Posted: April 1st, 2015

The future of Social Security

Will Social Security survive into the 21st century?

The social security system in the U.S.A cannot be disputed as one of the most important and successful insurance program in the world. Over the years the social security has given cash as well as provided insurance to the elderly as well as the disabled. However, with time there has been an increase in the gap between the promised benefits and the taxes that citizens have paid. Such a situation will make it extremely hard for the government to continue with the program. However, those tasked with the responsibility of reviewing are the politicians. Understandably, no politician wants to take away what remains to be the hope for so many Americans. Be that as it may, it is important that the program is not scrapped off; my opinion would be for the government to review the benefits that one accrues depending on their financial situation as well as the total amount that the government has collected.

Traditionally, all recipients of social security have received more than they contributed towards the program. For those who were rich, the social benefits would be significantly higher as compared to those who were poor. This is the main areas that any reform initiatives should be directed. The social security should observe and uphold some principles such as equity, efficiency, and progressivity. It must be noted that all the three principles may sometime not be agreeing, however, they are important in helping shape decisions that give a mutual understanding as well as providing a neutral ground. For example, on the principle of equity, it has been argued that the social security plan favors the rich and does not help in equity (Bakija & Steurle, 1997). However, the counter argument has been that the poor receive a significantly higher percentage in benefits as compared to the amount of money they will have contributed. The common ground is that the rich have the means and although they receive a small percentage than the poor, they also get more than they had contributed, these are some of the questions that are very controversial. Congress must look at the laws and determine what percentage the rich should get given that social security is about providing insurance for the disenfranchised. Most of the rich people continue to be capable even after they retire the issues is raised on whether they still qualify for these benefits.

However, before looking at some of the changes that need to be made, it important to note some of the guidelines that shapes the current policy on social security. The social security is anchored on the principles highlighted earlier in the discussion. It is important to note than economic efficiency is the state wherethe resources are used in making the consumer more satisfied. Applying this principle in the political context would mean that the economy does not favor one person at the expense of the others; the issues here are very much related to equity. The United States being a free market economy continues to leave the operation of the market on the individuals. Some would argue that this principle should mean that every citizen het what he or she paid for. However, such a policy would be in conflict with the principle of equity and democracy upon which the U.S.A was founded.      A democratic and fair government has the responsibility of redistributing opportunities equally on all its citizens. The same principle that applies in taxation should be applied in the social security (Kingson & Schulz, 1997).

The social security system was adopted with the aim of helping achieve progressive redistribution. One of the main beneficiaries therefore was the elderly group. However, social security can well be said to touch the lives of all Americans at some point in their lives. This explains why scrapping it is not an option. Every worker in the country- be they poor or rich- will receive a retirement package from the program (Social Security Administration, 2006). It is also important to note that there is not much complain or debate on the benefits given to the elderly. The main debate is on the question of individual equity. Dire hard capitalists raise the question on why there is a need to distribute wealth yet America is a capitalist system. Those in this school of thought argue that it would be more prudent to have a smaller program that would ensure redistribution only to the very needy and the elderly while retirement programs are offered by the private sector. However, this argument does not consider the principle that guide government spending. Further, it is not possible as yet, to have a private insurer who can tackle as many risks as the social security program does.

Another point that should be addressed is that people have been found to lack financial discipline. If the citizens were left alone to save as they want, then most would not. The social security system therefore ensures that it is mandatory for every worker in the U.S to save. Now that we have seen the many advantages that the social security has had on Americans, we must then consider why moving in to the future, reforming the social security is a must. As we initially discussed, the number of promised benefits continues to rise while the same is not reflected in revenue allocation. This basically means that the amount of revenue collected cannot sustain payments. This fact can be attributed to a number of happenings over the last thirty years when the policy was last reviewed. Firstly, there are a huge number of retirees as a result of changes in the demographic trends. Given the increase in life expectancy, there are more citizens reaching retirement age than the makers of the policy had anticipated. Secondly, Americans’ rate of taking early retires has increased. Thirdly, the birthrates in post world war two America were high which means the same people who are retiring now are more than those working, in the next twenty or so years the situation is likely to be such that a small group of working class people are sustaining a big number of retirees (Diamond, P, & Orszag, P. 2005).

Fourthly, inflation over time means that more benefits will continue to be given. This is because the social security laws are made in such a way that they are reliant on the economic situation. This perhaps explains why some of the laws that are being reviewed. For instance the retirement age has been raised to 67. The age limit may even be raised further. However, this plan is definitely going to hurt the young population as unemployment remains high. Another plan, which is largely beneficially and in line with my proposal, is to increase the taxes that are imposed on the benefits paid to the rich. Taxing, however, will not completely solve the problem. Economic and financial analysts seem to be in agreement that by 2017, the trust funds will have run out. In such an eventuality, the law requires that either benefit cuts occur or taxes are raised. Of the two options, there is need to consider some very salient issues. Firstly, the American population especially the needy continue to have more health care needs, the cost of health care has continually increased. A cut on the benefits would automatically disenfranchise them. Secondly, the cost of sustaining these elderly and needy people continues to increase (Brown et al, 2009). The only solution therefore would be to strike a balance between the two.

Given the principles outlined and more so that of equity, it is necessary for the government to increase the taxes imposed on the upper classes and the super rich. A third of their benefits should to the government in taxes. This would help the government to reduce the deficit between its finical obligations on the Social Security as well as the revenue raised. The reduction in benefits would pals reduce the disparity incomes between the income groups in the country.

From the discussion, it is clear that there is a need for the review of the Social Security policy in the U.S.A. however; it should also be clear that the social security continues to benefits lots of citizens especially the poor and those in lower income groups. Scrapping the program would therefore have dire consequences on the lives of those who rely on the program. The only viable and pragmatic decision would be for congress to reduce the benefits that the rich get from the program. This can either be done by increasing the taxes imposed on the benefits or reducing the percentage that the rich get from their contribution.