It was early spring in the year 2048 and my bithday was coming up thisAugust 26. I would be turning 70 years and retirring.
I am not looking forwardto it as much as I thought. My whole life I dreamed of moving to Florida andliving on the beach when I retired. I planned on traveling a lot seeing thegreat sites the country has to offer. All of these plans have changed insteadmy yougest son is putting an addition on his house so that I could move in. Iam very thankful for what he is doing, but I really don’t want to go. I want myprivacy and I’m sure he wants his too.
There is no other choice I worked aslong as I could but I’m just getting to old. We all agree that I am not goinginto a nursing especially me. If the government would have told us that theycouldn’t solve the Social Security crisis almost 30 years ago I would haveprepared better.
But instead they promised they could save it and the programwould still be aruond when I retired. They obviously lied and now I havenothing. Moments later I hear music its my alarm clock.
It was only a dream itsApril 1996 and I’m 18. The article about the Social Security in the paper hadme thinking and I must have a bad dream.The Presidential election will be coming up this November 96 and thequestion that many of Americans have on their mind is what are you going toabout the Social Security crisis? This question has our nation divided betweengenerations. The elder people of our nation (ages 50 and up) feel confident thatSocial Security will be there for them and that it should be left alone. On theother hand the Baby Boomers (ages 31-49) and Generation X (ages 18-30) lack thisconfidence fearing that they will never receive Social Security, and the moneythey put in would be a waste. Many politicians are afraid to touch this issuebecause the elder still make a large number of the voting block. Speaking as amember of Generation X it is our duty to vote for change in Social Security toensure we will have something to look forward to when we retire.
We can notwait any longer to defeat this crisis.The Social Security crisis is the threat of the Social Security systemgoing bankrupt. Well its more than just a threat its the reality.
The commonbelief is that Social Security is a saving fund where the government takes acertain percentage out of our weekly pay. Then that money is put into a savingsfund where it is held until we retire. When we retire the money is returned tous in monthly checks plus the interest.
This is where we are wrong. SocialSecurity is a pay-as-you-go system where the current workforce pays for thepresent retirees, and then when they retire they will depend on the youngerworkforce to pay for them and so on and so on. Which is fine when you alwayshave more workers then retirees. This is the problem the government will facewhen the Baby Boomers retire in the year 2010. In 1950 there were 7.2 workersfor each retiree. Today there are 3.
2 workers for every retiree, an by the year2020 there will only be 2.4 or less for each retiree. By the year 2010-2015Social Security is projected by the government to pay out more money than itcould take in. Since the current Social Security took in a surplus of $60billion last year with a projected total to be around $5 trillion they will haveenough money to last another 10 years or so.
All in all experts expect thatSocial Security will have spent every penny it has by the year 2030.In actuality the bankruptcy will probably happen about ten years sooner.See there is a catch to their surplus that not to many people know about. Thesurplus is put in to government bonds so that government can use that money tosupport other programs and to pay of other debts.
Also when the governmentfigures out the national debt they subtract that surplus to make the nationaldebt look smaller. The problem will come when Social Security needs thatsurplus to support its program and the government has to pay of these bonds. The United States will go further into debt having to severely raise taxes anddrastically cut government programs. Or they won’t pay the their debt and theAmerican retirees will be out trillions of dollars.There are also two other contradicting factors that boggle the minds ofalmost all Americans.
First as we all know the life expectancy of people isgetting larger. In 1940 a man at the age of 65 could expect to live another 13years; today they could expect to live another 17 years. The government figuresby the year 2000 many people will have collected half as long as they haveworked. The twisted part of the whole thing is that citizens are beginningretire and collect benefits earlier then ever.
More than half of all retireesbegin collecting benefits before they are 65. The average at which people begancollecting went from 68.7 in 1950 to 63.7 in 1991.The Government has tried to institute new polices and reform old ones,but they are falling short over the long run. In 1993 the President pushed atax that stated 85% of Social Security became taxable income to people withsubstantial amount of other retirement savings such as pensions and personalsavings. What they are telling is if you are one the smart people in Americathat pre-planned your retirement with other savings and not just Social Securitythey can put heavy tax on your Social Security checks.
Now you would have to paytwice once whiled you worked and again when you retire. Its has if you arebeing punished for doing the right thing.Another tactic many government official are trying to push is raisingthe payroll tax 2%.
The current tax is 12.4%, 6.2% from the employee and 6.2%from the employer.
This would aid us temporarily, but would do nothing to stopthe long term problem. “To maintain the systems solvency, taxes would have tobe increased, or benefits cut, between one-half and 1 percent every 10 years”(Bosworth 36). If you do the math you will realize by the time Generation Xretires the payroll tax needed to keep Social Security going will have almostdoubled. The higher tax rates will start some sort of recession with peoplegetting far less out of their pay checks to live on. Anyway who wants pay moretaxes. They would also like to cut many of the benefits that Social Securityoffers, but why should we pay more and receive less.
The U.S. government has dug itself into a whole waiting to the lastminute to save Social Security. When by simple demographics years ago would haveshowed the same problem. They have to get it out of their heads that SocialSecurity is such a great system that can be saved.
