Final answer:
The Social Security crisis of the 1980s was caused by a shrinking workforce-to-beneficiary ratio and the financial implications it had on the system. Reforms such as raising the retirement age and increasing payroll taxes were implemented to address the funding shortfall and ensure the program's sustainability.
Step-by-step explanation:
The Social Security crisis that occurred in the 1980s was largely due to demographic changes and financial strain on the system. The program established in the 1930s was funded through payroll taxes from the working population, designed to provide financial security to the elderly, disabled, and certain dependents. Over time, as the ratio of workers contributing to beneficiaries receiving benefits decreased, concerns about the program's solvency surfaced.
In response to these challenges, the Greenspan Commission recommended multiple changes to secure the future of Social Security. This resulted in the increase of the retirement age from 62 to 67 and a rise in the payroll tax rate. These measures aimed to extend the life of the Social Security Trust Fund, which accumulates more in payroll taxes than it pays out and was expected to face increased pressure from the retiring baby boomer generation.
Experts predicted that without such reforms, the revenue from payroll taxes would not suffice to cover the costs due to the aging population, a trend that continues to present a challenge for the system's long-term viability.