On Social Security:
On the other thread
@bwarbiany did a great job of explaining it. I want to go back a bit further.
The program was passed in the 1930's under FDR. When it became effective they IMMEDIATELY started paying benefits. Think about that for a minute.
A lot of people think that their money that was paid into it was "saved" and will be paid back to them when they retire. This is just fundamentally untrue. On DAY ONE, SS started paying benefits.
One of the original points was to try to encourage old people to retire so that younger people (who had families to support) could get jobs.
From then to now there have been taxes charged and benefits paid. Sometimes at a surplus, sometimes at a deficit. When there was a surplus, as
@bwarbiany explained, the surplus was "loaned" to the Federal Government which was spending more than it was taking in and they just stuffed the SS fund with IOU's.
What to do about it?
There are a multitude of issues to confront but the big ones are these:
- The population of elderly/retired people is exploding. The Baby Boom ran from 1946-1964. Those people are now 56-74. Worse, following the Baby Boom the birth rate tanked. Here is a chart of births by year in the US. During the 1946-1964 Baby Boom there were ~ 3-4 Million births per year peaking in the late 1950's and early 1960's when there were at least 4.2M births every year from 1956-1961. More on births below.
- The number of native-born Americans in their prime earnings years is comparatively very low. On AVERAGE* people earn the most from about the ages of 35-50. Those people, today, were born in 1970-1985. For those years births were never higher than 3,760,561 (1985). *Average: Some people earn a lot younger or older but on a population-wide comparison this is a solid figure. People younger than 35 are generally still getting established and people older than 50 start to retire, die, or reduce their productivity for other various reasons.
- Medical Expenditures: Technically Medicare is separate from SS but it all effectively works from the same sources and Medicare has an unfunded liability that is even larger than SS. Years ago when they added Rx coverage to Medicare they didn't raise the tax. John McCain railed against that. The rest of the politicians (both sides) just did it anyway. From a responsibility standpoint it was insane. You can't pay for something with nothing but they just stuck in in an IOU and kicked the can down the road and the voters basically applauded.
Birth rates:
From the link I shared, birth rates (per 1,000 pop) were over 30 back in 1910. Prior to that they were even higher. Back in the 1800's most Americans were farmers and LOTS of kids died of diseases that we don't even worry about today. In those days, it was not at all unusual for a family to have 6, 8, 10+ kids. As we industrialized, that slowed down. It slowed gradually through 1925 (the chart is in 5-year increments) then plummeted during the Great Depression of the 1930's.
The birth rate fell from 30+ in 1910 and 25+ as late as 1925 to Just over 30 in 1930 and <20 in 1935 and 1940. In 1945, the last year of WWII the rate was still just over 20. During the Baby-Boom of 1946-1964 it got as high as 25.3 (1954 & 1957). The birth RATE peaked, as noted, in the early-mid 1950's but the raw NUMBER of births peaked a bit later due to growing underlying population. Thus, the peak in number of births was not until later in the 1950's up through 1961.
Now I certainly don't want this to become a political discussion of abortion and birth control and it doesn't have to. I'm bringing them up just to illustrate what happened, not to comment on whether it was good or bad.
The Birth Control Pill was first available in the US in 1960. Griswold v Connecticut (US Supreme Court Case in 1965) banned State Laws prohibiting contraceptives (and set the stage for Roe v Wade a few years later). Note, politically, that this was not Griswold v Alabama, it was Griswold v Connecticut. My point is that these laws were not some Southern bible-belt thing, they were pretty common nationally.
My point is that prior to about the mid-1960's the only reliable way that a woman could avoid pregnancy was to abstain from sex. People tried other things such as condoms and the rhythm method. That generated an old joke:
Q: What do you call a woman who uses the rhythm method for birth control?
A: A mother.
Since women couldn't reliably avoid pregnancy without abstinence and for societal reasons related to that, most people back then got married and had kids very young. Among people who graduated from HS up until about the late 1950's it was extremely common for the women to get married within a year or two of HS graduation. There was a draft then so a lot of the guys either got drafted, volunteered for the draft (2 years instead of 3) or enlisted (3 years) then came home and got married.
Various factors but mostly the widespread availability of reliable birth control enabled women to choose to delay having children and consequently the birth rate flat out plummeted. Remember that it was >25 as late as 1957. From 1957-1968 the birth rate dropped every single year and by 1968 it was just 17.5. Note that this is still pre-Roe (1973).
The birth rate then bounced around between 17.2 and 18.4 through 1971 then fell off a cliff in the mid 1970's. From 1973-1976 the birth rate was <15. I was born in 1975 which had the fewest number of births (3.1M) since before the Baby Boom and the lowest birth rate (14.8) until the late 1990's.
The birth rate started climbing after the mid-1970's. My guess is that was a result of those women who delayed family in the mid-60's to mid-70's started coming back.
Why all of this matters for SS?
This all matters for SS because, as was explained above, there is no magic pot of money to pay benefits. Instead, the program is, effectively, simply a wealth transfer from working-aged people to retired people. Further, as I covered above, people generally are the most productive from about 35-50. The problem for the system is that there just aren't a lot of 35-50 year olds today comparatively.
Births in 1989 finally hit 4M again for the first time since the Baby Boom. Since then births have run right around that number. The rate continues to fall (or stagnate) but the raw number is growing (or at least stable) due to growing population. The problem is that those 4M people born in 1989 are still only 31. They will not hit their most productive age for another few years and Baby Boomers are still hitting retirement age at 4M+/year.
They system is going to be a mess until the Baby Boomers start to die off in numbers. The oldest of the Baby Boomers are now 74 while the youngest are only 56.
