Contracepting Social Security
by W. Patrick Cunningham
Social Security legislation was passed early in the Roosevelt
administration in response to the reality of thousands of elderly
Americans entering retirement without financial assets. With the
demo graphic shift from the subsistence farm to the wage dependent
city life, and the loosening of family ties, an income in old age
became essential. Social Security was designed as a "safety net"
to provide basic human needs to seasoned citizens; it sought to
provide a basic "floor" of income protection for elderly workers.
It also sought to provide proportionately higher benefits to low-
wage workers than to their higher-wage counterparts. It became
especially important in situations when the extended family
abandoned their older members, or when old people survived their
heirs and spouses without savings. Since 1935 it has assumed an
identity of respectability as "social insurance," rather than of
"welfare." However, in its financing it is nothing like insurance.
In fact, it resembles most a type of financial arrangement called
a "Ponzi scheme."
In 1963, 28 years into its operation, about 19 million persons
were receiving monthly benefits, while 76 million persons were
paying into it. By 1990, virtually every American worker was
covered by Social Security, contributing to it almost 8% of nearly
all their compensation. Employers matched these employee taxes,
while self-employed individuals paid for themselves both the
employer and the employee amounts.
The Social Security system provides retirement benefits to
citizens over the age of 62 (age 60 for widows). Through
amendments over the years, additional benefits were added? and
taxes were increased. Disability benefits were added, and severely
underfunded, in 1957; Medicare for elderly persons was added in
1963. The Medicare tax, originally limited as to income taxed, was
applied to unlimited amounts in 1993. About 90 percent of all
elderly households receive Social Security benefits. Social
Security provides about 35 percent of the total income going to
all married elderly couples and 45 percent of the total income
going to all unmarried elderly persons. During 1994, old age
and survivors benefits paid by the system totaled nearly $280
The idea that Social Security is financed in a Ponzi fashion is,
unfortunately, all too true. A large number of young workers are
taxed to support a small pool of surviving elders. Common sense
revolts against a "pay-as-you-go" retirement system in which the
young are constantly subsidizing the old with their tax money.
Such plans run chronic, planned actuarial deficits. They have no
assets to back up their promises. This is the reason they were
Outlawed in the private sector by Congressional action in 1974. It
seems wiser-certainly more traditional-to build up savings, and
draw those down during retirement. But government economists were
not using traditional models during the heyday of the New Deal.
They were following the theories of Maynard Keynes and his
American disciples. Keynesian economic analysis looked askance at
saving money. Saving, they argued, took spending money out of
circulation, and reduced consumption. But consumption at high
levels is needed if U.S. industry is to provide "full employment."
If savings exceed investment needs, total spending might not be
sufficient to buy all the goods and services produced at full
employment, and a recession might result.
Keynes' approach has a kind of naive appeal to amateur and
professional alike. It essentially says that we don't have to be
thrifty-at least in the public sector-because time will bail us
out. As deficits and debts in the Western world have soared, many
commentators have wondered if time is not running out, and why
Keynes should have taken such a short-sighted view: "in the age of
crushing government deficits, the economics that mortgages the
future to pay for present consumption may bespeak a vision that is
radically flawed." Modern biographies, particularly that of
Skidelsky, have given us a clue why Keynes' world-view was so
focused on the present moment, and not future consequences. His
vision was "characteristically homosexual," at the time his
economics solidified, and that fact alone is adequate to explain
why he ignored the needs of his progeny, the fruit of procreation.
Skidelsky mentions the views of Sir William Rees-Mogg, who "argued
that Keynes' rejection of 'general rules', which his homosexuality
reinforced, led him to reject the 'gold standard which provided an
automatic control of monetary inflation."' The vision of
Keynesian economics generally ignores the ultimate effect of one's
borrowing on children and grandchildren, because it does not care
about such effects.
Ironically, the key to the Ponzi functioning of the Social
Security system, and financing of deficits, is an ever-expanding
population base. Yet the breakdown of traditional family morality
under the influence of sexually permissive thinkers, degenerate
politicians, profitable tax-free institutions such as Planned
Parenthood and its allies, and proponents of welfare dependency,
has practically guaranteed that this will not happen. Figure 1
shows the demographic results of the increased use of
contraception in two eras.
The first was the "Roaring Twenties," during which time the white
Protestant sexual ethic deteriorated under the influence of neo-
Malthusians and Sangerites. Barrier methods of contraception
attained a measure of popularity once a twenty-year campaign among
mainline Protestant churches was successful in removing the sense
of sinfulness that attached to the "sin of Onan." Protestant and
Jewish birth rates plummeted. In fact, it can be reasonably argued
that a major unattributed cause of the Great Depression was the
sagging rate of birth and household formation during the 1920s.
