Ss Probl Essay, Research Paper

This paper is about our countries Social Security problem

The Presidential election was in November 2000 and the question that

many of Americans had on their mind is what are you going to about the Social

Security crisis? This question has our nation divided between generations. The elder

people of our nation (ages 50 and up) feel confident that Social Security will be there for

them and that it should be left alone. On the other hand the Baby Boomers (ages 31-49)

and Generation X (ages 18-30) lack this confidence fearing that they will never receive

Social Security, and the money they put in would be a waste. Many politicians are afraid

to touch this issue because the elder still make a large number of the voting block.

Speaking as a member of Generation X it is our duty to vote for change in Social

Security to ensure we will have something to look forward to when we retire. We can

not wait any longer to defeat this crisis.

The Social Security crisis is the threat of the Social Security system going bankrupt.

Well it’s more than just a threat it’s the reality. The common belief is that Social Security

is a saving fund where the government takes a certain percentage out of our weekly

pay. Then that money is put into a savings fund where it is held until we retire. When

we retire the money is returned to us in monthly checks plus the interest. This is where

we are wrong. Social Security is a pay-as-you-go system where the current workforce

pays for the present retirees, and then when they retire they will depend on the younger

workforce to pay for them and so on and so on. Which is fine when you always have

more workers then retirees. This is the problem the government will face when the

Baby Boomers retire in the year 2010. In 1950 there were 7.2 workers for each retiree.

Today there are 3.2 workers for every retiree, an by the year 2020 there will only be 2.4

or less for each retiree. By the year 2010-2015 Social Security is projected by the

Government to pay out more money than it could take in. Since the current Social

Security took in a surplus of $60 billion in the last few years with a projected total to be around $5 trillion they will have enough money to last another 10 years or so. All in all experts

expect that Social Security will have spent every penny it has by the year 2030.

In actuality the bankruptcy will probably happen about ten years sooner. See there is a

catch to their surplus that not too many people know about. The surplus is put in to

government bonds so that government can use that money to support other programs

and to pay of other debts. Also when the government figures out the national debt they

subtract that surplus to make the national debt look smaller.

The problem will come when Social Security needs that surplus to support its program and the government has to pay of these bonds. The United States will go further into debt having to severely raise taxes and drastically cut government programs. Or they won’t pay the their debt

and the American retirees will be out trillions of dollars.

There are also two other contradicting factors that boggle the minds of almost all

Americans. First as we all know the life expectancy of people is getting larger. In 1940

a man at the age of 65 could expect to live another 13 years; today they could expect to

live another 17 years. The government figured by the year 2000 many people will have

collected half as long as they have worked. The twisted part of the whole thing is that

citizens are beginning retire and collect benefits earlier then ever. More than half of all

retirees begin collecting benefits before they are 65. The average at which people began

collecting went from 68.7 in 1950 to 63.7 in 1991.

The Government has tried to institute new polices and reform old ones, but they are

falling short over the long run. In 1993 the President pushed a tax that stated 85% of

Social Security became taxable income to people with substantial amount of other

retirement savings such as pensions and personal savings. What they are telling is if you

are one the smart people in America that pre-planned your retirement with other savings

and not just Social Security they can put heavy taxes on your Social Security checks. Now

you would have to pay twice once whiled you worked and again when you retire. Its

has if you are being punished for doing the right thing.

Another tactic many government official are trying to push is raising the payroll tax 2%.

The current tax is 12.4%, 6.2% from the employee and 6.2% from the employer. This

would aid us temporarily, but would do nothing to stop the long-term problem. “To

maintain the systems solvency, taxes would have to be increased, or benefits cut,

between one-half and 1 percent every 10 years” If you do the math you

will realize by the time Generation X retires the payroll tax needed to keep Social

Security going will have almost doubled. The higher tax rates will start some sort of

recession with people getting far less out of their paychecks to live on. Anyway who

wants pay more taxes. They would also like to cut many of the benefits that Social

Security offers, but why should we pay more and receive less.

The U.S. government has dug itself into a whole waiting to the last minute to save

Social Security. When by simple demographics years ago would have showed the same

problem. They have to get it out of their heads that Social Security is such a great

system that can be saved. Well it was great a time, but as we know times change.

The only way to save Social Security is to completely overhaul it. With the best way to

overhaul is by the introduction of partially privatizing Social Security.

