Essay About Social Security And Government Accounting

Should Social Security Be Privatized?
Essay title: Should Social Security Be Privatized?
Should Social Security be Privatized?
Many people dont 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 todays 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
scheme.”
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 cant make
that decision and government can do it better. The result is a bankrupt
Social Security System.”
These economists believe that by investing in the private market,
someone currently entering the labor force and retiring at age 65 can
expect to receive an inflation adjusted retirement benefit from 1.5 to 5.5
times the current social security benefit.
Increasing life expectancy and decreasing birth rates have combined to
create the crisis the system is now facing. For example, in 1950 there
were 16 workers for every social security retiree, while presently there
are only 3.3 workers for every retired worker drawing benefits. Estimates
are that by 2030 there will be fewer than two workers for every retiree.
Privatizing social security sounds extreme, but it has been done
successfully in other countries like Chile. Jose Pinera, who was Chiles
minister of labor, privatized the state pension system in 1981. It is now
giving