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Reform Of Social Security Zoltan Van Dyke Period 4

Social security is on track to be bankrupt by 2018. It is crucial that we save this valuable institution before the weight of so many beneficiaries destroys it. Immediate reform of social security is necessary in order to preserve this valuable social institution for future generations. Currently, the pace of people getting onto the social security program is outpacing the number of people working and providing the funds necessary for this program. With this major predicament happening as we speak, we can no longer stand idly by as the system we pay into goes bankrupt before our very eyes. In order to provide a little perspective on the system, you need to know exactly how this institution works. Social security is a system which provides seniors with a monthly check which comes from a trust fund which they pay into the day they start working. The source of these payments come from current payroll taxes on income. Half of the payroll taxes are automatically taken out of your monthly paycheck while the other half is taken from your employer. It was instituted in the 1930s as part of the new Deal. It was a social program designed to allow people to retire with a decent living after they stop working. This program has stayed in effect with no major changes since it was implemented. As the program continues, problems arise when the working population

stays the same while the aging population increases, creating a smaller and smaller ratio between those who are paying into the system and those who are benefiting from the program. This is primarily due to longer life expectancy and increases in medical technology. Without a large ratio of people paying into the system, and a continual shrinking of this ratio, it is inevitable that the trust fund for social security will go bankrupt. It doesnt take much research to understand that Social Security is one of the most valuable social safety nets that is in effect today. Without it, millions of seniors would go into retirement without any money saved up. Soon, Social Security will be be bankrupt. This is due to the increasing life expectancy and lowering of the birth rate. The need for reform is growing everyday. Most politicians would prefer using short term solutions which only postpone the end of Social Security as we know it. The two main short-term solutions without the need for actual reform of the system include: raising the payroll tax, and cutting social security benefits, both unpopular solutions among large portions of the country. As so, it makes any kind of reform seem impossible. Even though we must take action in order to save this important institution. Multiple solutions exist to the current problem with social security. There are those who would implement short term reforms to save the system. But these reforms would only allow the extension of benefits for a longer period of time. To sincerely save this system, which is in desperate straits, we need a long term solution.This reform must be done sooner than later because the later we put off reform the more drastic measures will be needed to be taken to save the system. Most of these reforms are politically dangerous due to its unpopularity among the public. This is the primary

reason no real reform of the system has taken place. These unpopular solutions include: raising the retirement age, increasing the payroll taxes, decreasing payments to seniors, and partial or total privatization of the system. These kind of short term solutions are opposed by those on the right and those on the left of the political spectrum. Liberals tend to be opposed to cutting benefits for seniors because this would conflict their belief in extending social benefits. While conservatives are opposed to raising the payroll because they are opposed to raising taxes. All of these conflicts of interest make even minor short term reforms very difficult. Short term reforms can also hurt the seniors who currently benefit from social security and those who would have to pay into the current system. Any changes to payments to seniors would be opposed by the elderly and seniors interest groups. Also, the media would go buzzerk on those would raise the retirement age. Examples of this have occured when Republicans wanted to modestly cut medicare payements. During this debate, Republicans were called every name in the book. Democrats said that the Republicans wanted to run granny off a cliff. This kind of extreme reaction to modest cuts in social programs is the reason why reform seems like such a far away goal. On the other hand, increases in the payroll tax would broadly be opposed by the majority of the working population. Privatization is opposed by Democrats and liberals because of its supposed benefits to Wall Street and big companies and, in my opinion, because it gives the individual more power in their retirement at the expense of the government. So all around reform is opposed by huge sections of the population. Moving on to the current catastrophe that is unfolding, according to the GAO, social security will be in the red by 2018. At this point, the amount that the trust fund

pays out to seniors will outstrip the amount which is taken in from payroll taxes. After 2018, It will run larger and larger deficits. This along with the enormous amount of debt contributed by Medicare and Medicaid, entitlement programs will skyrocket as a percentage of the GDP. Also according to the GAO, just social security and medicare will consume over 20% of the GDP by 2056. This number is extremely high in comparison to previous years in the U.S. This kind of percentages are similar to the ones in countries like Spain, Greece, and Portugal who are all facing massive austerity cuts and provide a picture of what is to come when we act too late to reform our current system. It has become painfully obvious that reforms are absolutely necessary because without it the system will become unsustainable and eventually go bankrupt. Even though reforms may be politically hard, action must be taken soon in order to stave off the coming disaster of bankruptcy and a mountain of debt. Social security technically cant go bankrupt but it will contribute to a huge mountain of debt which will have reverberating effects on our economy and economic standing worldwide. With the kind of political climate we currently have it is no surprise that no serious effort has been made in the last decade to reform the social security system. As it seems that most politicians are more content sacrificing the sustainability of an important social institution for political favorability. This may be the most selfish thing a politician can do. Moving on to what we can do, the most sensible solutions to this dire problem are: increasing the retirement age, increasing payroll taxes, cutting payments to seniors, and some degree of privatization of the system. All of these reforms could drastically extend the viability of the program and save a valuable institution for generations to come.

