When established in 1935, Social Security made its first payments
to Americans at age 65. these first recipients never contributed
and were paid from contributions made by younger Americans.
Those American and successive generations believed their
contributions were investment and that they would be paid
at retirement by the earnings on those investments.
In fact, those younger Americans were paid by the contriubtions
of successive generations of "investors" as the federal
government spent their money to help finance operating
deficits. With the ratio of retirees to contributors rising
the Social Security Trust Fund will rise out of money by
2036, if not sooner.
Such a scenario could only continue if the working age
population grew more rapidly than the number of retirees,
but it hasn't because Americans live longer and the birth
rate has declined.
President Obama's claims notwithstanding Social Security is
a growing burden on federal finances as the difference
between the trust fund's income and what it pays out grows
each year. As we approach 2036, either payments will have
to be drastically curtailed or the government will have to
shut down other activities on a massive bases.
Social Security can work as long as it finds more and more
workers to suport the growing number of retirees. But it
can not do that because the system encourages people, who
once relied on their children and savings to help them
through old age, to have fewer children.
And by it nature, it reduces incentives for savings and
investment thereby slowing economic growth and making it
more difficult for each successive generation to support
the elderly.
Sheila McKinney
