Don’t remember the recession of 1957-58? Most people don’t. It was a garden-variety slump  painful to those who lived through it, but short-lived and leaving few lasting scars. Today it is remembered only by the few experts who crunch the numbers in the study of macroeconomic history. My parents’ recession is not my problem, and our next recession will not concern our children when they reach adulthood.

What worry me are the problems that we will bequeath to our children.

Long before I was born, Franklin D. Roosevelt established a compact among the generations. Families had long cared for their elderly members, but Roosevelt federalized that responsibility in the form of the Social Security system. Social Security is sometimes viewed as a pension plan, but it is mostly pay-as-you-go. The working-age population taxes itself to support its parents, in the hope and expectation that its children will do the same. On the day of my birth in 1958, the payroll tax to pay for this program, including both the employer and employee shares, was 4.5 percent.

Around the time I started grade school, Lyndon B. Johnson expanded the generational compact to include health care for the elderly. The Medicare system increased the payroll tax, but only modestly at first. Health care technology was far more primitive back then and, as a result, less expensive. By 1968, when, like my younger son today, I was in third grade, the payroll tax for both programs had risen to 8.8 percent.

Today, the payroll tax for these programs is 15.3 percent, far higher than the programs’ creators ever imagined. More worrisome is that this 15.3 percent is nowhere near enough to maintain solvency in the future. When my generation of baby boomers retires in large numbers and starts claiming benefits, spending on these programs will far outstrip revenue at the current tax rate.

Image Credit... David G. Klein

Two problems are working in concert. The first is demographic. Because people are having fewer children and living longer than past generations, the number of working-age people supporting each elderly person has fallen and will continue to fall. (But I am doing my part to fix this: I have three children.)