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Social security in America

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  1. Introduction
  2. Social security and the American government
  3. Social security benefits
  4. Alternatives to increasing payroll taxes
  5. Risks associated with privatization
  6. Proposed individual investment accounts
  7. The use of private accounts for investment
  8. The experiences of other countries with privatization
  9. Actual and projected social security balances
  10. Bibliography

Social Security is one of America's most important and successful programs. It has, since 1935, helped to reduce the poverty rate of those 65 and older drastically, having a greater impact than any other anti-poverty measure. Increasing Social Security expenditures since 1960 have reduced it further, from 35 to 10 percent of those over 65. Social Security has helped to bring about a situation where the number of elderly living below the poverty line is roughly equal to those of working age adults. The impact and influence of Social Security on America's workers means that its predicted shortfall must be treated with some concern and the government should begin taking steps to ensure the program's solvency sooner rather than later. However, claims that Social Security will go broke soon, are unnecessarily alarmist. It is predicted that the system will be pay out a majority of benefits for the next 38 to 48 years, if no steps are taken now. This gives the government enough time to weigh its options in keeping the system solvent. Yet delaying the implementation of these changes reduces the ability to spread costs more evenly over the working population and places a greater and unfair burden on younger workers.

[...] Social Security can only find permanent solvency in either reducing current benefits or increasing payroll taxes, or a combination of the two.[21] Certainly, other reforms are desired and encouraging people to retire later and boosting income through economic growth should be considered as well, but these are not the overall solution for solving the shortfall. There are numerous risks associated with privatization and fewer benefits than what be gained through a simple change in payments and taxes collected out of payrolls. [...]

[...] Dean Baker and Debayani Kar of CEPR, Defined Contributions from Workers, Guaranteed Benefits for Bankers: The World Bank's Approach to Social Security Reform, July 2002 Paul Krugman, Little Black Lies in The New York Times, January Social Security Reform: The Nature of the Problem. Issue Brief No US Department of the Treasury "Our Fight: Keeping Social Security Strong." AARP Nov . "EPI Issue Guide: Social Security." May 2005. Economic Policy Institute Nov . PINC-09. Source of Income in 2005-Number with Income and Mean Income of Specified Type in 2005 of People 15 Years Old and Over by Age, Race and Hispanic origin, and Sex Aug US Census Bureau. [...]

[...] It can make the burden of reforming the payroll taxes and changes in benefits payments easier to bear. A growth in real wages would create increased disposable income, which would compensate for income lost through paying more in payroll taxes.[19] Privatization comes with increased risks and new costs from a change in administration of Social Security. It seems a tempting solution, but the amount of money one would have to earn, save, and invest to gain the equivalent in benefits that Social Security provides, is often underestimated. [...]

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