Social Security System Term Paper

Social Security System

How does one earn a living wage during economic hardship? Certainly, earning a living wage is the mainstay of a decent standard of living for most working age Americans and their families. However, Social Security, the nation's largest family protection program, is in much need of improvement. "America's most popular and successful social program, Social Security provides a steady, reliable income for 45 million elderly and disabled workers of all races and income levels, as well as for many of their dependents and those of deceased workers"(Hendley and Bilimoria). Before Social Security was enacted, organized business and Republicans bitterly opposed it. For example, Congressman John Taber (R-NY) said, "Never before in the history of the world has any measure been brought in here so insidiously designed as to prevent business recovery, enslave workers and to prevent any possibility of employers providing work for the people" (Hendley and Bilimoria). There have been many studies that indicate that there has been discrimination policies levied against minorities and women. However, in recent years, many have come to think that these policies may also be applied to youth as well.

While young people seem very attracted to George Bush's economic policies than skeptical elders, it is actually the younger generation of new workers who are destined to lose most, because of the cost of diverting Social Security revenues into the new individual stock accounts while still paying benefits to retirees. "A transfer from general revenues will be needed to help with the transition's negative cash flow.... Bush has said it several times, and I've said at least 200 times that we are going to have that transfer from general tax revenue" (Aaron and Reischauer). Sometime around 2040, the government will have to borrow the money to keep everyone whole. Otherwise, it will have to raise taxes or cut Social Security benefits deeply, or both, just as some Social Security defenders warn. The world of working-class families is made up of people who try to pay their mortgages and get their children off to college. Yet, the economy remains troubled, particularly for young people, because young people are paying more into system that they will probably not receive.

Conservatives have continued to criticize Social Security since its enactment in 1935, it, but its popularity has saved it from multi-front attacks. There since have been many attempts to reduce reinforcement among Social Security's varied constituencies, including youth and minorities. Still others have tried to generate support for changes that will actually weaken the system but claim to strengthen it. One of these methods is the constant move toward privatizing the entire Social Security system. In essence, what many conservatives since the 1970's, and now Mr. Bush, have tried to do, is to take all of the Social Security funds and put it into the stock market. This program could be disastrous for young people because the volatility of the market could deplete the system by the time the average thirty-year-old will collect his/her fair retirement share. Given that the hands of the Congress has been in conservative hands for the past nine years, and the White House has been in Republican hands for the better part of the last thirty-five years, it seems unlikely that young people will ever benefit from a Social Security system of the present or in the future, particularly in the next thirty-five years.

We must remember that Social Security is essentially designed for young people because they will need to rely on it for more of their retirement income than the middle-aged because of the growth that the middle-aged saw during the nineties. In effect it represents a safety valve for those young people who haven't been able to become financially solvent once they reach their golden years. It is particularly important to young minorities. "Social Security reduces minority poverty; the progressive formula used to calculate Social Security payments is beneficial for minorities, and other low earners" (Hendley and Bilimoria). We must realize that there are more people over the age of 40 than there are under that age, particularly when we consider that the baby boom generation will begin entering the age of retirement in the next ten years. In effect, young people should be considered a minority just as African-American and Latinos. If we reconsider what a minority is in this country, we must take the time to include young people, particularly poor young people who will have to pay the bill for the current weak and soon to be depleted insurance system of Social Security.

If we take this a step further we can acknowledge that with minorities becoming a larger proportion of the U.S. population, more of the population will rely on Social Security in the future. Thus, the system needs strengthening to help low-wage workers, who are disproportionately minorities. "And policies such as full employment at decent wages are fundamental to improvements in Social Security benefits" (Hendley and Bilmoria).

Such a policy would raise the earnings of low-wage workers and increase their future Social Security benefits at the same time that it would add more money to the Social Security Trust Funds. However, it is critical to recognize that the government should raise benefits paid to lifetime, low-wage workers that are especially important to future working-class young people and their families. "And, with the minority population of the United States increasing at a faster rate than the white population, a growing proportion of people will rely heavily on Social Security in the future" (Hendley and Bilimoria). In addition, Social Security payments are especially important to youth and minorities, who according to our present system, are more likely than others to have little or no other retirement income. "Among private sector workers 21 to 61 years old, about one in three African-Americans and one in four Hispanics had pension coverage in 1993 (latest reliable date), compared to nearly half (45%) of whites" (Hendley and Bilimoria).

We must remember that Social Security benefits are important to most retirees, all the more so since pension coverage has declined for all workers. The trust fund, however, has become a varied form of fiction. "For years the federal government has used the trust fund to disguise the actual size of the federal budget deficit, borrowing money from the trust fund to pay current operating expenses and replacing the money with government bonds -- essentially IOUs" (Samuelson).

Nearly half of the trust fund consists of those bonds whereas "the other half is simply an accounting entry attributing interest to the bonds" (Tanner).

The Social Security Administration insists that there is no need to worry. Those bonds are backed by the full faith and credit of the U.S. government. But that is irrelevant. If there were no trust funds now or in the future, what would happen in the next ten years? "The government would have to raise taxes to continue paying promised benefits...The government will have to raise taxes to make good on the bonds to continue paying promised benefits" (Tanner).

Either way, young workers can expect to get hit with a big tax increase.

The Social Security System, we are told, is secure for the next thirty-five years, but that may nothing more than hogwash. "Social Security taxes currently bring in more revenue than the system pays out in benefits. The surplus theoretically accumulates in the Social Security Trust Fund. However, in 2013,... The situation will reverse. Social Security will begin paying out more in benefits than it collects in revenues" (Samuelson). To continue to meet its obligations, it will have to begin drawing on the surplus in the trust fund. We must acknowledge that the elderly are wrongly blamed for problems in the American economy. While programs such as Social Security and Medicare should be reformed, those programs are not causing poverty for younger generations. "Economic problems are largely the result of corporate downsizing and government policies that benefit the wealthy at the expense of the middle and lower classes" (Minkler). Social Security is a pay-as-you-go program and the money that you pay in taxes today is not being spent properly. In essence, young people have to hope that when they retire, there is yet another generation of vibrant workers to pay the taxes that will fund today's poorer youth.

At this time, people are living longer and having fewer children, and subsequently there will be fewer and fewer workers to pay taxes and more and more retirees collecting benefits. "People (in their sixties and seventies) should not be automatically entitled to government benefits and should instead continue to contribute to society through work" (Samuelson). Even if there were no reduction in benefits or increase in taxes, an impossibility given Social Security's looming financing shortfalls, Social Security is an extremely bad investment for most young workers. "In fact, according to a study by the nonpartisan Tax Foundation, most young workers will actually receive a negative return on their Social Security taxes -- they will get less in…