Much has been made about potential threats to the Social Security System in the United States today, and the primary threat is seen as deriving from demographic realities. The intent of the system from the beginning was for each generation to provide for the previous generation through a form of taxation so that the system would pay for itself as it operates. Some believe that they pay in money which is returned to them when they retire, but in fact what they pay in now is paid to those who are currently retired. The baby boom after World War II produced the first generation that was much larger than the one that would follow so that the system is now under strain and will have to be paid for by future generations rather than the one currently working. This suggests that the system needs drastic reform, and a number of proposals to do so have been made.
The 1935 Social Security Act was intended to create a system under which workers would receive at least as much in benefits as they had contributed, a goal that was considered crucial to public acceptance of a compulsory program. In a social insurance plan, however, where universal and compulsory protection is the goal, individual equity may be de-emphasized in favor of social adequacy, meaning a standard of living below which it is felt no one should fall. The 1939 amendments to the Social Security Act tried to resolve certain issues because the needs of millions of the elderly were not being met by the old age assistance programs in individual states. At that time, the 1935 principle of a fair rate of return was weakened, and benefits were based on average earnings during a shorter period of coverage than the original base of lifetime contributions. In some ways, the system never recovered from this change (The Academic American Encyclopedia, 1993, online edition).
Reform of the Social Security system at any level has been made very difficult by the popularity of the...