Saving Social Security: The
Social Security Amendments of
With the passage of the 1972 amendments, the construction of America's old-age pension system was complete. Nearly universal coverage, expanded benefits, pensions for a beneficiary's survivors, and the inclusion of a disability insurance program concluded the aims of Franklin D. Roosevelt. The program's advocates should have been able to rest on their laurels, their victory won. Yet ironically, the same amendments that completed the program also threw it into a severe financial crisis. Just 10 years after their passage, the entire system appeared to be on the brink of collapse. Social Security suddenly needed to be “saved.”
Yet participants then, and now, debated exactly what they were saving the program from. For the reforms of 1983 stemmed from two very different financial problems, a predicted shortfall in the Old-Age and Survivors Insurance (OASI) Social Security trust fund and the effects of the economic policies of the new Ronald Reagan administration.
The first of these problems was undoubtedly the result of the 1972 amendments. Recall that in that year Congress added a costof-living adjustment to Social Security benefits. Benefits now rise with the inflation rate, as measured by the Consumer Price Index (CPI). At the time, this was thought to improve the process for determining benefit increases. But it was based upon assumptions that turned out to be wrong. Most everyone expected that, in the years ahead, inflation rates would remain within the historical norm. This was incorrect. Inflation instead raced out of control as the 1970s progressed, and by 1980 the U.S. inflation rate was four