It helps bring Chile social security system out of bankruptcy. In 1981 Chile privatized it

social security by requiring their workers to put 10% of their pretax wages in private

pension funds. The funds are carefully regulated, and workers can switch among trust

fund managers for better returns or lower costs. They also receive periodic statements.

Upon their retirement they receive their money to buy annuity. What ever is left can be

passed onto their heirs. If there isn’t enough to provide a decent living the government

steps in guaranteeing a minimum. Now Chile enjoys a high savings rate well over 20%

of their gross domestic product compared to the US’s 3.2%.

The Senators plan proposes that 2% of the 12.4% tax would be taken out and placed in private accounts set up by the government. The money would be one’s own personal account

with compound interest The Institute for Research on

Economics of Taxation (IRET) adds, “that they would not be able to touch that money

until they retiree or become disabled. The money is theirs the government would not be

allowed to touch it. If that person should die the money would be added to their estate”

The Cato Institute (a nonprofit public policy research foundation founded in 1977 whose

publication, conferences, and seminars are designed to illuminate private sector,

voluntary solutions to social and economic problems) also adds, “that those presently in

the workforce would have the option of remaining in the current Social Security system

or switching to the new private system. Those entering the workforce after the

implementation of the new private system would be required to participate in the new

system. Thus the current system would be eventually phased out”. The plan also has guidelines to problems and questions that people have or arrive.

First off people begin to question the safety of the government handling their own

personal money. It a viable question considering our national debt and the way they

spend tax money, but the there is a viable answer. If you let people drop totally out of

Social Security and have their own pension plan there would be know way for the

government to keep track and ensure that people are saving. Then when these people

begin to retire and we find out that many of them never saved any money and will have

no monthly retirement checks we will have a poverty struck elder class that the

government would have to bail out. In conclusion to ensure that everyone has money set

aside for retirement the government has to control the money.

A questions many Americans have is where do we begin? You begin with all age

groups including people in there forties and fifties. For these people who are getting close

to retirement and wouldn’t have a substantial amount saved up the government would

take the benefits earned from year to date and put them into a bond. The bound would

be put along with the 2% they begin saving. The money would earn interest together so

when these people retire they will be shore to receive the money they deserve and then

some.

The only problem the plan doesn’t solve is the problem that can’t be solved. This is how

do you support the people already collecting their Social Security? Social Security will

have to use their surplus, but as stated the government has already used this money. In

order for people to get the money they deserve the government will have to cut their

loses and pay back their bonds.

It will severely hurt the budget, but what choice is there. No plan would have been able to solve this dilemma, it would have happened anyway. What more can you say? The time to change the Social Security system has come. The program considered by many to the prominent leg of the three-legged retirement stool, along with pensions and personal savings, is growing week. The result for retirees almost certainly will mean that the one leg of three legged retirement stool is going to get wobblier. The government is going to have to act now to prepare for the future because if they wait any longer the leg mine as well just fall off.

The government is there for the people and I’m sure they don’t want the suffering of

Generation X retirees on their conscious. I don’t want this to happen. I would like to

work hard in my life looking forward to luxury of retirement at the end, and as a citizen

of this country I should be given that right. If the system goes bankrupt that luxury just

maybe taken away.

The only way to ensure that Social Security will be around for the young people of this

country is to instate the partially privatization plan. Years ago it was considered to

radical of an idea, but now it seems that there really no other choice. It’s the only plan

that shows some hard facts to support it goals unlike many of the other plans by

Congress or President. You have read the argument and you now the facts I don’t

know how anyone could think otherwise. It took Chile out of bankruptcy it will do the

same for us to. What do we have to lose?

Bibliography

http://www.ncpa.org/ba/ba267.html Idea House, NCPA POLICY a 12- STEP PLANS FOR SOCIAL SECURITY REFORM JUNE 4, 1998

http://www.socialsecurity.org/

March 9, 2001, Aging Not Just an American Problem

http://www.findarticles.com/m1061/2_107/53914151/p1/article.jhtml

Fixing Social Security. Author/s: Amity ShlaesIssue: Feb, 1999http://www.concordcoalition.org/socialsecurity/000713policystatement.htm, CONCORD COALITION URGES SENATE TO RETAIN 1993 SOCIAL SECURITY TAX POLICY STATEMENTThursday, July 13, 2000