Pros And Cons Of Privatization Of Social Security

The debate on the privatization of Social Security is a controversial one with advocates for both sides. When Franklin Roosevelt signed off on a bill on August 14, 1935, known as the Social Security Act, a social insurance system was created where workers' would allocate a small portion of their earned wages to enable financial protection for when they retire (See Figure 1) (Privatizing Social Security). It specifically states that its purpose was "to provide for the general welfare by establishing a system of Federal old-age benefits, and by enabling the several States to make more adequate provision for aged persons, blind persons, dependent and crippled children” and others (H. R. 7260). Today, it has evolved to a government program which provides income benefits to millions of
This process is known as privatization. However, privatizing Social Security would require changing the structure of the whole program. This would be done by creating individual accounts for each and every beneficiary, which could have its risks, although people will receive benefits depending on their investments, subtracting the cost of what is lost in investments, along with managing expenses (Social Security). Arguments for privatization of Social Security include: the fact that the government's plan for the program will become insolvent by 2034, and it will lift future economic growth. However others believe that the government should remain in control of Social Security because it is cheaper, the transition to a new system is difficult, privatization will worsen the national debt, and many people in the US lack the financial knowledge to make their own financial decisions for later in their life. Social Security should not be privatized because the system of private accounts will not work and it is a worse