Brief History of Social Security, Part Two

In part one, I discussed the history of Social Security up to 1940. In this article, using new information from the SSA's 2007 Trustee's Report, I discuss the future of Social Security.

There were several changes to Social Security between 1940 and today, each resulting in greater costs for the program. These costs were offset, however, by a rapidly growing economy and a "Baby Boom" of workers entering the workforce beginning in the 1960s. In 1961, Congress reduced the age at which one could receive benefits from 65 to 62. I should note, however, that retirees who received benefits at age 62 did not receive full benefits. In 1972, Congress acted to make inflation-indexed increases to Social Security automatic. Prior to that, increases had to be voted on individually. In 1950, the ratio of workers to Social Security beneficiaries was 16:1. That is, 16 people were paying into the system annually for each person receiving benefits. Because of declining birth rates, increases in medical technology for the elderly, and the changes in the law mentioned above, that ratio had dropped by 2000 to 4 to 1. According to the 2007 SSA Trustee's Report, the ratio in 2006 was 3.3 to 1. They estimate that it will continue to drop as the first Baby Boomers retire in 2008 until it is 2.2 to 1 in 2030. Beginning in 2017, and every year thereafter, the cost of paying benefits will exceed the revenues generated by the workforce being taxed to support it. Currently the trustees estimate that we have an unfunded obligation of $13.6 trillion. An unfunded obligation means this is money we have already committed to pay to beneficiaries out to the year 2081. Many people have trouble conceptualizing a number like $13.6 trillion. Let me help you out. Since this money would be an outlay in economic terms, how big would it be laid out on the ground? Laid end-to-end, $13.6 trillion would cover 54,320 square miles; almost completely covering the state of New York (54,520 square miles).