Why is Social Security Headed for Crisis?
As Henry Hazlitt notes in The Conquest of Poverty, “From 1937 to 1950, Social Security was financed by a combined tax rate of only 2 percent… on wages up to $3,000 a year. Since then both the rates and the maximum wage base have been increased every year” (1973, page 88). A big reason for this massive expansion of the tax is that benefits were increased and expanded, as Hazlitt notes. (Just Facts also describes some of this history.) Another reason for the continued growth of the program is the increase in life expectancy. People live several years longer now (on average) than they did when Social Security first paid out benefits. The most pressing problem with the system, though, is the Baby Boom population bubble. So long as the number of workers relative to the number of retirees stays the same, the burden on workers remains constant. But over the next few decades the number of retirees will rise substantially relative to the number of workers. The result will be trillions of doll
