As Social Security Turns 60: Do We Have the Will to Save It?

Social Security celebrates its 60th birthday next month as the nation’s most successful social program, the object of a near-unique degree of political veneration from Congress and Presidents. That status has helped protect Social Security from any effort to reduce its benefits. It’s also responsible for delaying the changes that everyone agrees must be made if the system is to continue meeting its obligations beyond the early years of the coming century.

A key reason for Social Security’s enormous popularity is the extensiveness of its coverage. Each month Social Security checks reach 43 million beneficiaries, among them 3 million children and 6 million disabled people. The payments come from a now nearly universal special payroll tax that was conceived to ensure that Social Security would be self-financing and shielded from the winds of political fashion. “With these [payroll] taxes in there,” President Franklin D. Roosevelt said in 1935, “no damn politician can ever scrap my Social Security program.”

Last year about 139 million Americans and their employers paid $345 billion into the Social Security trust fund. Investment of the fund’s surplus in government securities--the only investments allowed--earned $31 billion. The system finished the year with a surplus of more than $58 billion. But that seemingly robust indication of fiscal health masks a looming crisis. Social Security, to paraphrase FDR, has a rendezvous with insolvency. Only if the political will is mobilized to act responsibly and fairly speedily can that course be altered.

The root of the problem is demographic and political. Steadily growing benefits paid to an aging population that is living longer will in time exceed the system’s income. In 1950, 16 workers paid Social Security taxes for each retiree collecting benefits. Today the ratio is 3.2 workers for each retiree. Fifteen years from now it’s projected to be 2.9 to 1. Within 35 years, when the last of 70 million post-World War II baby boomers retires, the ratio is expected to be only 2 to 1. By then, projections indicate, the system will no longer be self-supporting. To keep it going would require major cuts in benefits or massive tax-financed subsidies from the Treasury.

To a great extent, Social Security is the victim of social progress. Simply put, we aren’t dying as early. When it began, Americans on average lived fewer than 62 years. Only 54% of American men and 62% of American women reached 65; Roosevelt himself, the father of the system, was destined to die at 63. By the beginning of this decade, however, average life expectancy had risen to 76.3 years. Fully 72% of men and 84% of women were reaching 65. Those who did could expect on average to live 15 to 20 years more. If during their working lives they had paid into Social Security for at least 40 quarters--10 years--they were eligible to draw monthly benefits for the rest of their lives.

In fact, the majority of workers aren’t waiting until 65 to retire. About two-thirds now leave full-time employment earlier, many as soon as they become eligible at 62 for Social Security benefits. These retirees thus pay into the system for fewer years and collect benefits for more years.

Rule changes and generous benefit increases periodically voted by Congress have added to the system’s fiscal problems. Social Security was meant to be no more than a form of social insurance, to supplement personal savings, private pensions and family care. “We have tried,” said Roosevelt, “to frame a law which will give some measure of protection to the average citizen . . . against poverty-ridden old age.” But thanks to generous benefit increases, Social Security provides much more than supplementary support. For a majority of the aged it is the primary source of income. Indeed, as a 1992 congressional study found, Social Security has raised the incomes of 9.6 million older Americans above the poverty line. Without it, the poverty rate of the elderly would be close to 50%. Thanks to Social Security, that rate is below 12%.

Social Security, says Sen. Daniel Patrick Moynihan (D-N.Y.) “has put an end to what was the great terror of life--growing old and having no income and getting ill.” No responsible public figure has any interest in undoing that achievement. But the problem of how to keep the system solvent remains. These are some of the thoughtful proposals being talked about:

--Beginning in 10 to 15 years, raise the eligibility age for retirement benefits to 70, to reflect longer life spans. Benefits paid those already retired would of course not be affected.

--Reduce what have now become virtually automatic annual cost-of-living increases. In other words slow the rate of growth for benefits.

--Partially privatize retirement savings by mandating that a portion of Social Security taxes be committed to IRA-type investments in stocks and bonds, which historically have a higher return than Treasury securities. By broadening the sources of retiree income, future Social Security benefits could be reduced.

The Social Security system can be strengthened and kept solvent, without new payroll taxes or reducing present benefits and without putting an unfair burden on future generations. But that will be possible only if there is a firm bipartisan and multi-generational commitment to acting now to save the system.