Social Security Act

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The Social Security Act was brought into effect on August 14, 1935. Taxes had been collected for the first time in January 1937, and the first lump-sum payment was made that same month. Regular ongoing monthly benefits started January 1940. In 1939, the law included benefits for the retiree’s spouse and children, called “Survivors Benefits” (New York Life 1). Disability benefits were then added in 1956. The current version of the Act has been reformed to include social welfare and social insurance programs (2). Social security is a social insurance program that is funded through dedicated payroll taxes. The best way to insure that Social Security does what it was intended to do – help provide a secure and comfortable retirement – is through a system of personal retirement accounts, which will allow workers to privately save and invest their Social Security taxes. Retirement plans were first introduced to New Jersey teachers and New York Police Officers in the early nineteenth century. Many privately owned businesses began offering their own retirement benefits for their workers, known as formal pension plans. Government Social Security only occurred after the Great Depression. In 1935, Franklin D. Roosevelt advocated the public provision of retirement income during his presidential champagne, launching an Old Age Pension System that would provide annuity benefits to retired workers (Galasso 184). Initially, the plan was conceived as a fully funded system that would provide benefits without having to raise taxes or the national debt. But only a few short years later in 1937, the security system became a PAYG (pay as you go) system. Benefits were also extended to cover the retiree’s family/dependents. Later, an extensive plan was added to the program when the addition of Disability Insurance (DI) was inserted to protect workers and their dependents from income losses due to injuries during their work life. Signs of a breakdown occurred in 1972, when the cost-of-living increased, causing inflation and changing the benefit calculation to an average growth rate system. Currently, Social Security is facing an overwhelming fate. It is estimated that major deficits will arise within the short span of 10 years. Social Security will be bankrupt, and many of those who are paying into this fund will receive a 0% return. One may ask how this could be when people have been paying these extensive taxes since 1935. “For 25 years, [Social Security] has been taking in more than it has been paying out, and now has a $2.5 trillion reserve fund invested in government bonds” (Bethell 2). What this means is that the government has been reaching into the Social Security funds of the American people and replacing this money with IOUs, bonds which were placed without the intent of ever paying them back. The money has been used for decreasing the National Deficit all the way to donating for natural disasters in other countries. However, Hal Gershowitz, founder and CEO of New Century Information Services, contends that the system was ruined by other means. Sixty years ago, more workers were available and were able to support the benefits of one person. Since then, the ratio has dropped to 3.3-to-one. It is estimated that in 40 years, the ratio will have dropped over a point, reducing it to 2 contributors to every 1 worker. With this sort of decline, support for benefits will be impossible (1).

Presently, there is a leftover of collected taxes. Mark Brandy, professor of economics at Ferris State University, explains how, in 2008, Social Security collected nearly $805 billion and the money paid to cover benefits and administrative costs were $625 billion. This left an additional $180 billion that was paid toward Social Security but never used. Since then, this surplus has grown totaling $2.4 trillion (2). The obvious question is where did the money go? Ideally, this money should have remained in the services’ account to protect...
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