Social Security Privatize Yes/No Essay

2506 words - 11 pages

The United States Social Security System is often considered a political football, frequently debated on whether the government should continue to manage it or should it be privatized. Either way, in today’s economy, it’s vital to the welfare of many. The main purpose of the system is to provide benefits to America’s workers and their families for retirement, disability, and early death. (Unknown Social Security ProCon) According to the data collected in the 2000 census, “Social Security is the main source of income for men and women 65 and older.” (Hartmann, Lee Highbeam) This finding proves people have become to depend on the government for this benefit, and for a multitude of reasons ...view middle of the document...

“A 1972 amendment tied increases in Social Security retirement benefits to increases in the Consumer Price Index. In 1974, Social Security insurance was taken over by the Social Security Administration, and in 1983 an amendment allowed partial taxation of the benefits given to upper-income recipients. In 1999, payroll deductions for Social Security were set at 6.2% of annual wages below $72,600, and payroll deductions for Medicare were 1.45% of annual wages (no upper limit), with employers contributing matching amounts.” (Columbia Encyclopedia Infoplease) The rates previously listed continue to increase, often annually. The Social Security tax for 2010 is 6.2% of the first $106,800. Earnings above that are exempt from additional tax. In addition to the Social Security tax, all employee’s taxable earnings are taxed a 1.45% Medicare tax. Both taxes must be matched by the employer. (Averkamp Accounting Coach)
With all the tax revenue being generated, the next question often asked is; what is the best approach for investing it. This again, often leads to controversy. “Social Security funds are invested in federal securities, mainly long-term bonds. In 1997 a government advisory panel proposed that some of the revenues be invested in stocks and bonds to generate higher returns. The panel was divided over whether the money should be invested by the government or by individuals, as well as the amount that should be shifted from government bonds. Both approaches have their critics. Some regard government investment in stocks as a potential source of intrusive federal influence on U.S. businesses; others feel that allowing individuals to invest their Social Security funds would endanger the minimal postretirement “safety net” for all workers that the program is designed to provide if individuals invest unwisely. President George W. Bush, who campaigned for personal Social Security investment accounts, appointed (2001) a commission that offered several options for allowing individual investments in stocks and bonds as part of the Social Security program and for securing the program's financial health; it estimated that it would take as much as $3 trillion of additional revenue over the next 75 years and reductions in guaranteed benefits to accomplish both goals.” (Columbia Encyclopedia Infoplease)
The underlying theme with the proposals was the concern the cost of the program in its current state would outpace the taxes paid in from the worker population and the money made on the investments in early to mid-21st century. If this happened, benefits would have to be paid from money being received from the current worker population, which were expected to be insufficient to cover the need. This would put additional strain on the Federal government and could cause taxes to rise and benefits to be decreased. Historically, returns from investment over the past century have proven to provide sufficient returns which would address the financial void;...

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