Social Security
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Social Security is an involuntary social insurance program enforced by the United States federal government. The socialistic program was one of the "hottest" topics under consideration in the 2004 U.S. presidential election and in early 2005, when President George W. Bush and Senator John McCain began an unsuccesful campaign to give Americans the right to voluntarily opt out of the system and seek personal retirement accounts by depositing their payroll taxes into personally owned and invested accounts similar to 401(k) plans or IRAs. Social security systems are common in most developed nations.
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History
In 1889 Germany was the first country to introduce government pension plans.
In the United States a limited form of the Social Security program began as a measure to implement "social insurance" during the Great Depression of the 1930s, when poverty rates among "senior citizens" exceeded 50 percent. Social Security was controversial when enacted and remains so today.
The Social Security Act was drafted by President Franklin Delano Roosevelt's committee on economic security, under Edwin E. Witte, and passed by Congress as part of the "New Deal." It was controversial when originally proposed, with one point of opposition being that it would cause a loss of jobs. Historians such as Edward Berkowitz subsequently contended that the Act was a cause of the "Roosevelt Recession" in 1937 and 1938.
In 1956 the US Congress enacted the Medicare program which guaranteed affordable health care to citizens over the age of 65. A Medicaid program was established to provide health care for those who could not afford private health insurance.
Today most developed nations have an extensive social security system, however the United States are an exception compared to Western Europe, Japan and Australia.
Social security will face many problems in the 21st century, most notably the aging of the population in developed nations, although more problematic in Europe and especially Japan, will strain American social security budgets [1]
Social Security and African-Americans
African-Americans pay too much into Social Security while working and get back too little in retirement benefits to make Social Security a viable benefit.[Citation Needed]
The amount of social security benefits received is partly dependent on the length of one's life, and African-Americans generally have lower life expectancies than other groups.[Citation Needed] When a black man reaches age 65, he is expected to live only another 13.9 years,[Citation Needed] almost 2 years (24 payments) less than a white male. The RAND Corporation concluded that, because of differences in life expectancies and marriage rates, on a life-time basis the income transfer from blacks to whites is as much as $10,000 per person.[Citation Needed]
African-Americans often do not have enough money left over after paying taxes to save for retirement.[Citation Needed] Elderly African-Americans are much more likely than other groups to be totally dependent on Social Security for retirement income.[Citation Needed] Social Security's benefits are simply not enough: the poverty rates among black elderly women is 29 percent-almost twice the rate for all women.[Citation Needed]
African-Americans would be among those with the most to gain from transforming Social Security into a system of individually owned, privately invested accounts, similar to IRAs or 401k plans.[Citation Needed] Social Security reform must be looked at in light of the alternatives.[Citation Needed] Incremental reforms to prop up the existing system-such as raising payroll taxes or cutting benefits-could disproportionately harm African-Americans.[Citation Needed]
Social Security and women
According to a study by researchers at Harvard University, virtually every woman-single, divorced, married, or widowed-would probably be better off financially under a system of personal retirement accounts, the earnings of which could be shared by spouses.[Citation Needed] The researchers studied 1,992 actual women who retired in 1981, and compared their Social Security benefits to what they would have received from a personal account that returned 6.2 percent.[Citation Needed] Every woman studied would have been as well off or better off with a personal account.[Citation Needed] Not one woman was worse off under a voluntary system. On average, personal accounts would have provided the single women with 58 percent more than Social Security and wives with 208 percent more.[Citation Needed] Those higher returns are critical to women's well-being in retirement. Today, Social Security leaves 13.6 percent of women in poverty.[Citation Needed] Research shows that it doesn't have to be that way.[Citation Needed] In addition, voluntary account plans typically include a safety net that can ensure that every woman's retirement income is at least at or above the poverty line.[Citation Needed]
Reform
Social Security is going bankrupt.[2] The U.S. federal government's largest spending program, accounting for nearly 22 percent of all federal spending, faces irresistible demographic and fiscal pressures that threaten the future retirement security of today's young workers.[Citation Needed] According to the 2003 report of the Social Security system's Board of Trustees, in 2018, just 14 years from now, the Social Security system will begin to run a deficit.[Citation Needed] That is, it will begin to spend more on benefits than it brings in through taxes. Anyone who has ever run a business--or balanced a checkbook--understands that when you are spending more than you bring in, something has to give--you need to start either earning more money or spending less to keep things balanced. For Social Security, that means either higher taxes or lower benefits.[Citation Needed]
Even if Social Security's financial difficulties could be fixed by raising taxes or cutting benefits, the system would still need to be reformed. Social Security simply costs too much and pays too little. Social Security's rate of return on payroll taxes is dismal (about 2 percent) and declining. Workers deserve a retirement system that will make the most of their money.
Social Security Reform would lead to an increase in national saving, with hundreds of billions of dollars invested through individual accounts every year.[Citation Needed] Those investments, in turn, would substantially increase national investment, productivity, wages, jobs, and overall economic growth.[Citation Needed] In addition, Social Security Reform would amount to an effective cut in payroll taxes, boosting productivity and employment.[Citation Needed] Martin Feldstein, of Harvard University, estimates that modernizing Social Security has a value of $10-$20 trillion to the U.S. economy and would permanently increase our GDP by 5 percent. That would translate into at least one million new jobs and an increase in annual income of $5,000 for a family of four.[Citation Needed]
Pro's and cons of social security
This is a list of the most common arguments used in favour of, and against social security, some may not apply to American social security, since it is not as extensive as that of other developed nations.
Pro's
- Guaranteed affordable health care for everyone.
- Guaranteed income for the elderly who can't afford a private pension plan.
- Higher education becomes open to all social classes: chance to escape from the poverty cycle, people with high potential but small bank accounts can go to college.
- Pensions can not "disappear" because of fraud within a pension fund, or because a pension-funds goes bankrupt.
- Victims of an economic recession won't fall into extreme poverty.
- Social security decreases extreme poverty, which in turn decreases crime [3].
Con's
- Individual Empowerment: individuals would have more motivation to work hard and succeed, this does however doesn't benefit the disabled and the economy is unpredictable (recessions).
- Higher Returns and Greater Benefits: even the most conservative investors would accrue substantial assets during their lifetimes through privately invested accounts, yielding far more than Social Security promises in retirement income.
- Improved Economy: economists believe that the overall economy will benefit from an increase in savings and investment resulting from this system.
- Some individuals will get "lazy" and choose not to work, only costing society.
