Many people don’t understand how the Social Security system really
works. There are no separate Social Security "accounts" set up for each
taxpayer to which he contributes his Social Security "tax" each year. Many
people believe these accounts exist, that the money they pay into their
accounts grows each year until retirement, and when they retire they get
back what they paid in with interest. This is not true. Most people are
unaware of the fact that our current Social Security system is a
"pay-as-you-go" program, which means that the revenue the federal
government raises each tax year for Social Security benefits is paid out
that same year to beneficiaries.
Many economists believe that our Social Security system is in need of a
major overhaul if today's workers are to receive future benefits.
Thomas R. Saving, Director of the Private Enterprise Research Center at
Texas A&M University says, "What is wrong is that the Social Security
system was never set up to be a sound investment-based retirement system."
Karl Borden, professor of financial economics at the University of
Nebraska recently wrote, "Social Security is an unfunded pay-as-you-go
system, fundamentally flawed and analogous in design to illegal pyramid
schemes. Government accounting creates the illusion of a trust fund, but,
in fact, excess receipts are spent immediately."
Robert M. Ball, former commissioner of Social Security said, "Some of
the trust fund money should be put into the stock market. I want to do it
to get a better return for the Social Security system. Historically,
long-term government bonds have had a real return, after inflation, of 2.3
percent a year, compared with 6.3 percent for stocks."
Paul W. Boltz, economist for the T. Rowe Price mutual fund said, "When
we examine the pending financial crisis of our Social Security system, we
find, in effect, the characteristics of a government sponsored Ponzi-type
Michael H. Cosgrove, of the Dallas-based newsletter, The Econoclast
says, "People need to take the responsibility of investing their own funds
for their retirement. The Social Security system assumes people can't make
that decision and government can do it better. The result is a bankrupt
Social Security System."
These economists believe that by investing ...
... middle of paper ...
...oss would have to be made up either by hiking taxes, increasing
borrowing or drastically cutting benefits to current retirees. The
present Social Security system faces a long-term shortfall of between 1
percent and 4 percent of total payroll, depending on your projections of
future economic growth. But the existing pay-as-you-go system could be
rendered solvent by a judicious combination of increasing the retirement
age by two or three years and slightly
Also there is the question of whether to privatize the whole system, or
whether to add a second tier. We might keep the basic system but
supplement it with self-directed IRA-like funds. The basic tier would be
redistributive and pay-as-you-go. The supplementary layer would be private
and based on individual contributions.
A further question is who bears the risk when investments go sour.
There is no such risk under the current system. The stock market looks
like a great retirement vehicle in the 1990’s, but it wasn't so reliable
in the 1970s and 1930s. The program was deliberately designed as a social
guarantee of retirement income, not a system of government-mandated
Need Writing Help?
Get feedback on grammar, clarity, concision and logic instantly.Check your paper »
- The Privatization of Social Security Many people don’t understand how the Social Security system really works. There are no separate Social Security "accounts" set up for each taxpayer to which he contributes his Social Security "tax" each year. Many people believe these accounts exist, that the money they pay into their accounts grows each year until retirement, and when they retire they get back what they paid in with interest. This is not true. Most people are unaware of the fact that our current Social Security system is a "pay-as-you-go" program, which means that the revenue the federal government raises each tax year for Social Security benefits is paid out that same year to benef... [tags: Social Security Privacy Retirement Essays]
2005 words (5.7 pages)
- It’s a matter of either losing all that you have worked for and live in poverty when retired or allowing your hard earned dollars to grow and have a secure comfortable retirement. I believe that Social Security is a doomed Government Program and that Privatization of Social Security would allow for a more secure retirement plan for all Americans. Social Security was first created to help aging Americans in their senior years so they would not end up in poverty. Social Security was signed in as law on August 14, 1935 by President Franklin D.... [tags: retirement, poverty, tax revenue, sustainability]
1325 words (3.8 pages)
- Our nation is on the verge of a crisis. The money that is put aside for Social Security and the benefit of our elders is drying up. Because of this, our president has announced in his State of the Union address that Social Security should be privatized. The benefits of this plan, according to Mr. President, would allow the people to take the money out of social security, and place it in their own investments, thus alleviating the pressure from the government. Democrats are deeply troubled by this proposal and claim that this course of action would be disastrous for seniors.... [tags: government, politics]
910 words (2.6 pages)
- Privatization of Social Security When people lease a car, they pay, knowing that they get something in return. When people pay taxes, they pay, knowing it's the law, and many get some money back. What do people think when they pay social security. Many young people see Social Security as something they are paying but will never get anything in return. What is another way for retirement for the United States. A major topic of retirement talk today often ends up with the new idea of Privatization.... [tags: Exploratory Essays Research Papers]
1392 words (4 pages)
- Privatization of Social Security Defenders of Social Security point out that without it, nearly four million more older Americans would have been counted as poor during 1997. But analysts say that living above the official poverty income level in retirement years is not all that difficult even for those with low incomes during their working years. All an elderly person had to earn in 1997 to be above the poverty threshold for persons 65 or older was $7,698. To receive that amount of income, all an elderly person had to have at age 67 is $192,450 in government bonds assuming current interest rates and that the individual's net worth is protected from the erosion of inflation.... [tags: Papers]
591 words (1.7 pages)
- ... Instead, Social Security recipients would have money go into a private account which the account holder would have control over. In 2000 Bush pushed for privatization, this plan would give young workers the choice to create a government-supervised private account which included bonds, stocks, and other financial holdings (Fox News 2008). This started the idea of having ownership over a private account that was personally controlled. Account holders were directly receiving the money they invested in Social Security, and have the option to spend the money as they see fit.... [tags: retiree funds]
834 words (2.4 pages)
- Social Security Privatization and its Impact on Society II. Introduction Each day that goes by there is a politician or journalist arguing about social security, the plans for saving it, and the repercussions of said plans. These topics are constantly flowing through newspapers, internet sites, online journals, and economic journals as well as many other forms of media. The major topic of discussion is the plan put forth by the current administration to reform social security, or more specifically, privatize it.... [tags: Management]
2795 words (8 pages)
- ... Therefore, inferring from the 2013 Trustees Report this change is possibly the key component of any frame work to changing social security (The Board of Trustees, 2013). Proponents of social security privatization have built their argument around the premise the government grossly mismanages the fund, therefore individuals do not get the maximum return on their investment (Gokhale, 2013). They argue one of the key factors for government to keep social security in its current form is its ability to inflate the value of public savings and deflate the value of public debt (Svihula, 2008).... [tags: employment, policy makers, privatization]
1395 words (4 pages)
- There are a few major current concerns that was brought about the future “solvency” of Social Security. People are scared because of the projections of the trust fund will being depleted by 2040. This means that there will be a scare amount of income going in to the trust fund; as a result, people will not be able to receive the full amount of benefits that they were promised (Quadagno: 349). One reason they are scared is because that the Baby Boom generation is aging (Quadagno: 334). The Baby Boom generation make up the majority of the population and have the most influence on what is happening in the United States.... [tags: Retirement, Pension, Payroll tax, Privatization]
1504 words (4.3 pages)
- When we hear about social security we think of that number every adult and college teen should memorize as they venture on the real world. We don’t think any more of it and most people don’t know about the benefits of such a number and having one. Some migrants from other countries dream of being in America and having a social security so that they may reap the benefits of having such a number and becoming a US citizen, while most every day people just assume it’s a number. What social security is would be a program created back in 1935 and it was used to provide old age, disability, and survivors insurance and on top of that, a supplemental security income which is a income for the elderly... [tags: United States, privatization, retirement, stocks]
1203 words (3.4 pages)