Social Security’s Real Problem Started in the 1970s

Social Security’s long-term financial problems are not the result of Franklin D. Roosevelt’s original design. They are the product of policy changes adopted decades later.

When Social Security was created, it was intentionally modest. Benefits were structured to prevent old-age poverty, not to replace a large share of pre-retirement income. The program’s costs were kept low enough to remain affordable across generations, which is why Social Security enjoyed broad public support for decades.

That balance was disrupted in the 1970s. Lawmakers significantly expanded benefit generosity through flawed indexing rules and ad hoc increases that caused benefits to grow faster than wages. These changes were not necessary to preserve Social Security’s core mission, nor were they driven by a clear policy rationale. They permanently increased program costs and laid the groundwork for today’s financing shortfall.

Acknowledging this history matters. Respecting FDR’s legacy does not require defending every policy choice that followed. It requires distinguishing between the program’s original, affordable design and the later decisions that made it unsustainable.

A recent analysis details how this shift occurred and why it still matters today.

FDR’s Social Security Was Built to Last

At its founding, Social Security was designed as insurance, not a comprehensive retirement income system. Benefits were linked to lifetime earnings but capped to ensure the program remained affordable for workers and employers.

This structure reflected a clear understanding: a modest, reliable benefit would command lasting political support, while an overly generous program would eventually strain public finances and force painful corrections.

For decades, that approach worked. Social Security reduced elderly poverty without threatening federal fiscal stability.

The 1970s Broke the Formula

The 1970s marked a turning point. Changes to benefit formulas and cost-of-living adjustments significantly increased lifetime benefits, pushing replacement rates far beyond what was needed to meet Social Security’s original purpose.

These expansions were not driven by a sudden increase in elderly poverty or a breakdown in the existing system. They were the result of policy errors and political compromises that underestimated long-term costs.

Once enacted, those changes became embedded in the program. Benefits ratcheted upward, while the tax base supporting them did not grow at the same pace. The mismatch is at the heart of Social Security’s current financing gap.

Reform Does Not Mean Abandoning Social Security

Calls for reform are often mischaracterized as attempts to dismantle Social Security. In reality, the opposite is true.

Revisiting unjustified benefit expansions is a way to preserve the program, not weaken it. Social Security can continue to provide income security for retirees while returning to a cost structure that workers can sustain.

Preserving every expansion from the 1970s is not a requirement of honoring Social Security’s founders. Those decisions were policy choices, not constitutional principles.

CFE Takeaway

Social Security does not need to be reinvented. It needs to be corrected.

Respecting Franklin D. Roosevelt’s vision means restoring an affordable, insurance-based program that protects retirees without imposing ever-higher costs on future workers. The large benefit expansions enacted in the 1970s were a mistake, and there is no economic or moral obligation to carry those errors forward into the 21st century.

Reform that reflects this reality would strengthen Social Security, improve fiscal sustainability, and better align the program with the principles on which it was built.