When he quickly axed the Reagan administration’s proposed harsh cuts to early Social Security retirement benefits in 1981, House Speaker Tip O’Neill branded the New Deal achievement the “third rail” of American politics. Yet the clash didn’t stop the Massachusetts congressman from shaking hands with the Gipper on a deal embracing the 1983 Greenspan Commission recommendations to resolve an immediate crisis—yielding trust-fund surpluses for the next four decades.

Unlike the “bean counters” then and now, the two sunny Irishmen recognized that the centerpiece of the New Deal and, later, Medicare were designed to function within a bipartisan policy framework steering U.S. wealth generation—the political economy—that served the country incredibly well throughout much of the 20th century but has been all but abandoned today.

But as trillion-dollar-plus deficits since 2020 have ballooned the federal debt to $34 trillion, and interest payments on that indebtedness are poised to outstrip defense spending in a year or two, all the usual suspects are lining up again, spears in hand, to gore the lead ox of mandatory spending. 

Whether the editors of the Wall Street Journal, scholars at the American Enterprise Institute and the Manhattan Institute, or the analysts at the bipartisan Peter G. Peterson Foundation with its tagalong Committee for a Responsible Federal Budget, the whole green-eyeshade crowd is clamoring for cuts at Social Security and Medicare. This show of force seems to have spooked the House Budget Committee to push for a debt commission.

Why aim daggers at programs that retirees have paid into with every paycheck throughout their laboring years—which are projected to stay afloat for the next ten years via payroll taxes and existing surpluses—rather than the trillions squandered on over two decades of foreign interventions? Or the “gusher of subsidies,” as the Wall Street Journal frames it, of pandemic and green-infrastructure dollars to states and localities? Not to mention the trillions spent on the War on Poverty, still being waged on manifold fronts after 60 years, propping up a legion of social-welfare handouts, including Medicaid, that have no funding mechanism nor demand any recipient buy-in other than relative need.

More important, why do the budget alarmists offer no solutions to the root problems yanking at Social Security reserves: stagnant wages, tanking birth rates, and the elephant in the room, our deconstructed political economy?

Not long ago, the bipartisan “American Way,” which provided the context and economic foundation to carry Social Security and Medicare easily, worshiped the trinity of indispensable wealth creators delivering the highest living standard in the world: 

• Domestic manufacturing and the energy extraction to power that sector;
• Infrastructure gamechangers like the Interstate Highway System; and 
• Cutting-edge defense capabilities, spearheaded by long-term economic drivers like Eisenhower’s DARPA, JFK’s Moonshot, and Reagan’s strategic-defense industrial policies.

Winning demographics iced the cake. From its early years, Social Security established the married-parent family as the “American Standard,” reinforcing the “family wage” pioneered by Henry Ford and embraced by labor and management in the Treaty of Detroit in 1950. From our entry into World War II through the Reagan era, the lion’s share of U.S. households could boast one adult, most often the father, earning wages sufficient not merely to support both parents and several children, but also generous benefits that would extend into a couple’s retirement. 

The arrangement exuded generational reciprocity: Those same families reared a relatively sizeable posterity that guaranteed future human and social capital, not to mention healthy social-insurance reserves.

That bipartisan consensus continued in somewhat modified form under Presidents Carter and Reagan. By the 1990s, however, the political class was fully casting the American Way overboard, gambling the country’s fate on finance, the outsourcing of skilled labor and production, and mass immigration.

Due to an interlocking set of “supply-side” misconceptions—from free trade and tax-rate cuts for investors to the frenzied deregulation of U.S.-based multinationals—the economy would serve new pharaohs, especially global capital markets, who did not know the American Josephs. We transferred much of our industrial prowess to Communist China and put the untested lords of a service sector—investment bankers, venture capitalists, and management consultants—in charge. 

Although the gut punches did not hit immediately, the Great Recession demonstrated that America had lost her productive edge while her once-great middle class was shrinking and rapidly losing ground.

Parsing Census Bureau data, the Pew Research Center quantifies the fallout. The share of “middle-income” households declined from 61 percent in 1971 to 50 percent in 2021, and that cohort’s contribution to national “aggregate income” plunged from 62 percent in 1970 to 42 percent in 2020. More distressing: middle-income couples enjoying the postwar family wage declined from 54 percent of households in 1971 to 37 percent in 2021. Today’s middle-income household now requires multiple earners to achieve the same status that their less-educated family-wage counterparts enjoyed under President Nixon.

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President Biden points to historically low unemployment, a bullish stock market, and rising GDP numbers under his watch. Yet the country has suffered, as demographer Nicholas Eberstadt has exhaustively documented, from Depression-era rates of idleness among men since the end of the Cold War. This is hardly surprising: Net labor-force growth since 1990 mostly represents low-value-added service gigs, including part-time or seasonal work, not coveted family-wage jobs with good benefits. Making matters worse, entire swaths of low-skilled workers are being legally downgraded as “independent contractors,” short-circuiting fair-labor protections enshrined since the New Deal. Per the Social Security Administration, the median annual wage in 2022 stood at $40,847.

No wonder new automobiles only fill the dreams of 60 percent of U.S. households. The median price of existing single-family homes, now $382,600, mirrors the meteoric rise in asset values of the last 15 years and leaves many average Americans without an ownership stake in society. Meanwhile, unrestricted abortion and the necessity of dual-income households have helped depress the nation’s fertility rates to levels not suffered since the Great Depression, eating the seed corn of social and human capital to enable the United States to thrive, and afford earned benefits.

It’s the political economy, not Social Security, that needs immediate reform. If the political class would instead focus on rebuilding the working and middle class, rather than the budget woes generated by its meltdown—and restore the American Way—such an achievement would make the smiling O’Neill and Reagan grin anew.