Social Security
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THE SOCIAL SECURITY PROBLEM IN THE UNITED STATES OF AMERICA
ABSTRACT
This research presents the Social Security problem in the United States of America. It includes what the Social Security problem is in the United States of America, what kind of dangers it brings, what should be done about it. Reader can find information about the reasons of the Social Security problem and the solutions which might be done for this problem.
In addition, this is one of the biggest problems of the Government of the US that it pays attention in these days. So, reader may opine about the problem with seeing the solutions that the Government presents.
TABLE OF CONTENTS
CHAPTER
CHAPTER I
INTRODUCTION
Context of the Problem
Social Security trust fund is empty. More people believe in UFOs than in the future of social security.
Beginning in 2008, 74 million baby boomers will become eligible for retirement, and the Social Security system will begin to collapse. From that point on, we will have more retirees than ever and fewer workers paying into the Social Security system.
To put this into perspective, before the “baby boom” generation, there were 100 workers for every retiree, but as these same baby boomers begin to retire, that number is projected eventually to drop to merely two workers per retiree.
As we see, this is a really serious problem for the United States of America and serious solutions must be found as soon as possible. When we look at history of Social Security, we see this picture:
1935 – The Social Security Act, which covered workers in commerce and industry, was signed by President Roosevelt.
1937 – The Federal Insurance Contribution Act (FICA) required workers to pay taxes to support the Social Security system. Payroll taxes were 2%.
1939 – Social Security was expanded to cover dependents and survivors. Payroll taxes were 2%.
1950 – Coverage was expanded to job outside of commerce and industry, and benefit levels were increased. Payroll taxes were 3%.
1956 – Disability Insurance was created, and expanded over the following years. Early retirement at age 62 for women was permitted. Payroll taxes were 4%.
1961 – Early retirement at age 62 for men was permitted. Payroll taxes were 6%.
1972 – Automatic cost-of-living-adjustments (COLAs), which index benefits to inflation, were introduced. The formula to calculate increases initially overstated inflation by 25%, and people born between 1910 and 1916 received an unintended windfall. Payroll taxes were 9.2%.
1977 – The mistake in the benefit formula was corrected. The “notch” refers to the difference in benefits paid to the group that received the windfall and those who retired following the formula correction. Social Security was thought to be actuarially sound. Payroll taxes were 9.9%.
1983 – The National Commission on Social Security Reform was created in response to the actuarial unsoundness of the system. The commission called for 1) and increase in the self-employment tax; 2) partial taxation of benefits to upper income retirees; 3) expansion of coverage to include federal civilian and nonprofit organization employees; and 4) an increase in the retirement age from 65 to 67, to be enacted gradually starting in 2000. Again, Social Security was declared actuarially sound. Payroll taxes were 10.8%.
1985 – The Social Security Trust Funds were moved “off-budget” so that the funds earmarked for the Social Security system would be tracked separately from the rest of the budget. Payroll taxes were 11.4%.
1986 – COLAs were increased to respond to minor levels of inflation. Payroll taxes were 11.4%.
1993 – The amount of taxable benefits for upper income retirees was increased to 85%. Payroll taxes were 12.4%.
1996 – The Social Security Trustees Report stated that the Social Security system would start to run deficits in 2012, and the trust funds would be exhausted by 2029. All members of the Advisory Panel agreed that some or all of Social Securitys funds should be invested in the private sector. To keep the unchanged system actuarially sound, payroll taxes would have to be increased 50%, to 18% of payroll, or benefits would have to be slashed by 30%.