Expansion or Contraction of Social Security: Serious Side Effects

Abstract

During its first three decades of operation, the Social Security program was almost unanimously approved of by the populace and the press. The benefits were many times as large as actuarially purchasable from the contribu tions paid. The administration was efficient and prompt. How ever, in the 1970s, the situation considerably changed: finan cial problems arose—both over the short range and the long range—and the administration deteriorated. The press be came critical and cried "crisis." Many feared that the program was bankrupt and that benefit promises would not be kept. Accordingly, proposals were made to contract the system, despite considerable expansionist pressure for increasing benefits. Good and compelling reasons exist to maintain the program at about its present relative level, neither to expand or contract it. Further, its financing should continue to be solely through direct, visible payroll taxes, and not, as many propose, by designated, but unrelated, taxes or from general revenues. Financing the program indirectly is deceptive at best, because the American public would then believe that somebody other than themselves would be paying for a sub stantial portion of the cost. The simple facts of economic life are that all taxes are paid by people and that, although dif ferent taxes might appear to have different incidences, it is impossible to determine whether this is actually so.