Social Security Reform A little over 60 years ago the nation struggled through what was, up to then, the most dramatic crisis since the Civil War. The economy was uprooted after the crash of the stock market and the country’s financial stability destroyed. One of the many steps taken to alleviate the burden on the American people was that of the passing of Social Security Act of 1935 and its amendments by Congress and the President, Franklin D. Roosevelt. Under the provisions of the Act, the government would take on the responsibility of taxing the income of all working Americans and returning the money through numerous public benefits and programs.
Now the nation faces an economic and political problem with the program instituted to earnestly help the people. In the first half of the next century the government will face the task of paying benefits to a large generation with funds it will not have. This year Social Security assistance accounts for over 20% of the federal budget and will make up even more for the years to follow. Almost all political sides agree that Social Security must be reformed in some way before the baby-boomer generation begins to retire and collect. Social Security benefits refer to all those measures established by the government through legislation that help an individual or household to maintain an income of a certain level, insure income if one’s employment is lost, provide other assistance for disability, old age, survivors, and other forms of compensation.
Social Security may be defined through several characteristics: (1) participation is mandatory. Everyone, including children age 5 or older, is required to have a Social Security (2) Eligibility for benefits and levels of benefits depends on past contributions made by earners. (3) Benefit payments begin at a stipulated time such as at retirement from work, upon temporary unemployment, or with disability (4) Social-insurance benefits are means-tested – one’s wealth or lack does not determine whether benefits are granted (Compton’s). (5) Currently SS funds are collected and distributed on a pay – as – you -go (PAYG) system in which Social Security taxes from individuals are immediately distributed by the means of the SS Administration as it sees best fit. This means that taxes collected are not reserved for the individual who has paid them: in Rose 2 the current state he or she must rely on those persons paying SS taxes during the time of their retirement (Becker).
For a number of these characteristics and future issues, the Social Security System must be reformed or completely abolished to meet the needs of tomorrow. The leading concerns of Social Security that merits the immediate initiation of reform are the demographic and economic circumstances in the coming century. Even though “forecasting the economy and budget over such a long period is uncertain” there remain many “certainties” regarding problems facing Social Security in the first half of the 21st century (OMB, Budget Perspectives 23). The Federal Government’s responsibilities extend well beyond “the five- or six-year window” that has restricted the focus of recent budget analysis and debate. Of these “certainties” are the mounting challenges posed from the baby-boomer generation.
This generation, born in the years after World War II, is aging and will “begin to retire around the year 2005. By 2008, the first baby-boomers will become eligible for social security”(OMB 23). With the increased expenditures for baby-boomer group and pre-existing entitlements, a serious strain will be placed on the budget for the majority of the next 100 years. As currently, the PAYG system has allowed for four workers to pay for every retiree. “But, when the baby boom generation retires, eventually only two workers will be paying for every retiree”(OMB, 1998 Budget 195). Long range projections from research done by the Congressional Budget Office last year observes that “Those fiscal demands could produce unattainably high levels of federal debt and taxes unless additional actions are taken to control federal spending” (OMB, Budget Perspectives 25). The baby-boomer issue is not the only problem facing the future of the budget regarding Social Security.
The Social Security Trustees Report projects that population growth is expected to slow over the next several decades. This slowdown is expected to lower the rate of population growth making older groups and retirees a very large percentage of the population. The labor force participation (by percentage) will therefore decline as the average age increases (OMB, 1998 Federal Budget 196). This decrease in the number of Social Security paying workers will undoubtedly make for an abatement in the total amount of Social Security taxes collected each year to be distributed in services. As this occurs the Federal Government would have to borrow money to pay its obligations to those with Social Security assisted living, increasing the federal debt.
Rose 3 Another criticism of social security is the attacks on the fact that it pays Old Age, Survivors, and Disability Insurance (OASDI)+ to those persons regardless of their wealth or lack of it thereof. This practice, even though it was established to be non-discriminatory, has been rebuked by many persons of poorer backgrounds because it takes away from the extra benefits that they could be receiving and pay it to some persons who may not need it as extremely (Samuelson). Retired workers account for 61% of all social security recipients and of those 60% rely on it for half or more of their total income. Because this total amount usually is not too great, they feel they should be getting more by cutting the benefits paid to the other 40% that rely on it for half or less of their total income (OMB, 1998 Budget 196). The criticisms of Social Security, or “Insecurity” as some have labeled it, have been discussed and now the issue about how to revise and fix these problems must be firmly addressed by the Government in its all-knowing, all-powerful stature. The Federal Budget for the US Government for the Fiscal Year of 1998 and it’s supplements address the aforementioned problems but state no incipient actions to solve any grievances or future obstacles, as predicted by the Office of Management and Budget, the Congressional Budget Office and many other private organizations, including Dow Jones (OMB, Budget – Perspectives 23-31).
The 1998 Budget section for Social Security reports that all of the segments of the OASDI Trust Funds would be all be insolvent by 2029, “but it does not constitute an imminent crisis” because the Social Security Trustees measure the Administration’s well-being for a period of 75 years. Obviously the baby-boomer and generation-X generations are in danger of not receiving Social Security benefits being paid in taxes right now. Unofficial proposals by legislators and leading financial experts have been proposing solutions for many years now, but they either do not have the power to introd …