Home / General / The breakdown of the American system of government as illustrated by Social Security legislation

The breakdown of the American system of government as illustrated by Social Security legislation


A weird bit of American economic history is that, because continual inflation didn’t become a thing until the second half of the 20th century (prior to then inflation and deflation had alternated, so that nominal prices at the beginning of WWII were pretty much the same as they had been in the late 18th century), indexing wages and benefits to inflation didn’t exist at all prior to the 1960s.

Amazingly, from today’s perspective, social security benefits weren’t inflation-indexed until 1975. Since nominal prices nearly quadrupled between the beginning of Social Security and the mid-1970s, this had required Congress to adjust the benefits over and over again on an ad hoc basis, and it did so ten times between 1950 (when benefits went up 77% in a single year!) and 1973.

Indeed, Congress had to make major adjustments to the system constantly in order to keep the system self-financing, so that for instance the payroll tax on employees and employers went up, in pure percentage terms, by 600% between 1936 and 1983, rising from 1% to 7%. That was the last time the payroll tax was adjusted (the 1983 amendments caused it to rise gradually to 7.65% in 1990, which is where it is today).

The point here is that for, roughly, the first half of the existence of the Social Security system, from the mid-1930s to the early 1980s, it was understood by everybody but the most fringe right wing lunatics that of course Social Security taxes and benefits had to go up as the country got richer, because that’s what creating a system of social insurance involves. (In the late 1950s Dwight Eisenhower warned Republicans that any attempt to pare back on social insurance entitlements, most notably Social Security, would be an electoral catastrophe for the party. In another 20 years, Ronald Reagan would make doing so a central tenet of GOP dogma)

For the last 40 years, as right wing lunatics have gradually seized complete control of the Republican party, it’s been impossible to do anything substantial to adjust the system going forward, even though keeping it solvent would require tax adjustments that are positively trivial in comparison to those that were made constantly during the first 45 years of the program’s existence.

The history of Social Security, in other words, provides a stark case study in the gradual deterioration of the U.S. governmental system’s ability to function, because of the gradual radicalization of the Republican party.

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