Social Security In The 21st Century

The 2004 Report of the Social Security Trustees is in; but the jury is still out эarguing the findings of the report. Agree or not, the masses have a good idea of эthe final ruling and they all agree that the current state of the social security эsystem has suffered, for a very long time, from an ongoing deficit problem that эwill continue to grow unless immediate steps are taken to address the problem. эPeople, on both sides of the fence, argue in support or against the president's эproposed plan to save the Social Security system. Yet, they all concede and эacknowledge that in reality a problem does exist; and unless calculated эmeasures are taken, this problem cannot be controlled and will snow ball the эSocial Security System into bankruptcy.э

The Social Security system was designed in 1935 for a world that is very эdifferent from today. In 1935, most women did not work outside the home. Today, эabout 60% of women work outside the home. In 1935, the average American did эnot live long enough to collect retirement benefits. Today, life expectancy is 77 эyears. (2004 Report of the Social Security Trustees, p. 81) Benefits are expected эto rise dramatically over the next few decades. Because benefits are tied to wage эgrowth rather than inflation, benefits are growing faster than the rest of the эeconomy. This benefit formula was established in 1977. As a result, the current ээ20-year old contributor is promised benefits, which are 40% higher than what will эbe paid to seniors who retire this year. However, the current system does not эhave the money to pay these promised benefits. Furthermore, the retirement of эthe Baby Boomers will accelerate the problem. In just 2 years, the first of the эBaby Boom generation will begin to retire, putting added strain on a system that эwas not designed to meet the needs of the 21 century. By 2031, there will be эalmost twice as many older Americans as today, a drastic increase from 37 эmillion today to 71 million. э

Currently, there are fewer workers to support our retirees. When Social эSecurity was first created, there were 40 workers supporting every one retiree. At эthe same time, most workers did not live long enough to collect retirement эbenefits from the system. Since then, the demographics of the society have эchanged dramatically where people are living longer and having fewer children. эAs a result, there has been a dramatic change in the number of workers эsupporting each retiree's benefits. According to the report:э

э1.э In 1950, there were 16 workers to support every one beneficiary of Social эSecurity.э

э2.э Today, there are only 3.3 workers supporting every Social Security эbeneficiary.э

э3.э Moreover, by the time the current youngest workers turn 65, there will be эonly two workers supporting each beneficiary. (2004 Report of the Social эSecurity Trustees, p.47)э

Social Security is heading toward bankruptcy. According to the Social эSecurity Trustees, thirteen years from now, in 2018, Social Security will be эpaying out more than it takes in and every year afterward will bring a new эshortfall, bigger than the year before. When the young workers of today begin to эretire in 2042, the system will be exhausted and bankrupt. (Summary of the 2004 эReport of the Social Security Trustees, p.1) If immediate action is not taken to эsave it, the only solution will be drastically higher taxes, massive new borrowing, эor sudden and