The Social Security Debate

The New Poverty , B. Guy Peters expresses his concerns about the social welfare of the poor working class. He is worried that nothing is being done to help the less educated whom are getting pushed out of their secure jobs by technology and undersizing, and soon they will find themselves, figuratively, if not literally, on the streets. The other group of concern is the working poor. These are the people who work full-time and are still poor. But it is getting increasingly hard to maintain a full-time position when you do not have the training. He brings up Manpower, Inc., a temp agency and the largest single employer, which shows the movement away from salary positions to temporary ones. He says that firms have few incentives to create new jobs even if they are becoming profitable, but rather have a number of incentives to keep their labor costs as low as possible. He thinks that these changes are permanent and the attemps of social programs will not deem helpful. Peters thinks that several types of new social policy intervention should be put into effect. These include direct social assistance, and a wide range of services which will involve the coordination of a number of programs and organizations- education and labor market organizations. If this is not done, with the decrease in purchasing power, soon both adults in a poor family will have to work, now bringing child care into the equation if is was not already.

I thought that this type of reform was very interesting. It sparked my senses and made me really think about all the recent Social Security talk. What happens when the poor get old or injured and have to rely on the government because they now cannot work at all? Will there be funds available to them to ensure security?

What is Social Security? What is wrong with it? What can be done to remedy the problem? These are some of the questions that will be answered when looking at what Clinton and Greenspan plan to do about the ongoing problem of an exhaustion of the Social Security trust fund. The way to fix the problem is to invest in the stock market, says Clinton. Conversely, Greenspan would like to see an investment in bonds. The reality is that these questions and proposals need to be sorted out soon if there is to be any Social Security funds remaining after the baby boomers retire.

The History of Social Security

Social Security was a bill passed in 1935 by President Roosevelt with welfare as its primary purpose. The general population did not have much belief in the government at the time, but things were going to change dramatically. The first sight of an actual Social Security Check did not come until about 1940 and they were not something to write home about. Some of these checks were as low as twelve dollars. Regardless, this was a sign of hope and prosperity to come in the future as most the elderly population was living in poverty. Then World War II came and went and the nation began believing the their government. By 1980, a male receiving Social Security was getting 3.7 times as much as they put in, along with a 2 percent interest rate. Females were doing even better as they were given 4.4 times as much as they put into Social Security.

The Philosophy of Social Security

Social Security is a social insurance program, not just simply for the retired and elderly, but for the disabled and their wife, and children, and for the widows of working people who died young. These exceptions make up more than one out of three persons who collect Social Security checks. Therefore, Social Security is also a life insurance policy, along with being a reassurance of stability at an old age. Social Security is a pay-as-you-go system meaning that while working you are paying for the people collecting benefits, and when you begin to collect, the money will come from your children and grandchildren.

The Facts of Social Security

An estimated 145 million workers and their employers, pay taxes on wages. They both pay a 6.2 percent tax on salaries up to $68,400. They also pay a 1.45 percent tax which levied from their salary income. The money collected from the working and employers goes to pay the monthly benefits to some 44 million beneficiaries. Social Security accounts for 20 percent of the federal budget. It is the single largest government expenditure and has soared to about $367 billion in benefits last year. In order to qualify for benefits, you need ten years of work. The amount of the checks is in some kind of proportion with your earnings during your working career. A system of formulas is used to distribute proportionally more money to the people with lower incomes. The retirement age established is 65 years to receive 100 percent of your benefits. But, you can retire at an age of 62 and still receive 80 percent of your total benefits. The majority of the people today retire before reaching the age of 65.

The Problem with Social Security

Today there is a surplus within the Social Security system. They are generating more tax revenues from workers than they are paying out to beneficiaries. What s the problem with this? Well, the workers today are subjects of the Baby Boom era. Basically, there are more of them than there are retirees. This is good if you are retiring before the baby boomers do. At an estimated year of 2012 the first wave of the baby boomers begin to retire. As the largest generation population, this means that the baby boomers will begin to exhaust the Social Security surplus at a much faster rate than before. By the year 2029, the Social Security trust fund will be completely depleted. What does this mean for the next generations? In a nutshell, this means that there will be no money to pay out benefits to people who paid their taxes for security. At this point the government will be forced to rely solely on the revenue from the payroll tax. This will not be enough to pay all of the benefits promised. What can we do when this happens? One of two things can happen. Either payroll taxes will have to be raised to 18 percent from today s 12.4 percent, or benefits will have to be cut drastically.

Along with the primary problem of monetary exhaustion, there is the issue of an increasing life expectancy. This means that more people will be receiving benefits for a longer period of time. In order to remedy this problem, the age of retirement will be increased to 66 years for those born from 1943-1954 and 67 years for those born in 1960 to present. But this will not answer all of our problems and questions about the future of Social Security.