Social Security Case Study

In the United States of America, there exists a two-party system comprised of the U.S. Democratic Party and the U.S. Republican Party. Although these two parties have become somewhat neutral on many issues of national policy, each party has a unique perspective of how the ever-looming Social Security problem should be alleviated. First, the U.S. Democratic Party believes that in order to fix the Social Security problem, pension plans must be reformed and savings incentives must be expanded nationwide. Also, the U.S. Democratic Party has persistently argued against the recent idea of privatizing Social Security. On the other hand, the U.S. Republican Party believes the Social Security system is in need of much more drastic change. According to statistics provided by the official website of the Republican National Committee, "Under the current system, today's 30-year-old worker will face a 26% benefit cut when he or she reaches normal retirement age." Also according to the RNC website, "By 2041, when workers in their mid-20s begin to retire, the system will be bankrupt - unless we act now to save it." In order to fix this troubled system, the U.S. Republican Party believes that the only answer is privatization.

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

“pay as you go” system. This changing of the original system called for younger citizens

Our nation ensures social welfare through Social Security. However, the United States cannot ensure the welfare of its own welfare system. To save Social Security, Americans in general do not favor an increase in the payroll tax, a cut in benefits or an increase in the retirement age. Furthermore, Americans are relying upon Social Security as their sole source of income at increasingly alarming rates. Social Security is intended to supplement retiree income, not account for 100% of it. Through elimination of the potential options, that leaves one necessary action: invest the Social Security trust fund in the stock market.

It will leave my generation, our children and grandchildren, with back breaking taxes, which will have its own domino effect of causing ever increasing inflation (Trust). To be eligible for Social Security, which once was at age sixty-two for full benefits and now is age sixty-six and soon will be sixty-seven and as the years go by who knows what the retirement age will be for us (SSA). Social Security is paid through payroll taxes which pay for the benefits of today’s retirees (SSA). Money in excess of what is needed to pay today’s benefits is invested in special treasury bonds. This system works well when there is a rather high ratio of workers to beneficiaries or retirees. For instance, in 1960, there were 5.1 workers for every Social Security recipient or retiree, but the demographics are changing because Americans are living longer and are having fewer children (Crane). Today, there are 3.3 workers paying Social Security payroll taxes for every one person collecting Social Security benefits (Crane). That number will drop to 2 to 1 in less than forty years (Crane). At this ratio there will not be enough workers to pay scheduled benefits at currents tax rates. The last reason why social

For many years the social security program has been operating successfully. In recent times however, it is becoming apparent to some that social security is in need of reform. Their argument is that with the amount of people getting older in the next couple of decades, there will not be enough money left in the social security reserves to pay for everyone who needs it. That is why the idea of separating social security up into private funds has been brought to the attention of the American citizens. This idea of reform has been around for quite a long time; however it has been pushed on by pro reform supporters more in recent times because they think it is necessary for the

Many pros and cons arise with this option of Social Security reform. With other options the government takes the risk, but with privatization it is a personal risk. When account holders reach retirement they are able to withdraw from the account and use the money as they see fit. Government does not control the amount or what the account holders use the money for, leaving recipients with the choice to spend as much of the money as they wish and as quickly as they want. With no control over the usage of savings, this defeats the purpose of Social Security as a “safety net”. The biggest downfall to this reform is the transition period. Not only would the transition be a high cost, but those that are closest to retirement could be left with smaller savings in their private account. If young workers create private accounts then they are not supporting current retirees, and they are not receiving what they should be (Mitchell 2011). Another concern is that not all recipients will end up with a fair amount of earnings in their account. Such

Privatization of the United States Social Security system could actual be more efficient than the publicly operated system. Chile switched its public retirement system to a privately ran system to a less expensive system that has been fairly successful (Bosworth). Social Security privatization is overall a better option because it will increase the rate of the returns of its recipients. American 401K invested in US treasury bonds received between a 1.9% to 4.2% rates of returns while the average person born in 2004 will receive a rate of return of 1.7% (Bosworth). These bond options are as stable as a regular Social Security option is because both are provided by the government but a privatized account allows workers to pick higher yielding accounts. Privatized accounts allow for workers to also invest in the stock market at a higher risk reward basis. Survivor benefits from the death of a family member who paid into Social Security received from 75% to 71.5% for at least 10 years (Survivors Planner). This is the main flaw of the current Social Security system is that the result of an early death, the worker's family is at a significant disadvantage economically as well as emotionally. This lead to the main argument brought up by Barry Bosworth chair of international economics and Gary Burtless chair of senior fellow economics that the privatization of Social Security

