Two misconceptions are confusing current discussions about Social Security. The first is that the program has never been changed since its inception in 1935. The second is that until recently, the problems of funding baby boomer retirements were unanticipated and ignored.
Both ideas are wrong. Social Security today is substantially different from the program that was enacted 70 years ago. Moreover, tax and retirement experts have been discussing the implications of aging baby boomers for 50 years.
There are two useful resources for citizens interested in understanding the fundamental issues of Social Security and the retirement of the largest generation in U.S. history.
The first is an article in the most recent Journal of Economic Perspectives by John Hines from the University of Michigan and Timothy Taylor, who edits the JEP at Macalester College in St. Paul. They reviewed the annual reports of the Social Security trustees to show how responsible officials viewed the program’s prospects.
The very first report in 1941 noted that the trend for Social Security payments “will be steeply ascending over the next generation and longer. … Prudent management, therefore, requires emphasis on the long term consideration of income and disbursements.”
The same report warned that the proportion of the population 65 and over, then at 7 percent, would eventually rise to 14 to 16 percent. In 2003, the Census Bureau projected that the country would hit those levels in 2015 and 2020, respectively.
Those early reports, from 1941 through 1957, projected taxes and benefits to 1990 or 2000. The 1958 report was the first to examine effects of baby boom retirements, making projections to 2050. Insolvency would arrive in 2032, it predicted — not far from predictions made just last year, even though workers’ contributions to Social Security have increased dramatically in the 47 years since that study.
A second useful resource is the “Actuarial Resources, History, Research and Data” Web page on the Social Security Administration’s Web site.
The site offers both brief and extended histories of the program, as well as detailed information on passage of the initial act in 1935, major amendments in 1950 and 1956, and the addition of Medicare in 1965.
Among the site’s surprises: Survivors and dependents were not covered in the original act. There was no adjustment for increases in the cost of living until 1950. Disability coverage did not arrive until 1954.
Medicare, now highly popular, was controversial in 1965. Many Republicans, including then-Reps. Gerald Ford and Donald Rumsfeld, voted against it, but so did several conservative Democrats.
This Web site and the review of Social Security’s annual reports are a good basis for better understanding of the issues. The site is www.ssa.gov/data_research.htm.
The Journal of Economic Perspectives article can be obtained through college or main city libraries.
© 2005 Edward Lotterman
Chanarambie Consulting, Inc.