The best-laid plans
However, it is not as if we never saw the baby boomer generation coming or, somehow, forgot to plan for the eventualities.
At the time the boomer generation reached its end in the 1960s, it was clear that the huge birthrate experienced during the post-WWII era would put a strain on Social Security when these folks began to reach the age of retirement. Fortunately -- unlike today's Washington -- government in the early 1980s was actually capable of responding to a projected problem in a reasonable way.
And that is exactly what the 98th United States Congress did.
In 1983, acting on the research and recommendations prepared by the bipartisan Greenspan Commission, Congress enacted a number of modifications to the Social Security program designed to prepare the fund for the day that has now arrived -- the retirement of the baby boomers.
Those changes included raising both the tax rate and the age of retirement.
So, why the shortfalls after it was declared back in 1983 that Social Security was on firm and solvent footing for the foreseeable future? Was this just a miscalculation on Alan Greenspan's part or did something occur that he could not foresee?
It is true that there were some variables that could not be anticipated, such as people living a bit longer than expected. However, as it turns out, any mistaken projections in this regard are not what is causing the bulk of the projected shortfall in contributions to the Social Security Trust.
An unanticipated change
Greenspan's calculations were based on the presumption that income distribution in the United States would remain reasonable -- just as it had since America learned the lessons of how extraordinary disparities in income distribution lead to extraordinarily unfortunate economic events like the Great Depression.
How could Greenspan and his crew possibly have predicted that -- at the very time he was making his calculations regarding the future solvency of Social Security -- the nation was about to undergo a massive case of amnesia whereby the lessons of the Depression would be completely forgotten and greed at the top would return to, once again, trump sensible economic policy?
So, how does our record income inequality play into our Social Security problem?
According to Josh Bivens, acting Research & Policy Director at the Economic Policy Institute:
"Sixty percent of the current shortfall would be eliminated by a reversal of two adverse economic trends that have emerged since 1983: sluggish growth in average (real) wages and erosion of the tax base due to rapid growth in the inequality of earnings."
It's not particularly difficult to follow what Bivens is talking about.
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