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Sustainable Society:  A society that balances the environment, other life forms, and human interactions over an indefinite time period.







Social Security: The Ponzi Path to Dystopia

David Simcox*

Executive Summary
October 1998


Paying for the retirement of America's 95 million baby boomers beginning in 2013 threatens to exhaust the Social Security trust fund by 2032.

Relying on Ponzi like schemes to populate our way out of the dilemma through increased immigration and pronatalist incentives would be destructive and self-defeating. The consequence would be disruptive and environmentally devastating population growth, which would merely delay, not solve, the problem of too few workers supporting too many retirees.

Under current census projections, the number of working-age Americans (ages 18 to 64) to each resident 65 years and up will fall from 4.8 in the year 2000 to 2.7 in 2050.

Maintaining even a modestly positive actuarial ratio of 4 to 1 would require dramatically increasing U.S. population growth to 607 million by 2050, compared to the 392 million now projected. With the fertility of most native-born Americans well under replacement level, achieving such rapid growth in so short a time would require massive increases in already high levels of direct immigration boosted by the higher birth rate of the foreign born.

Even under such a high-growth scenario, one of seven residents would be of retirement age in 2050, compared to the one in five now projected for mid-century, and the total dependency ratio would remain about the same.

But, with the population at 607 million in 2050, taxpayers would be facing an even more daunting prospect of a major surge of retirements beginning in 2060 due to the aging of the more than 80 million workers added 30 or more years earlier. Their dilemma would resemble today's, but on a larger scale: either more Ponzian population growth or painful measures to cut benefits and raise revenues.

The "growth as a way out" approach overlooks the fact that sheer numbers of added workers can enrich Social Security only if they pay in more than they take out. Today's unselective immigration policies add large numbers of workers and their dependents who make little or no net contribution.

Low wages, higher public assistance costs, higher rates of tax evasion, and the progressivity of the Social Security payout work together to weaken the average net contribution of immigrants. Importing the massive numbers of immigrants needed to maintain a 4 to 1 ratio would further weaken what little selectivity now remains in the immigration process.

Long-term solvency of Social Security will require some combination of increased contributions, decreased benefits, and reduction of future low-paying claimants. Reform measures most needed are those that would achieve these goals while discouraging future population growth. Such reform should include incentives for more frequent and longer labor force participation among women, elimination of pronatalist incentives from the tax code and other legislation, and far smaller and more selective immigration, with ironclad guarantees from sponsors of permanent medical and financial support for immigrants over 50.

Finally, the nation must accept the reality of an aging population as a necessary step to population stability. The United States must recognize its own seniors as a major, but overlooked human resource, committing itself to the retraining and employment of the millions of productive aging Americans who want to work and who can bring highly valued skills and attitudes to the workplace.

See the complete essay, Social Security: The Ponzi Path to Dystopia, on the MFS Website here.
* Used with permission of Negative Population Growth, NPG.

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