It will leave my generation, our children and grandchildren, with back breaking taxes, which will have its own domino effect of causing ever increasing inflation. To be eligible for Social Security, which once was at age sixty-two for full benefits and now is age sixty-six and soon will be sixty-seven and as the years go by who knows what the retirement age will be for us. Social Security is paid through payroll taxes which pay for the benefits of today’s retirees. Money in excess of what is needed to pay today’s benefits is invested in special treasury bonds. This system works well when there is a rather high ratio of workers to beneficiaries or retirees. For instance, in 1960, there were 5.1 workers for every Social Security recipient or retiree, but the demographics are changing because Americans are living longer and are having fewer children. Today, there are 3.3 workers paying Social Security payroll taxes for every one person collecting Social Security benefits. That number will drop to 2 to 1 in less than forty years. At this ratio there will not be enough workers to pay scheduled benefits at currents tax rates. The last reason why social Security is unstable is because the government does not guarantee the benefits. According

I believe our current social security system should be replaced by a mandatory private pension system. If it is not gracefully transitioned from the way it currently is then it will unfortunately disappear altogether in an abrupt fashion. A replacement will alleviate this issue and replace it with a viable option that can sustain itself.

Conversely, the current state of the social security administration has raised several concerns and led to various arguments for the privatization of social security. Several of the arguments for privatization include opportunity for greater returns, freedom to choose individual investments, reducing government oversight, inheritance of benefits, and keeping the funds from being raided by Congress or the President. While there are several reasonable points, the overall argument for social security privatization is not sufficiently strong. One of the primary arguments for the privatization of social security is that stocks and bonds earn a higher return. From these higher returns, social security would remain solvent and individuals

Surely, the confidence equipped by a privatized platform in that individuals may ascertain that the funds they pay into the system, will unequivocally be theirs to keep for retirement, is a welcome change to the current method that is rapidly dissolving, and for which many “believe Social Security will not be able to provide them with any benefits at all by the time they retire” (Background of the Issue - Privatizing Social Security)- but it doesn’t come without potential repercussions. This deregulated concept not only allows citizens to manage their own retirement funds, but it also invites negligent economic reasoning among workers- a tendency which would defeat the purpose of secure, private

     Privatization is the most controversial argument in this sector of government. Many citizens believe that they should be allowed to make investments on their own rather than having the government perform this for them. These people believe that by doing so they have more control over their future and more autonomy from the government. Furthermore, they stress that privatization will increase competition, which is the basis of our free market capitalistic society. Many other communities in accord, feel that by investing privately what they are now paying in Social Security would raise economic growth and increase retirement incomes. For the past several decades, the average yield on private stock has excited inflation by seven percent compared to treasury bonds that only exceeds inflation by 2.3 percent. Alternatively, all plans to privatize social security come with an adverse effect. Most noticeably, is the tax increases which are necessary to make

Americans will have the privilege to choose where their pension contributions are invested. Besides the freedom to choose, this will also imply that there will be more money in circulation in the economy. This would lead to increased business activities, more jobs and better wages for employees (Gokhale 2). A case in point is Chile’s private social security which saw the country’s economy grow by 40% in its first year of implementation. Additionally, researchers say that Chile’s system has greater accountability than the previous system. In this regard, it is easier to adjust for factors such as inflation and minimum wage rate. Employees are also getting more benefits under this system than in the old system. Nonetheless, there are a few who are opposed to the idea of privatizing the social security system. They say that a private pension plan cannot guarantee a certain level of returns or benefits as the government does under the voluntary system (Weller 3). However, this argument is weak considering that a private pension plan yields more returns in general despite the high risks. Also, many people are okay with the fact that they can invest their funds in a manner they deem fit.

Recently there has been an argument regarding the social security system. It has been suggested that privatizing the system would provide more benefits. Privation plans are based on a simple idea (Bosworth and Burtless). Private pension system can boost returns which would help with retirement. The private pension system is also flexible (Kimmons). By moving towards the private pension system it can boost national savings and economic growth (Bosworth and Burtless). The current social security system should be replaced by a mandatory pension system.