Privatizing Social Security

Assurance in money is very important to a retiree and is a very important political issue at this point in time. The United States built a system of saving money in the form of a tax on the American workforce using this money as a paycheck for retired people. The general idea was that everyone would pay into the system as a worker and then receive the money and benefits they paid into the system as a retiree. This idea was good, but population complications have made it hard to keep the system afloat. The problem is that there are not going to be enough workers paying into the system to pay for the rising amount of retirees as the “baby boom” generation is beginning to draw money from the system. Political figures like President Bush have been reviewing ways to reform or change the system of Social Security. One of the most drastic and controversial ideas is privatizing Social Security, however this idea is the most logical of the proposed plans and offers the best rewards for the people. Privatizing social security puts the money back into the hands of the people giving them the power to choose how to use their money, a right entitled to all people under the US Constitution, providing a fair amount of money to people based on income, and, most importantly, avoiding debts the government would not be able to cover in the case of the current social security system.

The first step in fixing Social Security is understanding the problems with the current system. A social insurance system was created in the 1930’s, and the system, as it is now, was started in 1935. The need for a social insurance system derived from the poor economy following the Great Depression. The system largely benefited poor and low-income families, insured veterans of World War II, disabled persons, and those who required medical needs (replaced by Medicaid in 1965) (SS Online). Social Security was not designed to be a permanent remedy to retirement and unemployment issues, but because it offered quick relief, the idea was widely accepted. The government offered that a social security tax would support people in their old age. Government made little interference with the transfer of money, using a “pay-as-you-go” system. That means money paid into the system is almost immediately paid out to retirees. The problem, unfortunately, this is that all the leftover money is sent to the U.S. Treasury in exchange for federal IOU’s used to finance the national budget. There would be no problem if a federal IOU was worth tangible money. Congress has set no money aside for the use of covering a need for Social Security benefits, and the money loaned from the system is nothing but numbers on paper with no cash to back it up. There arises the unavoidable problem with the current system. As the baby boomer generation begins to retire there are exponentially more people drawing benefits from the social security system into which they already paid . However, with a lower ratio of people in previous history paying into the system, opposed to those drawing out, a strain on the system is evident. Predictions show that the current Social Security system will hit zero in 2014. In such a case, the money is supposed to be drawn back from the Treasury in IOU’s. Even if there was tangible money that the Treasury could return to the system it would only last until 2037. Consequently, government will have no money to pay people what Social Security has promised to cover (Sound Economy Foundation). Here lies the inevitable problem with this nation’s current Social Security system.

Congress and President Bush are focusing on reforming Social Security in an attempt to “pad the wall” toward which the current system is heading. There are essentially two routes that can be taken to reform the current system. The facts indicate, however, that any change would mean benefit cuts in the future for those drawing Social Security. The quickest, most effective plan would be an opt-out plan that involves cutting benefits promised to Social Security. This would make it possible to back up money in the Social Security fund for the future. Retirees object to this plan because it simply will not cover the future rises in the cost of living and because it breaks promises of benefits to current and future recipients (Shipman). As no political leader could support this plan and still hope for a chance at reelection, many people are leaning towards the other route, a phase-out plan. A phase-out would cut promises of increases in benefits and save money by raising the age of retirement. This plan sounds much better, but increased benefits are based on inflation and the cost of living, meaning retirees drawing from the system would not be claiming their full amount of promised retirement money (Armstrong). These ideas of reforming Social Security are helpful and certainly necessary to strengthen the already weak system,