Any proposal to deal with Social Security’s pending insolvency should be based on an understanding of history—why the 1977 Social Security reform failed in only five years while the 1983 reform bought 50 years of solvency. The 1977 reform failed as real wages declined, prices spiraled and the economy stagnated. The 1983 reform succeeded largely because of a strong economy: The inflation rate plummeted, ushering in decades of price stability, and real wages rose, producing about a quarter-century of strong economic growth.
Any Social Security reform based on raising the Social Security tax rate and expanding income subject to the tax would push millions of taxpayers to a cumulative marginal rate of more than 50%. That would cripple an economy in which real wages are already stagnant and gross domestic product is growing at less than 2% a year—ultimately failing to provide Social Security solvency.