Ssn Reform

A Much Needed Change

Benjamin Franklin was the very wise man that stated, "In this world nothing is certain but death and taxes." Paying taxes is something that we can not get around, no matter how hard we try. We pay taxes on food and clothes. We pay luxury taxes when we go on vacation. There is even a death tax. However, one of the greatest controversies dealing with paying taxes is the social security tax. The social security tax is one of the payroll taxes that many of the working Americans miss from their paychecks. The social security program was developed with great intentions. It was designed to help supplement people's retirement, but over the years this turned into a great problem. The debate has gone back and forth as to weather or not the program needs to be eliminated or reformed. The people that argue that the social security program needs to be eliminated say that the money needs to be trusted to the people to save for their retirement. This is not an effective way to solve the problem. The program needs to be reformed in order to fit the needs of a growing society while empowering and educating people on how to prepare for retirement.

The social security program was developed as a result of the great depression. The stock market crashed in October 1929. "Before three months had passed, the Stock Market lost 40% of its value; $26 billion of wealth disappeared. Great American corporations suffered huge financial losses. AT&T lost one-third of its value, General Electric lost half of its, and RCA's stock fell by three-fourths within a matter of months." (Information provided by www.socialsecurity.gov) This type of economic downfall had a major effect on the country. The elderly people felt the impact of the great depression the most. Something needed to be done in order to assist the poor. Many ideas were tossed around like the "Share our wealth / Make every man a king" campaign headed by Huey Long. Finally, in 1935 President Franklin D. Roosevelt stated in a message to congress, "Security was attained in the earlier days through the interdependence of members of families upon each other and of the families within a small community upon each other. The complexities of great communities and of organized industry make less real these simple means of security. Therefore, we are compelled to employ the active interest of the Nation as a whole through government in order to encourage a greater security for each individual who composes itÐ'... This seeking for a greater measure of welfare and happiness does not indicate a change in values. It is rather a return to values lost in the course of our economic development and expansion..." As a result, the social security insurance program was born.

This program helped people to put food on their tables and clothes on their backs. It literally prevented many Americans from starving. In the beginning the program was great and it worked the way it was designed. However, the changing demographics have caused a need for a change in the program. Because of the changing demographic, the program is losing money. People are now living longer and healthier lives than ever before. When the Social Security program was created, a 65-year-old American had an average life expectancy of about 12.5 more years; today, it is almost 18 years and rising. In addition, 78 million "baby boomers" will begin retiring in 2008, and in about 30 years, there will be twice as many older Americans as there are today. At the same time, the number of workers paying into the Social Security program verses the number of recipients is dropping. In 1960 there were 5.1 worker per beneficiary, today there are 3.3 workers per beneficiary, and their will be about 2.1 workers per beneficiary in 2032. These demographic changes have severely strained the Social Security financing.

One of the problems that came out of the social security program is that people started depending upon it as the bulk of their income. This income was never designed to be the main source of our retirement finances. Most of the social security reform suggestions deal with privatizing social security in some form. John C. Davis states in the article "How to Fix Social Security", "There are only three real solutions to Social Security's rapidly approaching fiscal problems: raise taxes, reduce spending, or make the current payroll taxes work harder by investing them through some form of personal retirement account (PRA)." Other reform suggestions are along the same line: "There are four general methods of improving the financial condition of the Social Security Trust Fund: (1) reducing benefits; (2) increasing revenues; (3) improving the rate of return on Trust Fund assets; and (4) other revenue sources, such as appropriating Treasury general funds. Benefit reductions can be accomplished through across-the-board cuts, means-testing, raising the retirement age, or changing the inflation-adjustments used to determine benefits. Revenues can be increased by raising the payroll tax rate, raising the cap on taxable income, extending the payroll tax to all government workers, raising income taxes on Social Security benefits, and diverting general tax revenues to the Trust Fund." American Institute of Certified Public Accountants, Inc (AICPA) Jeanne Shadi the CNN/Money Senior Writer stated in the article "Social Security: something's gotta give" stated that one of the option that may be considered is changing the formula for starting benefits. "Starting benefits might be reduced if the formula by which they're calculated is changed. One frequently discussed option: Instead of linking -- or indexing, as it is known -- initial Social Security benefits to wage growth, the starting benefits would be indexed to inflation. Since inflation tends to rise less quickly than wages, it's a reduced measure by which to set starting benefits."

There are many critics