What's wrong with our social security system?

Question

And how would you solve the crisis?

I have to answer this for my econ extra credit. I'm not quite sure how SS works. Please help!

I'm also not a tenth grader slacking off on a homework problem. There is SO much info on social security. I have tried researching. I need a broader understanding of how social security before I attempt to have an opinion on it. For example, what does it mean to "privatize" social security?

Answer 1

The idea was to provide our senior citizens finical support in their old age. The problem is that when the system started there were 5 or so people paying into the system for each person that would receive benefits and those benefits wouldn't last long because the person would soon die.

No days the equation is not so good there are only 2-3 people paying for each person that gets benefits and those people are living longer and longer. When the baby boomers start to retire then the equation will be reversed. With 5 people expecting payment out of a fund that one 1 person is paying into the fund soon goes into a negative value. That is the simple problem.

Now add politicians who can't stand to let all that money sit around doing nothing. They steal from the fund, passing measures that promise to pay it back, but then changing those bills. So the social security fund is further imperiled.

Then you have the simple problem that people are living longer and medical care is getting more and more expensive. There has been an adjustment made to social security that delays the payment date, but with current life expectancy they are unrealistic.

Then there is the normal way that the United States government runs the nation, we use tomorrow’s money to pay for today’s bills. This is called the national debt. The American government claims that most Americans are in debt and don’t have enough savings, which actually harms the nation’s economic standing, but the national government is the worst offender of all.

Currently we cannot pay the debts we owe our own nation, never mind the debts we owe future generations and when those debts increase and the number of people that we owe them to increase then what happens? You can’t manufacture value out of nothing; it has to come from somewhere. Some excuses for the national debt are that we can expect the value of our current holdings to increase. We can also expect to find new wealth or have other nations pay back the money that we have loaned them. But, these too are unrealistic expectations. The United States itself is heavily in debt and a lot of loans we have made to the third world probably will never be paid back.

The solution will be one for your generation to provide and it may not be an easy one. Can you imagine the Staples Washington Monument, or the Lincoln Memorial sold to Sony? We are going to need some sort of solution like this to pay what we have promised ourselves. That or maybe we can try and sell parts of Alaska back to Russia, hopefully those that don’t have any gold or oil in them anymore.

The probably result of the problem will be one of delaying it until the entire system collapses. Many people want us to try and solve the problem of tomorrow’s debt today, but since it is tomorrow’s problem few people really care. This will continue until tomorrow finally comes and the problem of social security becomes one that your generation has to solve. Will the US be forced to devaluate its currency, to drastically change social security, or to just give up on the entire system? Your professor wants you to start thinking about this problem because just like credit card interest the longer you take so solve the problem the bigger it will become.

Answer 2

Social security was designed by President Roosvelt in the 1930's as a means to take older Americans who co no longer work, and give them some money to take care of themselves being that at that time items such as 401K's and pensions were not readily available. Life expectancies increasing was also a factor in starting the program.

What I see as wrong with the program is that now the free market has come up with a system where many people can save for their retirement. I have a co-worker, for example, who probably will be getting her own pension of $40,000 a year, on top of her husband getting one probably in the $100,000 ballpark, and yet she insists the government better not touch the $1,000 she'll be collecting in social security. We need means testing. If you don't need social security, you shouldn't get it.

While it is a nice idea to have individual savings accounts, I think the people who could do that are already doing that. With means testing, we can get through the next thirty years where the baby boomers will be collecting a large amount of social security, but by 2035, when most of them are deceased, we should be on a more level footing.

Answer 3

It's existence. Social Security is an oxymoron, as most people on it can't afford to be social and have no security. On a personal level, I also believe that it further erodes the family. Let me be absolutely mean right now. Let's abolish it. Apart from anger, what will be one response from people? They will have to look to the family to help, perhaps even those on it needing to move in with an adult child, and if that adult child has their own children, that puts three generations of family under one roof, which might seem too old fashioned to some, but in reality strengthens the entire family bond. After all, the President's own children benefit from a Grandmother in the residence (and while I am no fan of the President, I DEEPLY admire that his mother-in-law takes a child care roll for them; the kids only benefit), why should it be bad for the rest of society? I know that you can't abolish Social Security entirely. However, it is not a bad way to start a genuine conversation on the issue and by being so far extreme, I have only to compromise to get what I would want in the end anyhow; stronger families.

Answer 4

They way they tax U. The payroll tax only goes up so far,after that it remains flat,but the more wealthy still get a somewhat bigger check each month anyways.Also the government taking money out of the fund just to buy weapons and other liabilities as well.Now with the Baby Boom starting to retire,there's far more people who's getting the retirement account than there are workers.A few ways around the problem.U can increase taxes or at least reform how it's financed.Increase the retirement age to either 67 or even 70 say.Bring in more workers from other nations or just somehow increase the productivity per worker hour.I happen to find all the above solutions except the increasing productivity part politically unrealistic in today's political envionment.