Well it was great a the time,but as we know times change. The only way to save Social Security is tocompletely overhaul it. With the best way to overhaul is by the introduction ofpartially privatizing Social Security.It help bring Chile social security system out of bankruptcy. In 1981Chile privatized it social security by requiring their workers to put 10% oftheir pretax wages in private pension funds.
The funds are carefully regulated,and workers can switch among trust fund managers for better returns or lowercosts. They also receive periodic statements. Upon their retirement theyreceive their money to buy annuity. What ever is left can be passed onto theirheirs. If there isn’t enough to provide a descent living the government stepsin guaranteeing a minimum.
Now Chile enjoys a high savings rate well over 20% oftheir gross domestic product compared to the US’s 3.2%.The plan has been pushed here heavily in the states by Senator RobertKerry of Nebraska (D). The plan would not allow people to drop out of SocialSecurity completely like some other more radical plans, but to divert apercentage of their payroll tax into accounts that work like IndividualRetirement Accounts (IRA’s). The Senators plan proposes that 2% of the 12.
4%tax would be taken out and placed in private accounts set up by the government. The money would be one’s own personal account with compound interest(Congressional Digest 246). The Institute for Research on Economics of Taxation(IRET) adds, “that they would not be able to touch that money until they retireeor become disabled.
The money is theirs the government would not be allowed totouch it. If that person should die the money would be added to their estate”(Congressional Digest 248).The Cato Institute (a nonprofit public policy research foundationfounded in 1977 whose publication, conferences, and seminars are designed toilluminate private sector, voluntary solutions to social and economic problems)also adds, “that those presently in the workforce would have the option ofremaining in the current Social Security system or switching to the new privatesystem. Those entering the workforce after the implementation of the newprivate system would be required to participate in the new system. Thus thecurrent system would be eventually phased out” (Congressional Digest 244).
Theplan also has guidelines to problems and questions that people have or arrive.First off people begin to question the safety of the government handlingtheir own personal money. It a viable question considering our national debtand the way they spend tax money, but the there is a viable answer. If you letpeople drop totally out of Social Security and have their own pension plan therewould be know way for the government to keep track and ensure that people aresaving.
Then when these people begin to retire and we find out that many ofthem never saved any money and will have no monthly retirement checks we willhave a poverty struck elder class that the government would have to bail out. In conclusion to ensure that everyone has money set aside for retirement thegovernment has to control the money.Another common critique is how much is 2% going to save? It wills save alot more than the average person thinks.
Currently Social Security takes adollar from the worker and gives it directly to the retiree with no growth orinterest. The IRET states, “With compounding interest at a 7% real return, adollar saved at age 20 would be worth $16 at age 60 and $32 at the age of 70″Congressional Digest). That’s more then the current system could ever own up to.
Many critics also wanted to know what would the new system do aboutpeople who earned low wages and wouldn’t have a substantial amount of money setaside to pay for retirement. The Cato institute proposes a minimum savingsamount, acting as safety net. It would be a number to a similar to the minimumwage where if the individual doesn’t meet the amount specified to earn a livablemonthly payment the government would supplement the difference to bring themonthly income up to the correct level.
The money would come out of the other10.4% that people still pay into. They also report considering the rate ofreturn even someone making minimum wage their entire life would still haveenough to meet the monthly requirement (Congressional Digest 244). Concludingthat the safety net would only support a scarce few. This would also keep ournations poverty level up.
A questions many Americans have is where do we begin? You begin with allage groups including people in their forties and fifties. For these people whoare getting close to retirement and wouldn’t have a substantial amount saved upthe government would take the benefits earned from year to date and put theminto a bond. The bound would be put along with the 2% they begin saving. Themoney would earn interest together so when these people retire they will beshore to receive the money they deserve and then some (Investment CompanyInstitute Congressional Digest 252).The only problem the plan doesn’t solve is the problem that can’t besolved.
This is how do you support the people already collecting their SocialSecurity. Social Security will have to use their surplus, but as stated thegovernment has already used this money. In order for people to get the moneythey deserve the government will have to cut their loses and pay back theirbonds. It will severely hurt the budget, but what choose is there. No planwould have been able to solve this dilemma it would have happened anyway.What more can you say? The time to change the Social Security systemhas come. The program considered by many to the prominent leg of the threelegged retirement stool, along with pensions and personal savings, is growingweek.
“the result for retirees almost certainly will mean that the one leg ofthree legged retirement stool is going to get wobblier” (Wechsler 25). Thegovernment is going to have to act now to prepare for the future because if theywait any longer the leg mine as well just fall off. The government is there forthe people and I’m sure they don’t want the suffering of Generation X retireeson their conscious. I don’t want this to happen. I would like to work hard inmy life looking forward to luxury of retirement at the end, and as a citizen ofthis country I should be given that right. If the system goes bankrupt thatluxury just maybe taken away.The only way to ensure that Social Security will be around for the youngpeople of this country is to instate the partially privatization plan.
Yearsago it was considered to radical of an idea, but now it seems that there reallyno other choice. It’s the only plan that shows some hard facts to support itgoals unlike many of the other plans by Congress or President. You have readthe argument and you now the facts I don’t know how anyone could think otherwise.
It took Chile out of bankruptcy it will do the same for us to. What do have tolose.