Social Security Privatization
Over the past few decades, social security has transpired to be one the most debatable as well as one of the biggest federal programs. Even though the benefits derived from the program are well-liked by the recipients, there is still concern about the issue of retaining enough revenue to continue to ensure the benefits of the program in future generations. The real concern is what to do with the system when the baby-boom generation begins to retire in 2010. No one can be sure if the currently imposed taxes are sufficient to fund the benefits (Aaron 1989). The current system that was started in 1935 taxes the wages of the American people, and then deposits these revenues into the OASDI Trust Funds. This pay as you go system takes the revenues from the current working generations, and uses the funds to pay the current beneficiaries of the program. However, as the number of beneficiaries increase in the coming years, there may not be enough revenues to provide the same amount of benefits. "More important, however, the reports project that unless corrective action is taken, the Social Security program will become insolvent--no longer be able to pay promised benefits in full--around the year 2030, well within the retirement years
of the baby boom generation (Diamond 1996)." Some economists argue that the social security tax may need to be raised to a level of 25% to allow for the same level of benefits. Another major disadvantage of privatizing is that there would no longer be a redistribution of income among the social classes. Over the years, the poverty rate among the elderly has steadily decreased. However, with privatization, many people in poverty may actually see a reduction in benefits, whereas the richer continue to experience greater benefits even though they may not need such benefits. Before being allured by the advantages of privatization, one needs to consider the stated downfalls of switching to such a system. Clearly, as soon as you put people's money into their own hands to invest, the major issue that comes to mind is how do you know if they'll make the right decisions. As the saying goes, "the greater the risk, the greater the return." Well, in order to get the larger return, many individuals will also have to take greater risks in the financial markets. As economist Rober Eisner notes, "The idea would result in varied rates of return, with some winners and inevitably some losers. It would be destructive to the principle of social insurance, and it should be rejected" (Skidmore 1999). The other major concern with the system is that how do you implement the system? It's true that Chile incorporated their plan successfully, however the United States differs greatly from Chile. The costs to maintain the system in Chile are already very high, and incorporating the system in the U.S. economy would have even greater expenses. Every fund manager must receive payment for their services, and the ability to manage 150 million individual accounts is much tougher than 1 social security fund (Diamo
Some common words found in the essay are:
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Approximate Word count = 1218
Approximate Pages = 5 (250 words per page double spaced)
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