Answer 5

Social security is a pyramid scheme. It can only pay out as much as it takes in. Therefore, it needs more people paying into the system to meet the monthly payout promise that has been made. Since social security started running a surplus in the early 1980s, Congress has been spending the money while claiming it is in a "trust fund." The "trust fund" is a collection of IOUs. In order to redeem these IOUs, Congress will have to raise the money from general revenue which means raising income taxes.

Just to put things in prospective, pyramid schemes are illegal for private citizens to operate. Only the government is allowed to steal money in this manner. Solving the crisis means immediately raising the minimum retirement age to 71 while raising the rate to about 8%. Another fairy tale regarding social security is that the employee pays half and the employer pays half. Anyone who has taken Accounting 101 understands that in business, there is a concept of the cost a company is willing to pay for an employee. If all they can pay an employee is $50,000.00 annually, they must subtract the cost of taxes; to include social security, unemployment insurance, workmen's compensation, etc... Thus, raising the FICA rate will do nothing more than reduce take home pay since companies do not have a magic fund of cash they can dip into and pay the increased rate.

The best way to fix social security is to eliminate it. Some projections are that people who begin to collect benefits in 15 years or so will get $0.70 on the $1.00 in benefits. Not a very good return on investment. All social security is doing is creating a huge debt that will be put on the backs of future generations. That is not fair which is why I support eliminating the program, even though I've been paying into it for 38 years (since I was 14 years old).

Answer 6

The Social Security system was begun to assure that older citizens in this country could afford to live decently in their twilight years after retirement. It also was to protect workers who were injured and could not continue to work. The fund was to grow because there were more workers paying into it than people drawing funds from it. The 2.3% (the original amount contributed, I think) supplemented by an additional like amount from employers that was contributed to the fund would have kept the fund solvent forever, particualrly if managed properly, but the money never went into the fund. In stead Congress put all the money into the general fund for our country and then overspent that until our current national debt is trillions and rising. This deficit grew while the rate of payments into the fund was constantly rising too. The 'fund' will be bankrupt in 'whenever', because in whatever year that turns out to be there will not be enough money collected that particular year to pay for expenditures for that year. This is one more lesson in how to be hood winked by our governement.
Solve something that was caused by the idiotic actions of hundreds of politicians? You must be joking! Given absolute power I would place all funds collected into an account and invest it conservatively in the stock market with proper oversights. I'd also demand that the Federal Government pay back over about a decade all the funds misappropriated from Social Security contributuions and deposit that in the same fund. Fine, no problem with SSA, however, the government would now be bankrupt.
The shame is that the first 15% of anything you earn now goes into this fund. You pay the first 7%+ and then your employer kicks in the same amount. So, that is almost 15% because employers look at the total cost for a worker per hour or some period of time and he could pay you what he is contributing to SSA for you. In the end it is just another tax called a rabbit. Now Congress must pull that rabbit out of a hat (or a Black Hole).

Answer 7

It is run by the government.

That is all the answer necessary. I would solve it the same way I would solve most government programs. Get rid of the entire system. I every American put HALF of what the "contribute" to social security in a jar, they would be better of than they are under ANY government run system.

Those who believe the system was designed to provide for retirement are WRONG. The system was designed to provide for those that outlived they PERSONAL savings for retirement. When the system started, the 'retirement' age was 2 year OLDER than the life expectancy. The majority of people were expected to DIE before the were eligible to collect anything.

Answer 8

It was Designed at a Time when the Population was Lower, and Lived a Shorter Lifespan.

Medical Technology has allowed People to Live MUCH Longer than Before. Longer Life means more SS Checks drawn.

Post-WW2 Baby Boomers not only Increased the Population, but Have HAD Children, who are Having Children. This is More than was Planned for when the SS was Designed.

Government has Borrowed Money from the Fund, and only Recently moved to Replace it. Anyone who knows Interest and Investments knows the Loss will not Catch Up. Particularly, since the Payouts outweigh the Income. Much more Money has to be Input to Offset the Expenses....VERY Basic Economics.
The PROBLEM: Who Pays and Where From? My Guess....it seems like SOMEONE is Spending a Fortune Overseas(not Counting the Windfalls Here).

Answer 9

People that need it can't get it and are given the run around unless it is proven that you are insane, a drug addict or alcoholic. Your government keeps spending on things not related to social security and never puts it back with interest! F.I.C.A taxes are taken from your check every payday...so much for returns on anything they take.

People earning over $200,000 should not have to pay into it and should be able to take care of themselves without obtaining ANY social security benenfits. They can afford to invest their money for themselves when they become retirement age, disabled or elderly.

Answer 10

About the only answer left is Privatizing it and making it the persons responsibility.

When Social security was instituted people didn't live much past 65. Now that the avg lifespan of Americans has increased substantially. There are to many people in the system to pay for it and as mentioned before with the baby boomer retirement coming there will only be more people getting social security checks. The American taxpayers cannot handle it all without huge tax increases or making Americans responsible for their own retirement.