expiring in 2013 (“Tax Extenders”)

Molly F. Sherlock
Specialist in Public Finance

Dozens of temporary tax provisions are scheduled to expire at the end of 2013 under current law. Most of the provisions set to expire in 2013 have been part of past temporary tax extension legislation. Most recently, many temporary tax provisions were extended as part of the American Taxpayer Relief Act (ATRA; P.L. 112-240). Collectively, temporary tax provisions that are regularly extended by Congress—often for one to two years—rather than being allowed to expire as scheduled are often referred to as “tax extenders.”

Interest in tax reform during the 113th Congress has led some to believe that tax extenders should be addressed as part of the tax reform process. The President’s FY2014 Budget identifies several expiring provisions that should be permanently extended (and in some cases substantially modified), including the research and experimentation (R&D) tax credit, enhanced expensing for small businesses, the renewable energy production tax credit (PTC), the new markets tax credit (NMTC), the work opportunity tax credit (WOTC), the deduction for state and local sales taxes, the exclusion of discharge of principal residence indebtedness, and the tax deduction for energyefficient commercial buildings. Unlike previous budget proposals during the Obama Administration, the President’s FY2014 Budget does not propose or assume that some set of expiring provisions is temporarily extended.

There are several reasons why Congress may choose to enact tax provisions on a temporary basis. Enacting provisions on a temporary basis provides legislators with an opportunity to evaluate the effectiveness of tax policies prior to expiration or extension. Temporary tax provisions may also be used to provide temporary economic stimulus or disaster relief. Congress may also choose to enact tax provisions on a temporary rather than permanent basis due to budgetary considerations, as the foregone revenue from a temporary provision will generally be less than if it was permanent.

The provisions that are scheduled to expire in 2013 are diverse in purpose, including provisions for individuals, businesses, the charitable sector, energy, community assistance, and disaster relief. Among the individual provisions scheduled to expire are deductions for teachers’ out-ofpocket expenses, state and local sales taxes, qualified tuition and related expenses, and mortgage insurance premiums. On the business side, under current law, the R&D tax credit, the WOTC, the active financing exceptions under Subpart F, and increased expensing and bonus depreciation allowances will not be available for taxpayers after 2013. Charitable provisions scheduled to expire include the enhanced deduction for contributions of food inventory and provisions allowing for tax-free distributions from retirement accounts for charitable purposes. The renewable energy production tax credit (PTC) is set to expire at the end of 2013, along with a number of other incentives for energy efficiency and renewable and alternative fuels. The new markets tax credit, a community assistance program, is also scheduled to expire at the end of 2013.

A majority of the provisions set to expire at the end of 2013 were temporarily extended as part of ATRA. There were, however, a number of provisions that had previously been included in “tax extenders” legislation that were not extended under ATRA. Moving forward, Congress may choose to address expiring tax provisions as part of tax reform, deciding at that time which temporary provisions should become a permanent part of the tax code. Alternatively, Congress may choose to develop a tax extender package, extending some or all of the provisions that have previously been extended in “tax extender” legislation.


Date of Report: June 27, 2013
Number of Pages: 24
Order Number: R43124
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The Commodity Futures Trading Commission: Background and Current Issues

Rena S. Miller
Analyst in Financial Economics

The 113th Congress is interested in an array of issues faced by the Commodity Futures Trading Commission (CFTC). The congressional committees with oversight of the agency, the House and Senate Agriculture Committees, have begun to hold hearings related to various policy issues faced by the agency, as part of the CFTC reauthorization process. This process occurs roughly every five years and is currently underway, as the last authorization of appropriations for the agency expires September 30, 2013.

The CFTC witnessed a major expansion of its role in overseeing derivatives markets following passage of the Dodd-Frank Act in 2010. This act brought previously unregulated over-the-counter (OTC) derivatives, called swaps, under the oversight of the CFTC. The new role of the CFTC as a regulator of the swaps markets comes in addition to its preexisting role overseeing the futures and options markets, which include commodities and financial market instruments such as interest rate futures. Under the Dodd-Frank Act, much discretion on a range of key issues related to the new regulation of swaps was left to the CFTC (and to the Securities and Exchange Commission for swaps based on securities).

As the agency seeks to use its rulemaking powers to implement Dodd-Frank, several issues are proving challenging or contentious. These include the CFTC’s and other financial regulators’ implementation of the Volcker rule under Section 619 of Dodd-Frank, which prohibits proprietary trading and hedge fund activities by banks. Other Dodd-Frank implementation issues have prompted legislation in the 113th Congress. H.R. 677 addresses the scope of an exemption from clearing requirements for swaps between affiliates within an umbrella organization. A related issue is determining the scope of any exemption from the Dodd-Frank Act requirements on swaps for overseas branches or affiliates of U.S. organizations and for foreign organizations trading with U.S. persons—an issue that H.R. 1256 seeks to address. H.R. 1256 passed the House on June 12, 2013, in a roll call vote of 301-124. Another bill, H.R. 634, which also passed the House on June 12 in a roll call vote of 411-12, would prevent regulators from imposing margin requirements on swaps for both counterparties in which one counterparty is a non-financial firm, known as an “end user” of derivatives. H.R. 1003 would mandate additional cost-benefit analyses by the CFTC when it conducts future rulemakings.

In addition, changing technologies have created novel challenges for the agency’s oversight in such matters as monitoring high frequency trading in the derivatives markets. Furthermore, certain failures, such as the collapse of the futures trading firms MF Global and of Peregrine Financial, and enforcement issues, such as the manipulation of LIBOR, have flagged policy issues for the CFTC on the enforcement and policy fronts. Commodity price volatility, such as in the 2008 and 2011 runups in oil prices, has also sparked congressional interest in the CFTC’s proposed position limits rule, which some hope would constrain volatility in these markets. The CFTC’s position limits rule was vacated and remanded by a federal court in 2012—a decision that the CFTC has appealed.

This report provides summaries and abbreviated analyses of selected issues faced by the CFTC that may be relevant to the 113th Congress. It is not an exhaustive list of issues facing the agency. The appendix offers detailed background information on derivatives markets and related policy issues addressed in the Dodd-Frank Act. This report will be updated as events warrant.


Date of Report: June 24, 2013
Number of Pages: 23
Order Number: R43117
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