Bernstein, Aaron (2005) Why the Greenspan fix didn’t work BUSINESS WEEK, 5/30 60-61

Back in 1983, a commission was establish to fix social security. At the time, the youngest of the Boomers was 19. The thinking was that the earlier one moves on this issue the more likely that it can be resolved without much pain. Allen Greenspan headed the commission and changes were made. It seemed as if things were in balance.

However, after the Reagan income tax reforms, wages stalled and economic inequality increased greatly. As the inequality increased, more people who became rich no longer had to pay as much social security. The social security payroll tax caps at various levels throughout the years. Thus a billionaire pays only about as much as a skilled worker. So, more money went to the billionaire than to the social security pool. Thus with the wealthy gone from the regressive pay roll tax and with wages stalled, the social security system had less money.

According to BUSINESS WEEK, roughly greeter income inequality has cut the inflow of taxes to the social security fund by 50%. Slower wage growth cut the fund by 25% and people living longer by 5%. The remaining 20% is due to OTHER factors.