The most obvious solution would be to raise the retirement age to effectively counteract the aging of the population and help solve the problem of less workers per beneficiary. The current ratio of workers to beneficiaries has been decreasing since the 1960s. This ratio has been halved in the last 50 years. By increasing the retirement age we will help to increase the amount of people paying into the system. But a dramatic increase would have a negative effect on those who are between the current retirement age and those reaching the new retirement age. If the rise in retirement age is brought about too quickly, then it could lead to cuts in benefits among seniors. It should be slowly implemented, in increments, increasing the age by one year every 2 years until we reach the new senior age of 70. Attempts at This will help make the system more sustainable for the long term. Another solution would be to increase the amount that workers pay into the system. The current payroll tax is at 4.2% for empolyees and 6.2% for the employers. The rate for employees have been lowered under the payroll tax cuts. Under normal circumstances the employee and employer would pay equal amounts equating to a total payroll tax of 12.4% for social security. Payroll taxes were steadily raised from 1957 to 1990 when the payroll tax was capped. I believe that we should continually increase the payroll tax steadily over time. But since it hasnt been raised in over 20 years, a drastic increase of 4% is necessary. By doing this they are insuring that in 30, 40, 50 years when they retire, the system in still in place by the time they are retired. Though this is a very short-term solution it is necessary in order to stave off going in the red for another few decades which is long enough to implement more long term solutions in order to salvage whats left of this important social institution.

Modestly cutting benefits to seniors would allow them to keep receiving most of their payments while making a large dent in the current shortfall in the Social Security trust fund. Cutting payments to seniors would be very politically risky. Checks from the social security trust fund are appropriated based on how much an individual pays into the system and how long they wait to start receiving benefits from the system. The checks you receive tend to be fractions of the amount you earned while you were working. This means the amount you receive tends to be modest at best. Due to the small amount most seniors get, i dont believe that a modest cut in their payments would be too disastrous. Considering that all seniors already receive free healthcare, it seems that many of their needs are already met by the government. This being so, a modest cut in order to save the system for generations to come seems like a noble enough solution. But being dependant on the government as they are, most seniors would be very opposed to this sort of cutback. Also seniors groups like AARP are very powerful and have the backing of millions of seniors whose interests would be affected by changes in their benefits. In the day and age where drastic reform is needed to save this institution, all people, workers and seniors, need to make a sacrifice. Finally the most important solution that would insure this institutions solvency forever is partial privatization which would allow an half of your payroll taxes to go into a personal account which could be used for investment or as a savings account. This kind of change would allow someone to grow their retirement on their own and increase the amount that they would receive from their investment upon reaching retirement. It also gives you much more control over the money you make and pay into the system, which would otherwise sit in a government trust fund and slowly lose its value over time due to

inflation. Privatisation has long been opposed by liberals as a scheme to benefit those who have more money and take away from those who are poor, who may not have as much to invest or may have poorer choices when it comes to investments. But this is a very common misconception among liberals, but allowing those with less money to invest and grow their earnings allows them to grow out of poverty and provide them with better options with which to retire with. If anything they should be supportive of a tool which could help lessen the wealth inequality. But as usual, they are more concerned with how much control they have over you instead of thinking about what would be best for the individual. Saying it would benefit the rich is also absurd, any modest profit they could make through privatization would pale in comparison to the amount of money they already have saved for their retirement. Partial privatization also gives those who make bad investments a degree of protection because half of their payroll taxes would still go to the standard social security trust fund. All in all, this guarantees you the freedom to make decisions to grow your nest-egg, and also assumes a degree of protection from bad investments. This sole solution is the one that will help increase the benefits of seniors while not forcing higher payroll taxes on the working population. Multiple solutions exist to the current predicament regarding social security. Some of these could be implemented right away but with the current political climate any of these solutions seem doomed to fail in the halls of Congress, but without it, retirement will become all become impossible. These reforms will be politically dangerous and could hurt us in the short term but in the long run the sacrifice will benefit your kids and their kids. We need strong leaders and even stronger solutions in

this time of out of control government spending. This said, as long as we stay on this path, retirement as you know it will be over before your kids know it.