Social Security Reform
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Social Security:
Being a nineteen year old college student, what does Social Security have to do with you? The fact is, it has every thing to do with us as students! Shortly after President Bushs re-election, he started to put his new found political muscle into Social Security reform, declaring now is the time to act. This new reform will allow workers to withhold payroll endings and put that money into personal retirement accounts. This new plan is designed to give the American people the ability to invest their own money. So many of us less informed and younger voters might ask, why do we need this new Social Security and what is wrong with the old system? The answer is simple, we simply have too many people to support the system in its current state.
The reason I am writing this paper is so younger students who are in college, and do not have the time or simply interest in politics can know why Social Security reform is important to our generation. I feel that as students we simply are not paying enough attention to what is going on in our country. Social Security is going to have a very big impact on our lives if we dont start taking action. The fact is that the people who will be affected by this new reform the most are this generation; it is not the President or his generation of baby boomers, it is us, the young college students. If our generation is going to be affected by this new reform then dont you think we should know why we need Social Security to be reformed, and how the new system will work?
Let us start with what is wrong with the current system of Social Security. FDR created the Social Security program in 1935. It was designed to be a contributory social insurance program: if everyone puts in, everyone will receive benefits. In 1935 when the plan was created, there were forty-two workers to support every one beneficiary of Social Security. The problem is that it was created for a much smaller population, one who was able to support itself because there was enough money going into the system to put out to retired people. At the time Social Security was created, it was a good idea. Now there are only 3.3 workers supporting every Social Security beneficiary. Just three years from now, in 2008, baby boomers will begin to retire and over the next few decades, people will be living longer and the benefits will increase dramatically. By 2018, Social Security will pay out more in benefits then it collects in payroll taxes. By 2042, the trust fund will be exhausted, the taxes that the government collects will only fund seventy-three percent of the scheduled benefits. This means that today, a 30 year old worker will face a twenty seven percent benefit cut when he or she reaches the age of retirement.
How can this problem be fixed and will President Bushs new plan to reform Social Security work? The answer is yes. The problem with old the system can be fixed, and best way to fix it is though reform. President Bushs plan to reform Social Security is fairly simple; it calls for the money to be put into personal retirement accounts. This means younger workers would be given the chance to put a part of their payroll taxes in personal retirement accounts with their names on them. The key here is personal accounts would be entirely voluntary. They may put taxes in or they may keep all of them in the current system. If workers were to put their money into personal accounts, the money would go into a conservative mix of bond and stock funds that would have the opportunity to earn a higher rate of return than anything the current system could provide. An example of this is a young person who earns an average of $35,000 a year over his or her career would have nearly a quarter million dollars that would be saved in his or her own account upon retirement. This type of savings would provide a nest egg to support that workers traditional Social Security check, or they could also pass it on to his or her children. The best part about this new reform to Social Security is that it would replace the current system with real assets of ownership, something that would allow the people to watch and control.
Those with opposing argument would say there is nothing wrong with the old system and there is no reason to change it. Many economists think the trust fund will never run out. These economists believe if the economy continues to grow at the rate that it is averaging now, then the trust fund might last forever and never run out. Many of these economists say that even if the trust fund were to run out that Social Security would still be able to pay eighty percent of these benefits that have been promised. They feel the shortfall would be a small part of the federal budget, and these shortfalls could be made up for with other sources. In an article that was published in the Rolling Stone, economist Paul Krugman, believes that there is no crisis in Social Security, so why is President Bush pushing so hard to privatize it? His answer is ever “since the days of Berry Goldwater, the Republican right has really wanted to dismantle Social Security.” “Social Security is the biggest social-insurance program that we have.” “Its been highly successful, and its extremely popular.” (Bates, Jan 13, 2005) For these reasons many economist think that Social Security Reform is a waste of money. The old system of using a trust fund will work and even if the trust fund were to become exhausted, we would have plenty of other sources to use if it did.