Social Security Reform
A little over sixty years ago the nation struggled through what was, up to then, the most dramatic crisis since the Civil War. The economy was uprooted after the crash of the stock market and the country's financial stability destroyed. One of the many steps taken to alleviate the burden on the American people was that of the passing of Social Security Act of 1935 and its amendments by Congress and the President, Franklin D. Roosevelt (http://www.socialsecurityreform.org/history/index.cfm). Under the provisions of the Act, the government would take on the responsibility of taxing the income of all working Americans and returning the money through numerous public benefits and programs which provide monthly benefits to nearly 45 million retired and disabled workers, their dependents, and survivors. Now the nation faces an economic and political problem with the program instituted to earnestly help the people. In the first half of this century the government will face the task of paying benefits to a large generation with funds it will not have. Social Security is the largest Federal Program, accounting for 23 percent of all Federal spending. Almost all political sides agree that Social Security m
Questions arise as to how the government could do this without taking over the market and the consequences if there were a crash. Putting SS funds into the stock market for higher returns is agreed to be a very likely idea, but would individuals be willing to obey a compulsory law requiring letting the government manage funds on the stick market? There is also no true way to insulate investment planning from political pressures. If the market fell, the funds invested would go down also, and if they succeeded too well the stocks would raise interest rates on debt, hurting the economy (Business Week, How to Resecure SOCIAL SECURITY.). Compulsory saving in stocks would also require tax increases or cuts in government spending (Samuelson). Privatization, though, may be worth a try. Currently, the US Government can afford to experiment; as there exists no immediate SS crisis, and if funds are not raised for saving the benefits being paid after the trusts go bankrupt will not be at paid at 100%. A small amount of investment therefore definitely seems worth a try. "Social Security: A Program's Rise." Journal of Economic Perspectives 1995. A very practical, and yet controversial, method being proposed for saving is that of lowering the Cost Of Living, or making a Cost Of Living Adjustment (COLA). Last year it was discovered that the consumer price index (CPI) has been over-stating the annual cost of living by 1.1%. Social Security payments are directly tied to the CPI and determine the annual payment amounts. In other words, beneficiaries have been doing a little better than the true rate of inflation. Simply by reducing the CPI by 1.1 percent a year the government could save approximately $1 trillion in 12 years (Thomas 2). The benefit payments would still rise with the true cost of living, but the Social Security trust funds would be able to remain solvent well past the expectation dates proposed by the trustees. This simple solution also has been thwarted by political apprehension. US economist Daniel Patrick Moynihan, states, "politicians are scared of each other and the AARP" (Thomas 2). It may be likely, though, that President Clinton will appoint a non-partisan committee to review the Social Security Issues and lower the CPI, and thus benefits, through protected legislative order, sparing any legislators.
Some common words found in the essay are:
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Approximate Word count = 2287
Approximate Pages = 9 (250 words per page double spaced)
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