Social Security Essay Research Paper Social Security

Social Security Essay, Research Paper

Social Security is a hot topic of debate today, since most American’s believe

that the system is near collapse. The trust fund that Americans have been paying

into for Social Security is likely to dry up in 2029 due to the large number of

baby boomers heading into retirement. Franklin Roosevelt set up Social security

to help the people that had worked and Struggled all their lives in honest toil.

Social security was set up to accomplish two main goals. The first goal of

Social Security is to act as a disability or life insurance policy that protects

almost all Americans. Currently, there are seven million survivors of deceased

workers and four million disabled Americans that receive income support from

Social Security. The second goal is to provide lifetime retirement benefits that

rise with inflation. Social Security payments for retirees are needed to keep

half of the elderly Americans above the poverty line. A large number of baby

boomers believe that they won’t see a dime’s worth of Social Security benefits,

and most younger people assume that once they have reached retirement the

program will be gone. There have been many proposed solutions to the Social

Security problem. A first possible solution is to dramatically change the Social

Security Payroll Tax. Another proposal is to change amount of benefits of the

provided by Social Security. A third reform proposal includes investing Social

Security money in stocks either by the government investing the money or by

setting up mandatory IRA investing. Another major development in the future of

Social Security is the recent proposals made by President Clinton’s Advisory

Committee on Social Security. In January of this year the Advisory Committee on

Social Security presented a report of strategies to save Social Security.

Shortly after the 261 page report was released there was a huge increase of

debates and criticism over the future of Social Security. The issue facing

American today is when and how to reform Social Security. Although the American

public and political groups are unwilling to accept the burdens of social

security reform, extensive reform is needed soon to continue paying the current

benefits to American citizens. A change in the Social Security tax is a possible

factor of reform to bring the Social Security program back on track. Currently

the Social Security tax is a flat-rate tax paid on all employment earnings up to

a specified limit. Due to inflation the limit is increased every year currently

it is just over $60,000. This tax is much harder on a lower income individual

because the higher income individual is only taxed on their income that is below

a certain amount set every year. It has been proposed that if the limit on the

payroll tax were lifted, two-thirds of the projected Social Security deficit

would be eliminated. Once the limit on the payroll tax is lifted a rise in the

tax rate of the employers and the employees by 1.1% is predicted to be enough to

solve Social Security’s problems. This is assuming that two evasive actions take

place. First the government will have to keep its hands of this extra tax

revenue gained by the tax increases. Second the proposed solution will only have

a chance to work if it is started immediately while the baby boomers are still

able to add a little more cash to the trust fund for there own retirement. This

solution isn’t likely to be implemented by today’s political system. The

advisory council on Social Security would not pursue the lift of the limit

because the support of the wealthy voters for Social Security reform would be

lost. Americans are also weary of Social Security tax increases. The middle and

lower class voters would also not support a Social Security tax increase. A

recent poll by Money magazine found that 70% of the public is unwilling to pay

more tax than the current 6.2% rate. Another proposed solution to Social

Security’s problems is a to decrease the amount of benefits received by

retirees. The first way to reduce the amount of benefits that are being paid out

is to adjust the CPI. Sen. Daniel Monynihan of New York (Dem.) has proposed that

a 1.1% cut in annual cost-of-living adjustments for pensioners would be a

reasonable solution to Social Securities problems. The adjustment of the CPI

would reflect the belief by many economists that the CPI overstates current

inflation. He claims that this would almost completely solve the problems in the

Social Security program by insuring that the expected inflow of funds would

equal the expected outflow of benefits for future decades. An alternate approach

to lowering the amount of paid benefits is to raise the retirement age.

Currently the retirement age is expected to rise from 65 to 67 in 2037. A recent

poll taken by Money magazine found that 70% were in favor of raising the