Franklin Roosevelt’s New Deal: Social Security

1569 words - 7 pages

Signed in 1935 in Franklin Roosevelt’s New Deal, Social Security has actively played a role in the American economy. The original as well as the amended system entails many social welfare and social insurance programs. Consisting of unemployment benefits, temporary assistance for needy families, health insurance for the aged and disabled, grants for medical assistance programs, state children’s health insurance, and supplement security income, Social Security ultimately aids people who need help in assuring a comfortable lifestyle. Social security is the biggest government program in the world; it is also the greatest expense in the federal government budget. It takes up 37% of the ...view middle of the document...

In 1939, surviving spouses and minor children were included as beneficiaries. Because of this the payroll tax first began to expand. Like America today, the people in the 1950s always wanted more. So, more people were added to the plan and the benefit was increased, allowing the first cost of living allowance. With disability insurance added in 1956 and early retirement for women at the age of sixty two permitted, the poll taxes now stood at four percent. In 1961, retirement for men at 62 was allowed; again, this caused the poll tax to rise another two percent. For the first time in 1983, President Ronald Reagan signed into law the taxation of the social security benefits that people received. In addition, the trust fund for the social security system was set aside from the federal budget so that it was able to be tracked. Moreover, the poll taxes were at 11.4 percent and in 1993 they rose again to 12.4 percent. Following this increasing trend, the Social Security Trustees Report stated that the social security would go in the red in 2012. The only way that the program would stay alive if it stayed as it is right now is to increase the tax by 50 percent or the benefits must be cut by 30 percent.
As the amount of people are added to the program and the higher the demand for protection is, the less money that is in the fund. According to a CRS report, one-fourth of all the elderly relied solely on social security for their income. Social security is essentially fixed income. Retired people don’t make more money as time goes on. However, they get a fixed amount each month. When inflation, or devaluing of dollar and rising prices, occurs it in return hurts the person who is part of the plan. Because things are becoming more expensive, they don’t get more nominal disposable income to pay for the items which have increased prices. Since they cannot afford the prices, they cannot solely rely on the social security checks to be their source of income. They must find another job or another means of income in order to support themselves. Even with social security alone, according to the Congressional Research Service, or the CRS, the 3.4 million elderly live below the poverty level.
Social security is not a sole reliable source because the federal government is writing checks from a bankrupt fund. Because there are no tangible dollars in the social security fund, presidents such as Clinton have borrowed money and ran deficits. Because the federal government has relied on the money in the social security pot to pay for other things, essentially borrowing it without paying it back, it creates a negative cash flow in the economy. The social security system is taking money from nothing. James Dorn from the CATO Institute states that “promised benefits far exceed estimated revenues, and if all future benefits beyond this time frame are included, the unfunded liabilities are nearly $16 trillion.” He goes on to explain that if Medicaid is added to...

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