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Social Security Reform

Social Security Reform


Social Security reform plays a central role in politics today. Although the Social Security system works for Americans for nearly 70 years, the system has some evident flaws. Since the Baby Boomer generation has much larger size, Generation X does not have an opportunity to support all of the retiring Baby Boomers. The American Social Security system needs reconstruction in order to pay benefits to retiring Baby Boomers.
The history of Social Security dates back to 1935. At this time President Roosevelt signs the Social Security Act. Because the Great Depression causes a 25 percent unemployment rate, President Roosevelt calls for a "legislative safety net" to protect "every man, woman, and child" (Whiteman, 2001). In 1934, President Roosevelt sets up a committee to create a plan for economic security. By 1939 not only workers in commerce and industry, but also dependents and survivors use Social Security system (Whiteman, 2001). Payroll taxes equal only two percent in 1939 and do not rise to three percent until 1950 (Quadagno, 1988). Only in 1956 disabled workers begin to receive Social Security (Quadagno, 1988). When Social Security appears in use, it grants benefits to about 60 percent of the American work force. Today, about 95 percent of all retired workers receive Social Security benefits (Kingston and Schulz, 1997). The Social Security program provides benefits for retired workers of the age of at least 65 years old (Kingston and Schulz, 1997). This program also provides death benefits and disability insurance to survivors. (Gramlich, 1998)

According to the Mind Connection web site, "The [Social Security] system does more than provide a base income for the retired workers. It purposefully redistributes wealth from productive members of society to those who are less productive (Quadagno, 1988). The Social Security has a pay-as-you-go system (Kingston and Schulz, 1997). The retired workers immediately receive the money paid into the Social Security system. There does not exist any specific Social Security fund (Kingston and Schulz, 1997). According to the pay-as-you-go system implemented for several generations of retired workers they receive money from those people who work. President Roosevelt sets the system up this way because he lacks money to start off with (Kingston and Schulz, 1997). The system works according to the following concept. 69 percent of the taxes go to a trust fund to pay for retirement and survivor benefits, 19 percent goes to a trust fund to pay for Medicare benefits, and 12 percent goes to a trust fund to pay for disability benefits (Gramlich, 1998).
Still, the current Social Security system faces many problems. Since the Baby Boomer generation retires in the near future and the life span of Americans increases, working people have no opportunity to support all the retired Baby Boomers (Kingston and Schulz, 1997). Even the government's predictions that the economy starts to grow faster with wages rising, unemployment going down, life expectancies reducing, fertility rates increasing, and fewer workers becoming disabled, create a four-year shortfall of the Social Security benefits(Gramlich, 1998). The Social Security system also fails since the government borrows money from the Social Security fund. This in turn results in a false government surplus (Whiteman, 2001).

Retiring Americans have Social Security as a reliable source of income for nearly 70 years. However, with the large Baby Boomer population, the Social Security system needs serious reconstruction in order not to fail. The government has to change the system so that the younger generation had no sufferings from severe tax increases. In current situation Baby Boomers have no opportunities to retire when planned and receive large benefits. In order to create a fair retirement plan our Social Security system needs to include privatization or choice of privatization. Thus, Social Security needs immediate reconstruction.




Bibliography:

1. Achenbaum, W. A.Social Security: Visions and Revisions, 1988.
2. Quadagno, J. The Transformation of Old Age Security, 1988.
3. Gramlich, E. M. Is it Time to Reform Social Security? Ann Arbor: University of Michigan Press, 1998.
4. Kingston, E. R. and Schulz, J. H. (Eds.) Social Security in the 21st Century. New York: Oxford University Press, 1997.
5. Whiteman, V. Social security. New York: Allyn and Bacon, 2001.

Posted by: Anastasia T. Ray

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