The second period of accelerated contraceptive sex began in 1964
as anovulent-abortifacient hormone pills, promoted by self-
interested propagandists and maverick theologians, gained
widespread acceptance among the public. The constant hammering by
the popular press, despite (or in some sense because of) the
issuance of , ultimately overcame the traditional
Catholic reluctance to use any form of artificial birth
regulation. This produced the infamous "baby bust," the longest
period of declining births in the century. The relative drop in
births, 26%, equalled that experienced in the period 1921-1933,
but it involved a larger absolute decrease in birthrate, and
lasted two years longer than that earlier "bust." Furthermore, the
"echo boom" that followed it was neither absolutely nor relatively
as impressive as the 1946-63 boom. This extension of the birthrate
decline was also partially caused by the decriminalization of
abortion between 1970 and 1973.
Both of these dramatic declines in birth rate were followed by
extended periods of economic malaise, the latter being associated
with Carter-era "stagflation," in which high unemployment was
uniquely accompanied by high interest rates and inflation. It is
also not coincidental that the first great crisis in Social
Security funding occurred immediately after the latest population
bust, and required a fundamental restructuring in Social Security
financing (much higher taxation) in the early 1980s.
Both the "boomer" and "bust" generations are now adults and in
their productive years. Some boomers have been paying Social
Security taxes to support their elders for as long as thirty-six
years. These are only about a decade from the earliest age at
which they can collect old-age benefits. Now the Ponzi financial
structure of Social Security is about to interact with the
demographic boom-bust phenomenon in catastrophic ways.
Figure 2 shows the projected ratios of workers paying into the
Social Security fund to retirees drawing from it. The annual
Trustees' report shows that since 1975 there have been between 3.2
and 3.5 workers paying in for every beneficiary taking out.
Beginning in about 1996, there should be an increase each year in
the number of new retirees, and in the number of total
beneficiaries, due to the enhanced birthrates after 1933. For a
short time, the total number of workers will not decline because
new workers enter and older workers reenter the workforce at about
the same rate as senior citizens leave it. But by the year 2005,
the ratio of producers to consumers has sagged to about 3.0 (using
an estimate about halfway between the "intermediate" and
"pessimistic" projections of the actuaries). This means that
the taxes of only 3 workers will be available to support each
When the boomers begin to retire in earnest, about the year 2010-
15, under no combination of circumstances currently foreseen could
the system support them without massive tax increases on younger
workers. By the year 2026, at which time the oldest boomers would
be eighty, the ratio of workers to beneficiaries has decayed to
2.0. This is, of course, intolerable. In a pure pay-as-you-go
financing system, payroll taxes would, between employer and
employee, be in the 40% range. It should be noticed that in the
"pessimistic" case, the worker-retiree ratio is in free fall
through much of the next century, and ends with about 1.3 workers
for each retiree.
THE REAGAN "PATCH"
Early in the 1980s the pay-as-you-go system faced its first major
financial crisis. The Trustees of Social Security reported that
the Old Age and Survivors' Trust fund was facing insolvency. As a
result, the largest increase in Social Security taxes in history
was approved. The amount of wages subject to the tax was
tremendously increased, and the rates boosted. The advertised
reason for this change was to set aside a reserve to be saved for
the Boomers' retirement era, but this was a smokescreen. Viewed
from a vantage point fifteen years later, we can see that the real
effects of the tax expansion were threefold: 1) it gave more money
to fund current retirable to the Treasury in return for special
Social Security bonds, and financed an expansion of public welfare
programs (especially worldwide family limitation programs) and
Department of Defense activities without a general revenue tax
increase; 3) it drastically reduced the rate of private savings. I
call this the "Reagan Patch" because it solved the immediate
problem without resolving the fundamental demographic cause. The
primary financial result of this drastic change was an expansion
of the self-financed budget deficit, and a dramatic increase in
the public debt, which in 1996 stands at about $5 trillion. About
15 percent of that debt is in the hands of the Social Security
Trustees, who are thus building up a paper "reserve" for the
future, represented in Figure 3 as a ratio of reserves to expected
annual payments to beneficiaries.
Discounting the almost impossible set of conditions that produce
the "optimistic" or low-cost reserve line in Figure 3, we can see
that the Trust Fund will never have in it, at current rates, more
than about two years of benefits. Sometime between the years 2000
and 2012, as more and more beneficiaries draw on their Social
Security pensions, the Trustees will stop lending to the Federal
Treasury and begin demanding that the notes be paid back. Unless
the Treasury is running a surplus in its budget by that time, this
action will put great pressure on the money markets and capital
markets alike, and may cause a major financial dislocation.
