The United States of Americas social security program is the largest government program of any country in the world. This extensive program faces a number of challenges and problems, more so then ever before in it's history. This essay will briefly discuss the history of the social security program in the united states as well as give an in depth look at the major problems it faces in the future such as the retirement of the baby boom generation, lower birth rate and longer life expectancy. Major criticisms of the Program will be discussed such as components appearing to favour specific members of society mainly the wealthy while negatively effecting lower class citizens. Several potential solutions will be compared and contrasted which are the main views of how to fix the problems within the social security program with major political disagreements on which solution would yield the best results. The solutions I will discuss in depth are increasing pay roll taxes , reducing benefits ,the privatization of the social securities program as well as others.
The 1929 stock market crash in the united states and the bank failures which followed resulted in the United States loosing significant amounts of money. As all americans were effected by this the elderly were most direly as they lacked the time to regain their wealth before having to retire due to a number of factors such their mental and physical health.(ssa.gov 2010) Before social security was in acted the poverty rate for the elderly in the United States was approximately 50 percent for people over 65 years of age. (ssa.gov 2010) To counter act this trend the current U.S president Franklin Roosevelt created the social security program also know as the old age, survivors and disability insurance. This new social program was made to address the long term problem of financial security for the elderly through a system where individuals made contributions from their earnings into a combined fund which at the time of their retirement they received payments from that fund as a
percentage of their previous earnings in order for them to maintain a comfortable life style without requiring them to work.
After the second world war the baby boom generation created a much higher number of workers then of retirees. A large surplus of money in the social insurance program was created compared to the amount of money the program paid out in benefits. Due to more people in the labour force opposed to people of age of retirement. This excess money has been used to help fund many other government programs.
According to Ben S. Bernake , Chairman of the federal reserve board of directors in a speech to the Washington economic club, (Bernake 2005) the ratio of workers paying into the social security program opposed the the number of retirees receiving benefits has been decreasing over the past several decades, however in the next 30 years this ratio will decrease dramatically reducing the amount of money paid into the program. According to Mr Bernake in 2008 when the first members of the baby boom generation begin to retire there will be approximately 5 working age persons for every person 65 and older. However according to the 2005 address by 2030 this ratio will have dropped to 3 working age persons to 1 person aged 65 or older.
The United States Census bureau (2008) estimates that currently 13 % of the United States population is over the age of 65. By 2020 however it is estimated this number will be 16 % and then reaching 20 % by 2040. These numbers are clear indication of how the population is aging and will be requiring benefits. This figure is in contrast with the decrease of birth rate in the united states in respect to the baby boom generation. According to the Census bureau the annual growth rate for the united states population was 1.2 percent annually. This figure has declined from the 2.3 percent in 1963 during the baby boom. This decline however is not apparent in...
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