It is not difficult to understand why Social Security is our country's most popular government program. Prior to its inception in the 1930's, more than half the nation's elderly lived in poverty. The program was designed as a social (old-age) insurance plan which provides a guaranteed income to retired and disabled workers whose loss of wages promises an uncertain economic future. I emphasize the word guaranteed, as this is the issue in contention when considering reform propositions.
Social Security, as we know it, ensures an acceptable standard of living for all citizens, and provides a safety net for those who, due to age or disability, are no longer able to support themselves by labor. It's benefits are, as stated by author Joseph White, "guaranteed, adjusted annually to account for inflation, paid for as long as the recipient lives, and based on collectively set standards of need and contribution, as opposed to returns and investments in markets" (White 43). The entire concept of privatization distracts us from the reason behind Social Security that ALL Americans would have the means to live in dignity. As such, to perform its proper role in the protection of our citizens, social insurance should be "national, compulsory, and contributory, and provide benefits as a matter of right" (Brown 10).
Politicians argue that there is an emergency need for drastic reform, as the current system is facing collapse, but this is not necessarily the case. It is important that we, as taxpayers, are able to wade through the often party-prejudiced political jargon and arrive at an informed opinion. This essay is an attempt to dispel some of the myths surrounding the controversy, and offer an argument against the private market's ability to adequately protect individuals (and hence society) against risk and uncertainty.
Social Security is a pay-as-you-go system, meaning that current payroll taxes are used to pay benefits to current retirees. In 1983, Congress introduced an element of pre-funding by adopting an increase in payroll taxes that allowed the program to take in more tax revenue than it paid out, with the surplus dedicated to supplementing tax revenue when the baby boomers began to retire (Hill). Today, that excess revenue is spent on government programs and reduction of federal debt, and the trust fund is credited with bonds equal to those expenditures. By reducing the debt, the government saves BIG money on interest payments and enhances its ability to borrow in the future. Any diversion in contributions would reduce the surplus, and have a negative impact on the programs supported therewith. While political groups have charged each other with squandering/draining the surplus for their own party-affiliated ends, this is actually impossible, as the Social Security trust fund is separate from the federal budget. "By running a deficit or spending a surplus," Dean Baker tells us, "the government can no more drain Social Security than they can drain the bonds under [his] bed" (Baker). Reformation advocates favor allowing workers to create private retirement accounts funded by the aforementioned 2 percent diversion of our Social Security taxes. They suggest that the emergency need for reform arises from the estimated population expansion and the increasing number of retirement-aged workers, and warn us that "inflation will push the current 12 percent contribution as high as 23 percent within the next 50 years" (Feldstein). Both sides agree there is a projected shortfall as the ratio of retirees to workers rise, however, these figures are as aggressive as the trustee's projected rate of productivity growth are conservative. The numbers show that "if we don't do anything, the system would pay all benefits to retirees right through the year 2038" (Baker). That is to say that if the government makes no changes whatsoever during the next 35 years, it...