Social Security

Social Security was created in 1939 as a safety net for the elderly and

disabled. Four years after enactment the Administration and Congress

revised it. President Franklin wanted more to be done to revise the

program.

Social Security is a source of financial security for millions of

Americans. The program provides financial benefits for retirees, disabled

persons, and family of survivors of retired, disabled and deceased

workers currently 48 million people have collected benefits this year.

Baby boomers are the largest generation in American history. The 76

million persons born in 1946 through 1964 are making up the boom era.

In 2008 baby boomers will be reaching 62 years in age. The cost of

Social Security will increase much faster than income tax due to the

population of persons 65 and older will grow faster than that of the working

aged population. The baby boom generation and life expectancy

increasing will contribute to an aging population. When Social Security began

life expectancy at age 65 was 12 and one half years. Today that number

has grown to seventeen and one half years, and by 2030 it is expected to

reach 19 years. Beneficiaries will continue to grow while tax rates

remain the same.

Social Security taxes must be paid by public employees, self-employees,

State and local government public employees; the tax is referred to as

F.I.C.A (Federal Insurance Contribution Act). Employers also pay Social

Security tax that matches the employees contribution. The employers

share is a deductible business expense for income tax purposes. There is

an additional tax on workers earnings to pay for Medicare hospital

insurance. Higher income Social Security beneficiaries pay federal income

taxes on their benefit income which also help finance Social Security.

The tax began at two percent, and has been raised more than twenty

times, currently it is at 12.4 percent. The system today is pay-as-you go.

Under this current system it is widely believed it will become bankrupt

in the very near future. As benefits are increasing, longer living

Americans, the younger generations promised benefits will be greatly

decreased. In past years the number of workers that support Social Security

beneficiaries have decreased and somehow serve as proof that todays

system will not survive. Today there are 3.3 workers supporting a single

beneficiary. By the time todays younger generation reach age 70 this

number is expected to decline; there will be 2 workers for every

beneficiary. Advocates as well as President Bush feel if the system is not

reformed it will result in extremely higher tax rates, massive borrowing

will have to occur, or a drastic reduction in benefits or other

government programs will occur.

President Bush is dedicated to reforming the current system. In doing

so he has promised not to change the system for those born before 1950.

The system today is