Social Security has long been a topic of heated debate for the people of the United States from small, low income families to the most educated Harvard graduates. Although all Social Security programs serve for only one simple purpose to provide people income and benefit after their retirements, different people all have different perspectives and ideas on how this goal should be achieved. The new elected president Bush also carries out his own plan of allowing partial or total privatization of SS. Is it a good solution for the problems remaining in our present SS system? What is the main problem of the Social Security system? And how does Bush's proposal affect our financial future? Those questions are going to be answered in my paper. But first of all, let's take a look at the history and legislation change of the Social Security program.

Because of the massive unemployment and poverty caused by the Great Depression, the government realized that it had to do something to protect employees from unemployment, illness, and old age. The first step taken was the Social Security Act of 1935, Employees used to sue their employers to receive compensation after a work-related in

Although the Social Security program has achieved a lot for providing benefits for the retired workers and less-income families, there are still some problems remain in the system. One of the most major problems is that the money that the taxpayers earn on their mandatory Social Security contributions is a lot less than they could earn in a private pension, a funded system or even the unstable stock market. Harvard economist Martin Feldstein argues that "Social Security contributions can be expected to grow at the same low rate at which the payroll tax base has been growing : 2.6% , on average since 1960. The real pretax return on non-financial corporate capital was 9.3% over the same period." This information granted the 6.7 % difference, shows the loss is quite significant. Because of this result, distortions in labor supply will occur. People will need to work longer hours than if a funded system were used to be able to afford the same amount of retirement income. Feldstein estimates that this loss from Social Security taxes in 1995 was about $68 billion. That's nearly 1% of the GDP compared with the data from our textbook. The damage it dose to national saving and investment is severe. If we would switch to a funded or privatized system, it would expand the nation's stock significantly that the GDP would easily slide past $10 trillion, which is, according to Feldstein, equal to 2% of GDP per year.

I think the best solution to this problem should refer to the Bush's plan on the Social Security reform. From the last paragraph, we know that the main problem for the Social Security system is its low return rate and this is due to the inefficient government management of our tax money. So n

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Approximate Word count = 1150
Approximate Pages = 5 (250 words per page double spaced)