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







"Nine Misconceptions About social Security"

Dean Baker*
July 1998


3. The demographics of the Baby Boom will place an unbearable burden on the Social Security system.

Those who want to overhaul Social Security make their case with the following numbers: in 1960 there were more than five workers for each beneficiary; today there are 3.3 workers; by 2030 there will be only two workers for each beneficiary. At present the fund is running an annual surplus of more than $80 billion, approximately 20 percent as much as its current expenditures. This surplus will generate interest revenue to help support the system as the ratio of workers to beneficiaries continues to fall in the next century. Also, the fact that workers are becoming more productive year by year means that it will take fewer workers to support each retiree.
The United States had 10.5 farm workers for every hundred people in 1929; it has fewer than 1.1 farm workers for every hundred people today. Yet the population is well fed, and we even export food.

Rising farm productivity made this possible. Similarly, increases in worker productivity (which have been and should be reflected in higher incomes), however small compared with those of the past, will allow each retiree to be supported by an ever smaller number of workers.

In fact the demographics of the Baby Boom have very little to do with the long-range problems of Social Security. The main reason the fund will run into deficits in future years is that people are living longer. If people continue to retire at the same age but live longer, then a larger percentage of their lives will be spent in retirement. If people want to spend a larger portion of their lives in retirement, either they will have to accept lower incomes (reduced benefits) in their retirement years relative to those of their working years, or they will have to increase the portion of their incomes (higher taxes) that they put aside during their working years for retirement.

This is the main long-range problem facing Social Security. Current projections show that the annual deficit will be 5.71 percent of taxable payroll in 2070, long after the Baby Boom will have passed into history. But the annual deficit is expected to be only 4.44 percent of taxable payroll in 2035, when the worst crunch from retired Baby Boomers will be felt.

Examining just the change in the ratio of beneficiaries to workers overstates the burden that workers will face in the future.

To assess the burden accurately it is necessary to examine the total number of dependents -- beneficiaries and children -- each worker will have to support. It is projected that this ratio will rise from 0.708 per worker at present to 0.795 in 2035. But even this number is well below the ratio of 0.946 that prevailed in 1965. And the fund's trustees project a lower birth rate, meaning that the increased costs of providing for a larger retired population will be largely offset by the reduction of expenses associated with caring for children.

Dean Baker is the author of "Getting Prices Right: The Battle Over the Consumer Price Index", 1997.
The Atlantic Monthly; July 1998; Nine Misconceptions About Social Security; Volume 282, No. 1; pages 34 - 39.
See at < http://www.theatlantic.com/issues/98jul/socsec.htm >.


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