* List solutions involving cuts in benefits and change to a privatized system.
* List 9 steps to keeping the current system solvent.
What is Social Security?
Initiated in 1935
Provides old age and survivors insurance
Paid into by all workers, to take care of them when they are no longer able to work Government-administered fund
Motivated by the Great Depression
Why/Why Not Privatize Social Security?
Two types of changes to Social Security have been proposed. One would keep the current defined-benefit structure but build and maintain a larger trust fund, to be partially invested in stocks and corporate bonds. The other would set up individual funded accounts, also to be partially invested in private markets. Both would raise taxes or lower benefits in the near term to increase funds for paying future benefits. Proposal 1: Privatizing Social Security
Privatizing Social Security can increase real incomes for everyone while ensuring a dignified retirement for future retirees. It is transforming the current Social Security system from an unfunded pay-as-you-go system to a system of mandatory private savings accounts. According to Altig and Gokhale, there are 4 key elements that supports this proposal and they are as follow: Key Elements to Social Security Privatization
Workers under age 32 would be allowed to divert up to 46% of their payroll taxes to individually owned, privately invested accounts Individuals will receive retirement benefits equal to or greater than those currently promised by SS.
During the early years of the transition, the government would issue new debt to supplement revenues from the continuing portion of the payroll tax. Once benefits to current and soon-to-be retirees had been paid, the continuing portion of the pay roll tax would be used to service and retire the debt. No new taxes are required to finance the transition.