Economic Feasibility of the Social Security System

In “The Social Security Problem”, Max Moore discusses the fearful reality of Social Security running out of funds. He states that the U.S. Department of the Treasury predicts that Social Security funds will run out by 2041 and action must be taken in order to prevent this (134). In his essay, he explains how the depletion of Social Security funds are a result from a decreasing retirement age, decreasing fertility rate, and shrinking work force. These things contribute to an increased population relying on Social Security, an increased population of the elderly, and a decreased ratio of workers paying for those beneficiaries (135). Moore explains the proposal of George W. Bush to make Social Security partially privatized; allowing young workers to invest their retirement savings into their own account. This would result in people putting their retirement on the line in

Currently, the United States is contemplating at a forthcoming Social Security crisis. If changes are not forged, the Social Security system will not be able to keep up with the demanded payouts and is estimated to empty the trust fund around the year 2037. In this paper I will review a brief history of the Social Security program, touch upon the eligibility requirements, discuss what economists believe about the future of the Social Security Program, and finally state the Pros and Cons to the proposed raising of the age requirement for minimum payout.

We could save the Social Security Program, if we engaged in some simple changes. There could be some slight changes in the retirement age area and in the Taxes area. According to the Article "Modest Changes Could save Social Security Program" written by Stephen Ohlemacher, he clearly stated that employees are 100% grantee for an full retirement benefit package once the hit the age of sixty-six. It will later rises to the age of sixty-seven for elders that was born in 1960 or later. In addition, employees are able to receive an early retirement at the age of sixty-two, although their retirement benefits would have been reduced (Ohlemacher). Some changes we can apply to the retirement age, is that we could slightly increase the retirement age until it reaches seventy in the year 2027, which would eliminate some shortfall in the program. Secondly, there should be a three-year increase in the early retirement age,

Debates over Social Security have been ongoing since its inception in 1935 until today. The trend seems to be toward an increasing percentage of the American public, across party and demographic lines, in favor of strengthening Social Security funding, and a willingness to pay more to preserve and even improve benefits. However, the trend towards privatization of Social Security is also on the rise. What is not clear is whether Americans favor privatization because of fears that the Social Security Trust Fund is living on borrowed time.

The social security system, established by the federal government in 1935; is currently one of the most costly items in the federal budget. The purpose of the system is to provide for Federal old-age benefits, and to enable social insurance and public assistance. The proposal of moving to an entirely new system would give the people living in the United States their own individual authority of controlling their own investments. If social security does not become privatized; the system itself will turn unsustainable, the retired and disabled will not fully receive their earnings; and the people of the United States will continue to have no control over their investments.

After its passage on August 14, 1935, Franklin Delano Roosevelt regarded the Social Security Act as “a cornerstone in a structure which is being built but is by no means completed” but whose purpose is to “take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness.” The very opposite of soundness, however, was achieved. Today, looming deficits and abuse of the program have left it the focus of many debates. At their conclusion, the discussions generally only point toward making it more difficult to receive the money you put in, back, and raising taxes drastically on those still working to provide benefits for the disproportionate amount of retirees. Its problems are vast, but a permanent solution has yet to be decided. Far less discussed, however, is if the program itself is worth saving. Because of

Social Security is facing pressure to lower benefits… due to longer life-spans, an overall population increase …the Baby Boomers beginning to reach retirement age, and the increase in the number of people receiving Social Security and Medicare benefits. If the system continues as-is, the total benefits will eventually surpass the amount of taxes paid into the system by younger workers. If the system is not altered at some point full benefits will not be paid as promised. (13)

(FDR) stated The Social Security Act was for (workers in business and in industry.”) And the job categories that were not covered by that of (business and industry) were workers in agricultural labor, domestic service, teachers, nurses, just to name a few. Basically the employment definitions under (FDR) reflected the typical white male categories and configurations for the 1950’s era. So, consequently most women and minorities were excluded from the benefits of unemployment insurance and old age pensions that Social Security presented and they still continued to suffer and endure

Social Security came about when Roosevelt wanted workers and consumers to have more independence to back their own interests on the market in order to support his New Deal’s countervailing powers. While the initial plan was to use the respective American’s contribution and a portion of the general revenues of the U.S Treasury, Roosevelt opted for a more “self-financing plan under which old-age pensions worked on the model of insurance premiums” (Rauchway 98). When the worker would retire from old age, they would be able to draw their pensions without any governmental intervention. This would provide minimal amount of protection to average Americans, but unfortunately it could not be applied to all workers due to its restrained financial limits and late addition compared to other

