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Social Security’s Coming Crash

The welfare state was born in Otto von Bismarck’s Germany, a ploy of the famed Iron Chancellor designed to counter the electoral appeal of the rival Social Democrats.  Thus, social security was created in 1889 and eventually spread, under several guises, to many nations.

Here, the Old Age, Survivors, and Disability Insurance program (Social Security) was approved in 1935, an early victory for Franklin Delano Roosevelt as he rapidly and dramatically expanded government control over the economy.  For FDR, Social Security’s most important benefit was political: He recognized that once the American people got hooked on government benefits, they would never go back.

He was right.

Although Social Security has long been viewed as the third rail of American politics—touch it and die—it really is better seen as a symbol of America’s entitlement culture.  The United States lags behind Europe but nevertheless has constructed an expensive and expansive welfare state.  Virtually all spending programs go up each year, regardless of which party controls Washington, and the most outlandish increases have been concentrated in the big three social-welfare systems: Social Security, Medicare, and Medicaid.

The challenge of paying for the welfare state has grown over the last year.

U.S. GDP is about $14 trillion.  One year of economic output already is committed to paying off...

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