Social Security
Social Security concerns are one of the most pressing issues that my generation will face. Social Security pension funds may not even be available in whole for the current retiring generation. Why is this, what is the real problem, and what is the solution, are just a few questions that should spring to mind. Why is a failing system, one which every working American is paying in to, and will (hopefully) inevitably receive benefits from, not undergoing a major overhaul?
The Social Security Act (SSA) was signed by Franklin Delano Roosevelt in 1935. Essentially the program was created to help people over age 65, who had been working their entire life, and forced to retire due to medical and disability issues (DeWitt). A 65 year old man or woman would find it very difficult to continue working, and without a job they would have to rely on their children’s earnings or some other beneficiary. Since not everybody could survive this way, the SSA was passed. Additions to the SSA include survivors benefits, disability benefits, and the ability to share benefits with a spouse and children (DeWitt).
How Social Security is maintained is a relatively simple process. Every working American has a percentage of their earnings deducted from their paycheck. The money collected from this Federal Insurance Contribution Act (FICA) is placed in special trust funds created for this revenue (DeWitt). When it comes time to collect, benefits are also paid out of this trust fund.
Since retirees have been putting in to the system, and they will be the only ones taking out, what is the problem? Due to inflation, and the rising cost of healthcare, the money that was originally placed in these trust funds will not cover the cost of a modern day retiree (Penny). So the government solution was to use the trust fund money that the current workers are paying in. There are currently 3 ½ workers paying in, for every existing retiree (Penny). By 2030 however, the baby boomer generation (which is twice as large as the current generation) will be completely retired; and actuaries say that when that happens there will only be 2 workers for every retiree (Penny). The amount being paid out will significantly overwhelm the trust funds.
The solutions are not politically popular. Fixing this problem in its current state, without changing the system, will require FICA tax hikes - from 12.4% to 14.1% (Altman), cuts in other government programs, and/or borrowing money (Penny). Raising the retirement age from the current 67 to 68, 69, or even 70, is suggested by actuaries to be one of the easiest changes to pass, and will help as part of a package deal to keep the system from imploding. This is not totally unjustified, as the life expectancy has been increasing disproportionately from the retirement age.
For the past 15 years, the amount of money taken in has not been enough to cover the amount being taken out (DeWitt). All solutions other than an overhaul of the Social Security program will be like using duct tape – a temporary fix. George W. Bush has offered a program that will allow people to divert portions of their Social Security taxes in to private accounts for investment in stocks and bonds (Grier). This change alone would not repair the problem, but combined with a reduction in benefits and a change in the retirement age, would help bring Social Security Trust Funds back in to the black (Grier).
Since this is an election year, I feel it is important to note the stances of our two major political candidates as well. Senator Obama of the Democrats is strongly against establishing private accounts, citing that if an investment were to go awry, it could be worse than what would happen if the government were to continue holding on to it (Miller). He also opposes raising the minimum retirement age, as well as reducing the paid out benefits (Meckler). Obama states that a new tax of 2%-4% on those earning more that $250,000 a year will help compensate for Social Security losses. I could find no evidence supporting that this would be enough change. Senator McCain of the Republicans is convinced that the path to Social Security prosperity is with Bush’s plan to allow private investments (Meckler). He notes that increasing the retirement age and lowering the amount of benefits allowable would permit the system to work without raising taxes (Miller).
Personally, I don’t believe that any of these plans is the best course of action. I think three things need to happen to solve all future Social Security calamities. One, Congress should subject at minimum 90% of aggregated wages across the nation to be eligible for taxation in to the Social Security fund (Altman). This is a modest tax increase of 6% that could be phased in over the next 4 years, would not hurt the middle class, minimally affects the upper class, and would bring in billions of dollars of revenue (Altman). Two, allow private investments in long-term government bonds. Lastly, and the most radical, make paying in to Social Security optional. Many people do not want to pay in to a system that they can only collect on when they are 67 years old; and even then, only collect a slow percentage of what they originally paid Allow people to do what they want with their money. This can stimulate the economy, and remove millions of retirees and their beneficiaries from the government payroll.
Works Cited
Altman, Nancy. 2008. The Battle for Social Security. Los Angeles Times April, 9. http://www.latimes.com/news/opinion/sunday/commentary/la-oe-altman9apr09,0,3295623.story
DeWitt, Larry. Social Security Act and its Development. March 2003. http://www.socialsecurity.gov/history/briefhistory3.html
Grier, Peter. 2005. Social Security's Battle Over Values. Christian Science Monitor January, 12. http://www.csmonitor.com/2005/0112/p01s03-uspo.html
Meckler, Laura. 2008. Social Security and the Candidates. Wall Street Journal September. <http://online.wsj.com/article/SB122074594873607453.html?mod=relevancy>
Miller, Jim. 2008. Where the Presidential Candidates Stand on Social Security and Medicare. The Observer October, 2. http://www.observernews.net/artman2/publish/Savvy_Senior_33/Where_the_Presidential_Candidates_Stand_on_Social_Security_and_Medicare_printer.shtml
Penny, Tim. 2004. Social Security Needs Long-term Overhaul, not Campaign Slogans. Christian Science Monitor March, 15. http://www.csmonitor.com/2004/0315/p09s02-coop.html
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