SOCIAL SECURITY: THE PONZI PATH TO DYSTOPIA

• David Simcox
• October 1, 1998
• Forum Papers
• Forum Paper
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SOCIAL SECURITY: THE PONZI PATH TO DYSTOPIA
An NPG Forum Paper
by David Simcox
October 1998

The rapid population growth of the baby boom era created a huge bulge of workers whose Social Security payroll taxes provided a surplus that has helped fund the overall federal budget. However; after 2012 these same workers’ entitlement to retirement and Medicare benefits is projected to begin exceeding the income from Social Security payroll taxes, thus requiring that an ever-increasing share of the federal budget go to pay for Social Security. David Sinwox demonstrates in this Forum why using population growth to simply add more tax-paying workers, as many advocates of high immigration propose. is neither a viable nor long-term solution to this dilemma.

— Edward Lytwak, Editor

Population growth only postpones the day of reckoning. According to the Census Bureau’s 1992 most likely “medium”‘ projection, there is the troubling prospect of nearly 400 million Americans by mid-century. By even the most conservative projections, trying to populate our way out of Social Security’s present actuarial’ dilemma would further darken the nation’s already problematic environmental and demographic future.

There is no denying that Social Security’s viability requires some tough decisions well before 2012, when outlays are expected to begin exceeding cash revenues. Without remedies, the trust fund will be depleted by as early as 2032, and revenues will fund only 70 to 77 percent of benefits paid.’

But adding scores of millions of new workers would at best postpone — but not solve — Social Security’s problem of too few wage earners supporting too many retirees. Such an expansion, even just enough to maintain a barely favorable actuarial balance of workers and retirees, would have to add at least 200 million more U.S. residents by 2050 to the nearly 400 million now projected. Consider the projections of the U.S. population’s age distribution to 2050″ based on Census data in Table I on the following page.

The graying of America is striking in these projections. The numbers 65 and over rise steadily from one in eight in 2000 to more than one in five by 2040, before beginning to recede. The ratio of working-age residents to those 65 and over fails from 4.8 to 1 in 2000 to 2.7 to 1 in 2040.

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