Social Security, as we know it today, began as the “Economic Security Act” in 1935, and it wasn’t until later that activist Abraham Epstein coined the phrase “Social Security”. In its earliest form, the government paid benefits only to the primary worker in the household, but in 1939 the act was rewritten to include survivor’s benefits for spouses and children. The very first recipient of social security received 17 cents, paid to him in January 1937. The first person to receive monthly benefits began to do so in 1940. In the three prior years, this person had contributed a total of $24.75. By the time of her death in 1975 (at the age of 100) she had collected $22,889 (http://people.howstuffworks.com/social-security-number6.htm). By contrast, the first person to ever be issued a social security number (in 1936) died in 1974 at the age of 61 without ever receiving a single social security payment (however, his widow did). This is the “math” of social security and it doesn’t always add up in a logical way.

     It is not difficult to understand why Social Security is our country’s most popular government program. Prior to its inception in the 1930’s, more than half the nation’s elderly lived in poverty. The program was designed as a social (old-age) insurance plan which provides a guaranteed income to retired and disabled workers whose loss of wages promises an uncertain economic future. I emphasize the word guaranteed, as this is the issue in contention when considering reform propositions.

Following his election in 1933, Franklin Delano Roosevelt signed into law something radical for its time: The Social Security Act. This act changed America’s economic landscape completely, by minimizing the long-existing problem of retirees and the elderly living below the poverty line. Simply put, Social Security is a way to guarantee that older people, namely retirees, have at least a minimal source of income in their later years, by providing around 40 percent of the average person’s yearly income. Social Security both is and functions as a defined benefit plan, wherein benefits are decided by the amount of quarters than a person works, and are decided by a sliding scale with caps (United States). As directed by the sliding scale, per-dollar benefits are much higher for people of lower incomes, while overall-benefit amounts are higher for those of higher incomes (Benefit). Both the scale and the caps are adjusted yearly according to inflation. Social Security accumulates its funds into a trust fund, and puts excess money into investments in US Treasury Securities, where interest is accumulated and put back into the fund. Social Security’s benefits are not affected by the investments. Since 1982, the Social Security trust fund has experienced a net-increase and in 2015, the asset reserves sit at 2.8 trillion dollars (Financial). Despite this, the misinformed often point their fingers at the trust fund and claim that it is on its last leg, and will soon run out. Every few

Social Security serves as an important source of income for the elderly and the disabled in the United States. On the other hand, there are some shortcomings of social security privatization as well. First, it is a very expensive procedure. Under the Reagan administration, the government tried to privatize the social security program, but it failed to do so being left with no other option than to increase the taxes as it did not work the way it was expected. If to take the current government, the social security system continues to be beneficial for retired individuals, but the estimated costs for its privatization are nearly two trillion dollars, which is too expensive for the current administration. Furthermore, the system fails to cover the retirement funds of the elderly. Although it is planned to privatize social security program, this is associated with some kind of investment, which is always risky. When individuals think of their retirement opportunities, they might want to have some guarantees, which are not given by the social security program. What is more, the privatization of social security is likely to contribute to the spread of bureaucracy. In fact, if social security is privatized, there would be needed a totally new administrative body required for distributing benefits that the retired individuals have rights to receive. A new system of

The Social Security System is in need of a new reform; our current system was not designed for the age stratification we have at this time. The U.S. Social Security Administration Office of Policy states, “The original Social Security Act, signed into law on August 14, 1935, grew out of the work of the Committee on Economic Security, a cabinet-level group appointed by President Franklin D. Roosevelt just one year earlier. The Act created several programs that, even today, form the basis for the government's role in providing income security, specifically, the old-age insurance, unemployment insurance, and Aid to Families with Dependent Children (AFDC) programs.” Social Security was modeled to aid the elderly citizens, however during the

(5) Currently SS funds are collected and distributed on a pay - as - you -go (PAYG) system in which Social Security taxes from individuals are immediately distributed by the means of the SS Administration as it sees best fit. This means that taxes collected are not reserved for the individual who has paid them: in Rose 2 the current state he or she must rely on those persons paying SS taxes during the time of their retirement (Becker). For a number of these characteristics and future issues, the Social Security System must be reformed or completely abolished to meet the needs of tomorrow. The leading concerns of Social Security that merits the immediate initiation of reform are the demographic and economic circumstances in the coming century. Even though "forecasting the economy and budget over such a long period is uncertain" there remain many "certainties" regarding problems facing Social Security in the first half of the 21st century (OMB, Budget Perspectives 23). The Federal Government's responsibilities extend well beyond "the five- or six-year window" that has restricted the focus of recent budget analysis and debate. Of these "certainties" are the mounting challenges posed from the baby-boomer generation. This generation, born in the years after World War II, is aging