Social Security reform
Often called the third rail of American politics, social security has been honored as a sacrosanct pillar of our social structure. We want to believe that when we retire, we will be taken care of, that someone who works long and hard all their life has a reward at the end of the tunnel. In the past couple of years, President Bush and the GOP have been annihilated around the country in taking on social security as they have tried to partially privatize it. If they had been successful, medicare would have been next. These two programs alone account for approximately 10-15% of our total national budget and the percentage goes up every year. At the very least, social security needs to be reformed.
When social security was started, it was a brilliant pyramid scheme where, due to shorter lifespans, relatively higher birthrates, and a higher retirement age, each individual drawing social security was supported by fifty or so workers paying into the system. Now, due to low birth rates, (impacted by the era of abortion and contraception), better medicine, etc. there are only 2-3 workers per social security drawee. The system is not taking in as much money as it was relative to what it pays out and within ten years it will be losing money. Although politicians argue over the exact date of its collapse, some Generation X-ers, (and perhaps even some baby boomers), and certainly our children cannot expect the system to persevere for us. We are paying into a system that will not be there for us. If there is any merit or good in having such a system, reform is needed.
The second major problem with social security is how it is collected. It is a flat tax, up to a point, and then regressive. Most Americans believe in the idea of progressive taxation, that is, higher tax brackets pay a higher percentage of tax on their earnings and lower income households pay a lower percentage. Regressive, by contrast, would be where lower income families pay a higher percentage of their earnings and the well-to-do get a tax break. Social security is collected at a flat percentage of your income, independent of what you pay for regular taxes. The deductions and credits you qualify for do not apply to the social security tax. Once you hit roughly $90,000 in income, you do not pay a dime of social security taxes, however, for money earned above the threshhold. Consequently, a millionaire will pay at least 100 times less of a percentage of his/her earnings as somebody below the poverty line. If you are rich enough to cross that 90,000 and change threshhold, you get a huge tax break just because you have more money.
The third major problem is that social security is not kept in a separate account. It goes into the general treasury. Although you will see a separate line on your taxes for the social security tax it goes to the same federal treasury. There is no account growing interest for your retirement. There is not even an account for redistribution to the elderly.
The fourth major problem is with how it is paid out. A billionaire like Bill Gates could draw more money from social security upon retirement than a poor retired blue collar worker. This is true despite the fact that Bill Gates will not have paid social security taxes beyond the first 90K of his income in any given year and the blue collar worker will have paid a higher percentage of his/her income into social security.
The fifth major problem is the amount that is paid out doesn’t cover the bills. The initial idea of social security was to provide financial security in retirement. Now social security, on average, covers only 40 some percent of the cost of living in retirement.
I am not in favor of abolishing social security altogether, such a step would be far too drastic and take a partial safety net out from under those who depend on it. I agree that promises to seniors has to be kept because our government, our society, has made that commitment. People have counted on it and cannot be blindsided by a sudden shift in policy. But the time is now to address these problems and start taking steps to reform a failing program that is unjustly operated. To the merits of partial privatization, I would agree with its proponents that in the event the system fails, people being allowed to invest their own money would aid them come retirement. Investing in a 401(k) like retirement program is better than money just sitting in the bank, on average, and certainly better than money paid in that never even earns a cent of interest. The danger, opponents say, is that partial privatization will lead to full privatization and leave poor investors without a safety net. While this concern is legitimate, it is hard to swallow the simultaneous refusal to address reform of the program from some of the same representatives. Also, through engaging the process of reform, there are many potential ways social security could be saved, both as an institution for our retirees and as a justly executed social program.
Last, this issue should not be politicized. Given its enormous and growing impact on the federal budget, and given the current budget crisis, it is of paramount importance that the issue be addressed effectively or else, sooner or later, we all lose.
