Jon Reisman

On August 14, 1935, President Roosevelt signed the Social Security Act, setting up a system of payroll taxes supporting retirees. The retirement age of 65 exceeded average life expectancy at the time by about a year. August 14th, 1935 was also my father’s 8th birthday, and in 10 years would be V - J Day, marking Japan’s surrender and the end of WWII.

In 1937, the original contribution rate was set at 1 percent of pay, which was matched by employers. The tax was paid on the first $3,000 of income. Since then both the tax rate and the cap have been steadily increased. The employee payroll tax is currently 6.2 percent with a cap of $147,000 

Beneficiaries were expanded under subsequent Presidents to include survivors, dependents, those with disabilities and various previously excluded state employees. From its inception until the early 21’st century, the social security system took in more revenue then it disbursed. The surplus was used to purchase treasury securities, thereby financing a substantial portion of the national debt.

The biggest factor threatening the fiscal sustainability of the system is the steady (until quite recently) increase in average life expectancy. In 1937, the average American died before they began collecting benefits. Life expectancy increases changed that to an expected post age 65-collection period of about a dozen years by the 1990’s. It is currently predicted to be insolvent in 2033, which would trigger automatic cuts in payments.

To sustain what has become the country’s most popular government program some combination of revenue increases (raising the tax rate  and/or income cap) and/or benefit cuts (reducing promised payouts, reducing cost of living increases and/or raiding the retirement age) is necessary, but politically perilous. The last major fiscal sustainability reform came in 1983. Ronald Reagan and Tip O’Neill forged a bi-partisan deal to gradually raise the retirement age for baby boomers. The 1983 reform showed that early relatively modest changes could avert later more drastic cuts that were not taken until the crisis worsened.

When I ran for Congress in 1998, the looming insolvency was more than 40 years away (the situation has gotten worse in recent years, pushing up the predicted insolvency by almost 5 years.) I remember going to an AARP sponsored debate (incumbent Baldacci skipped it but sent a surrogate). I advocated for Reagan/O’Neill style gradual increases in the retirement age (I was still a callow youth of 42.) I will never forget the daggers the AARP moderator looked my way. The AARP was and still is a left listing appendage of the Democratic Party, which is why I have chosen to join AMAC, the right leaning alternative.  

George W. Bush also unsuccessfully advocated for the Reagan/O’Neill approach in 2005, and the last major opportunity to sustain the program without drastic changes was lost. Presidents Obama, Trump and Biden would not touch the third rail, and with insolvency now just a decade away, the option of modest changes is essentially lost. The prospect of Greek style unrest and crisis over systemic entitlement reform looks inevitable.  

I began collecting social security in January 2023 at age 66 years, 4 months, after paying into the system for almost 50 years. I have my doubts about both my personal and the system’s sustainability- one or both of us is not likely sustainable without some drastic interventions.           

Jon Reisman is an economist and policy analyst who retired from the University of Maine at Machias after 38 years. He resides on Cathance Lake in Cooper, where he is a Selectman and a Statler and Waldorf intern. Mr. Reisman’s views are his own and he welcomes comments as letters to the editor here, or to him directly via email at [email protected].