The addiction to "free stuff" has been a part of human civilization. This is not going away. In fact, it is growing further - particularly in the United States with Social Security. Social Security was introduced during the FDR administration under the New Deal program. It was created as a response to the Great Depression, and it was intended to provide a safety net to help destitute Americans: the elderly and the unemployed. This eventually became one of the most enduring programs in the history of the United States, shaping the mechanism of retirement for more than 90 years. However, there was one glaring problem in the program: it extracted wealth from younger Americans to give to older Americans. In short, it took money away from the most productive people in society and gave it to the least productive. The system could work as long as there were more young people feeding into it - a Ponzi scheme. But with America aging and its workforce shrinking, the days may be numbered for Social Security.
Social Security was signed into law in the 1930s. Back then, the total fertility rate was around 2.1 children per woman, which is at replacement level. From the late 1940s to the 1960s - the baby boomer era - fertility surged.
In the 1950s, the total fertility rate was around 3 children per woman, well above replacement level. However, in the 1970s, the fertility rate declined to around 1.7 children per woman, a dramatic decrease compared to the 1950s. Since then, in 2024, the fertility rate has reached an all-time low of 1.599 children per woman. This has dramatic implications for Social Security as it directly affects the worker-to-retiree ratio - a major issue for the sustainability of Social Security - because fewer births in earlier decades mean fewer workers today relative to retirees. To compensate for this shortage, the U.S. federal government borrows or prints money. In fiscal year 2024, Social Security spending accounted for about $1.5 trillion (21-22% of the federal budget), making it the single largest line item in the budget - larger than defence, education, or most other individual categories. Given the current trajectory, Social Security will become unsustainable unless strong policy changes are made.
However, this is where the issue becomes complicated, the demographic that disproportionately benefits from the program is the elderly; and elderly Americans form one of the largest and most powerful voting blocs. Additionally, they have a higher turnout rate compared to any other group.
In the 2024 federal elections, older Americans made up nearly one-quarter to nearly one-third of the electorate. Unfortunately, this means restructuring the Social Security system becomes a herculean task - so much so that it has ubiquitously been called the "third rail of politics." Politicians in the United States rarely talk about restructuring it because they know they will lose to the candidate who promises to preserve the status quo. Previously, the Republicans were the pro-restructuring party. However, Trump explicitly campaigned during the 2024 elections not to touch Social Security at all, effectively making status quo Social Security a bipartisan issue. In fact, the Democrats want to increase spending on Social Security even further.
Most economists agree that Social Security will need to be restructured at some point - the sooner, the better. Bond market speculators are already preying on the fragility of U.S. debt. The dollar is losing its reserve currency status, and the United States is in a Cold War with China. To compete toe-to-toe with China, the United States must ensure that its domestic policy is sound and concrete. A fiscal crisis brought on by unsustainable debt and money-printing will become an ulcer that spreads to every aspect of America. The elderly must sacrifice some comfort - for, the ones who will pay for them will be their own children.
The writer is an undergraduate student at University of New South Wales, Sydney
