Is the Social Security System Going Broke? You Bet It Is

The nation’s Social Security program is in deep trouble.

Why?

For plenty of reasons.

First and foremost, when the 1935 Social Security Act was signed into law by President Franklin D. Roosevelt, there were 45 people paying into the system for every person receiving retirement benefits.

In 2020, for each retiree, there were only 2.7 employed persons contributing.

Another important reason why Social Security is on the brink of insolvency: over the decades, economist John Cogan has noted, Congress expanded entitlement payouts to the point, "the program’s original noble purposes are no longer recognizable."

To understand what happened since 1935, here’s the historical record in a nutshell.

President Roosevelt was particularly pleased that the Social Security Act he engineered through Congress required participants, who would receive retirement benefits, to earn the privilege. That's because the benefit was to be funded by a payroll tax placed on each person’s annual earnings, not from the federal government’s general fund revenues.

The retirement benefit, FDR said, "should be self-sustaining in the sense that funds for the payment of insurance benefits should not come from the proceeds of general taxation."

Roosevelt’s vision that the Social Security fund would, over time, have a large reserve and be self-funding was, however, short-lived.

In the post-World War II-era, Congress, not surprisingly, couldn’t keep its hands off the reserve funds, and the Social Security retirement-fund surplus was spent on new benefits for other programs, the largest of which was Aid to Dependent Children.

Welfare payments made to support children of divorced and widowed mothers was expanded to include the children of women who were never married.

To shore up the Federal disability program, Congress diverted a piece of the Social Security retirement funds to those programs in 1966.

The congressional giveaways continued.

In 1966, the average Social Security benefit was raised 7%. A year later, President Lyndon B. Johnson approved amendments that increased the average benefit by another 13%.

In his trenchant work, "The High Cost of Good Intentions," John Cogan of The Hoover Institute wrote, "Congress attached an a across the board 15% Social Security benefit increase to a major tax measure in 1969. In 1971, 1972, and 1973, Congress attached across-the-board benefit increases of 10%, 20%, and 11%, respectively, to bills raising the national debt."

And then in 1974, Congress approved the Church Amendment which established Social Security payment inflation adjusting indexing provisions that began on Jan. 1, 1975.

Despite numerous increases in the Social Security payroll tax, due to the inflation of the late 1970s and early 1980s, economic recessions, the decline in the U.S. birth rates, and longer life expectancies, the pay as you go system was in trouble in the mid-1980s.

To avoid insolvency, President Reagan and congressional leaders created a commission led by Alan Greenspan.

Greenspan’s recommendations plus additional amendments to the Social Security Act, shored up the system, at least for a while. These included transfers of federal tax dollars, advancing payroll tax increases and the taxing of benefits for high earners.

But these so-called reforms were only a band-aid.

Congress was addicted to squandering trust fund dollars.

On one occasion, the one-time Social Security chief actuary, Robert Myers, warned Congress, "Gentleman, you are never going to save the surplus.  . . . Temptation is never overcome."

The Feds continued their smoke and mirror tactics like the much-ridiculed "lock box" proposal, to give the appearance the system was not on the edge of the fiscal abyss. Also, Congress continued to raid the Social Security retirement trust to shore up disability programs.

Now, the day of reckoning is just around the corner.

The trustees of the Social Security system have recently announced that the fund "will be able to pay scheduled benefits on a timely basis until 2034 . . . "

What must be done to save the system? Former U.S. Senator Rudy Boschwitz, outlined a sound proposal in The Wall Street Journal (June 8, 2022).

His recommendations include:

• Raising the full retirement age over time to 68 ½;
• Raising the early eligibility age to receive benefits from 62 to 67 years of age;
• Giving the cost of living increases every 14 or 15 months instead of annually; and using the lowest 12 months of inflation;
• Raising the payroll tax 0.1% every 2 years. Half would be paid by the employee and half by the employer.

These and Boschwitz’s other recommendations could be the formulas to save an ailing system.

If the president and Congress remain in denial and refuse to address the program’s underlying problems, I predict that when the money runs out, there will be a populist reaction of both young and old at the polling booth that will rock the very foundations of the political establishment.

And that’s what may be needed to get Washington pols to act responsibly.

George J. Marlin, a former executive director of the Port Authority of New York and New Jersey, is the author of "The American Catholic Voter: Two Hundred Years of Political Impact," and "Christian Persecutions in the Middle East: A 21st Century Tragedy." Read George J. Marlin's Reports — More Here.