SOCIAL POLICY| 453number of Americans over age 65 will more than double, while the number under
65 w i l l g row by on ly 18 percent.^38 When this happens there will be fewer workers to
support the retirees.^39 See Figure 14.7 for evidence of the aging population. “Wait
a minute,” you may be saying. “Why does it matter how many workers there are for
each retiree? I thought that Social Security was a pension program that you pay
into while you’re working and then get the benefi ts when you retire.” Not exactly.
Social Security is a “pay-as-you-go” system under which today’s workers support
today’s retirees. Therefore, the huge increase in the number of retirees will strain
the system because each worker will have to pay higher taxes to maintain the same
level of Social Security benefi ts for retirees.
Social Security faced its fi rst real crisis in the early 1980s, well before the Boom-
ers started retiring. Benefi ts had increased faster than payroll taxes throughout
the 1970s, and the Social Security Administration estimated that it would not be
able to meet its obligations as early as 1983. New laws passed in 1983 provided for
a gradual increase in the retirement age from 65 to 67 and increases in the pay-
roll tax that generated surpluses for a trust fund to cover the Boomers’ retirement.
The fi rst change was relatively straightforward: people born in 1937 or earlier
could retire in 2002 at age 65 and receive full benefi ts. Between 2003 and 2027 the
retirement age increases gradually to 67 for a person to qualify for full benefi ts.Source: Social Security Administration, 2012 OASDI Trustees Report, Figure II D5, available at http://www.ssa.gov/
OACT/TR/2012/tr2012.pdf (accessed 9/24/12).
THE SOCIAL SECURITY TRUST FUND
As of 2011, the cost of the Social Security program exceeds Social Security payroll
taxes, so taxes will need to be raised to cover the trust fund’s obligations and the
program’s ongoing expenses. What do you think are the best solutions to address the
long-term future of Social Security? What are the politically viable solutions?
FIGURE » 14.7
Trust fund
assets
(positive)Unfunded obligation
(negative)Around 2033
trust funds run out.12–10–3–2–5–4–7–6–9–83Trillions of dollars (present value)2011 2020 2030 2040 2050 2060 2070 2080
Ending year of accumulation2086