Widespread contraception and abortion, then, have been the major
social and moral causes of an inevitable Social-Security induced
financial crisis early in the next century. Artificial birth
regulation has poisoned the financial stability of the U.S. system
of social insurance.
We can already see many of the results of this kind of population-
induced economic trauma in our European and Japanese counterparts.
These cultures did not experience much of a population boom in the
1950s, and so are somewhat ahead of us in their demographic-
economic crisis. In Europe, a shortage of workers to finance
social programs has caused EEC governments to resort to relatively
high taxation for social insurance, combined with planned and
needed importation of workers from the Middle East. This
importation of laborers from foreign cultures, together with the
growth of reactionary "Generation X" gangs from the de-
Christianized indigenous populations, has led to terrific
confrontations and even many deaths. In Japan, a prolonged 1990s
stock and bond market pullback has led to enormous domestic
The economic expansion that characterized the "glory years" of the
Reagan revolution was largely created by massive spending by young
Boomer families buying new cars, new homes and new furnishings.
That is over, and even the "echo boom" will not restore the
demands of those years. Time will not bail us out of the Social
Security catastrophe. Neither will a Social Security tax increase.
Ultimately, the huge Social Security reserve will be more of a
problem than a solution. Furthermore, the expansion of Social
Security taxes will cut back on domestic savings even further.
Many commentators are relying on the privatization of Social
Security to solve the problem of financing Boomer retirement.
This, too, is a chimera. Financial instruments do not produce
wealth or income. Only people produce income. If we shift perhaps
20% of Social Security dollars into private accounts, the Social
Security surplus will not grow, and the Federal government will
not be able to borrow that excess money. The private accounts will
buy up stocks and bonds. Ultimately, these will be cashed in to
produce retirement income. But if that income must be produced by
real people and real businesses still in the workforce, then the
number of such producing units is still critical, whether the
income originates from taxation (Social Security) or production
(interest, dividends, and capital gains). The root cause of the
21st century catastrophe is not that the wrong pile of money is
being created, but that there will be inadequate productive
populations to support a large number of retirees.
THE REAL SOLUTION - PROCREATION
Remarkably, the Social Security Trustees themselves suggest the
only viable solution to the Boomer retirement crisis: making more
baby Americans. In Figure 4, which remarkably is one of the few
sets of OAS data graphically presented in the Trustees'
reports, we see that the Social Security deficit (shown as a
negative number), gets more positive as the fertility rate
improves. By extending the Trustees' study results to the point
where the Social Security deficit is eliminated (over the 75 year
study span), we can see that is to increase the U.S. fertility rate
to about 3.5 children per female.
This kind of prediction is nowhere to be found in the Social
Security report. It essentially restores the original demographic
conditions under which Social Security was created. Any other
"fix" to Social Security depends upon an uncontrollable or
unattainable set of conditions: highly robust economic growth
(which is probably impossible with stagnant populations),
reduction or elimination of Social Security payments to retirees
with other income sources, or increasing mortality rates.
Remarkably, in the 1995 Trustees' Report, the actuaries improve
the solvency of the system by assuming just that latter change!
A system of social insurance that must pray for an increased
mortality rate among the aged, even as that mortality rate
inevitably drops, is crazy. That kind of thinking reminds one of
the 1950s toy box that, when you turned the switch on, popped its
lid and released a hand that turned the switch off.
Depressed fertility rates have caused the looming crisis. A
significant and quick increase in American fertility is the only
reliable way to restore solvency to the social insurance program.
1 Scheiber, Sylvester J., , EBRI, 1982, p. 275.
2 Davis Gregg, , 2nd edition,
Richard D. Irwin, 1964, p. 693.
3 E. R. Kingsorn, B. A. Hirshorn, J.M. Cornman, , p. 86.
4 Trustees of the OASDI Trusts, 1995 annual report, p. 7.
s Aaron, Bosworth & Burtless, , p.
6 E. Michael Jones, , Ignatius Press, San Francisco, 1993, p. 58.
7 Robert Skidelsky, , Viking Books, NYC,
8 , p. xv.
9 It is unarguable that one who expects no progeny will have less
concern over the effects of his actions or theories on the next
generation than one who feels some responsibility for it because
of a personal or family stake in the outcome. To Keynes is
attributed the comment denigrating long-term planning: "In the
long run, we're all dead."
10 Trustees' Report, Table IIF- 19 (1995).
11 The actuaries' past predictions of "intermediate" estimates
have proven too optimistic, so we have chosen a set of conditions
slightly less favorable than the intermediate, and slightly more
favorable than the "worst case" scenario they give.
12 Trustees' Report, Table IIF-20 (1995).
13 Cf. 1995 Trustees' Report, Table II-GI (1995).
This article was taken from the July/August 1996 issue of "Culture
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