The Social Security program was started in the United States in the wake of the Great Depression. Originally intended as a safety net of last resort, the program began with nearly 10 workers for every one beneficiary. The original Social Security pensioners were from a different era, one in which the average life expectancy was around 65 years old. This meant that, at most, the average beneficiary would only draw on their Social Security benefits for a few years.
Today, the program, like so many well-intended government efforts, has grown and metastasized, vastly exceeding its original scope while providing benefits for an American population that currently has a life expectancy of 79 years, 14 years longer than the original cohort of pensioners. This has led many groups across the political spectrum to seriously question the program’s long-term sustainability. While these complaints could be at least plausibly met with counterarguments as late as the 2000s, it is becoming increasingly clear that the long-term viability of the Social Security program is in serious trouble.
The Social Security Administration admits, in its own words, that a reckoning is coming
The Social Security Administration itself admits that the OASDI trust fund will become insolvent by 2033. This is made even worse when considering that the estimate of the fund’s date of insolvency has been steadily moved up through the years, being 2037 just five years ago. This means that, as the program is currently constituted, an immediate reduction in benefits of 25 percent will be required as soon as the fund becomes insolvent.
But that isn’t the whole story. Unless FICA taxes are raised to pay for the benefit shortfall, those benefits will almost certainly continue to decline. This is where the Social Security Administration makes projections that may fall far afield of reality. The demographic reality of the United States is that the average IQ of the country has been falling for decades. At the same time, marriage rates, a key predictor of per-capita economic output, have also been sharply declining. There is every reason to believe that these tax-revenue-killing trends will continue. And they could spell disaster for a program that relies 100 percent on payroll tax for its funding. As per-capita FICA tax revenues decline, future politicians will be faced with an impossible choice: continue raising FICA taxes, potentially sending millions of workers into dire poverty or out of the labor force completely, or continue reducing Social Security benefits.
If history is any guide, the Social Security benefits available to today’s young workers will be a pittance compared to what they are paying in.