What is a pay-as-you-go system? How does this concept explain the current?

Question

current finance mechanism of the Social Security system? Short of privatization, what could be a better alternative method of finance?

Answer 1

In a pay-as-you-go system (approximated by Social Security today), money raised by a payroll tax on wages is paid out almost immediately to beneficiaries.

Private funding reserves are the ONLY realistic way for future generations to be able to be financially independent. Otherwise there will be a LOT more homeless elderly running around.

Answer 2

Pay as you go is the best way to finance social security because it eliminates the biggest problem people have in planning for retirement, that is predicting the cost of living decades into the future. In principle pay as you go means that what ever the fraction of the mean wage level you retired with, will be available from taxing workers earning the mean wage at any future date regardless of intervening inflationary periods. The system is in trouble because of the baby boom and bust that followed, and the increasing life span of retirees so some adjustments are needed. The shortfall could be made up from general tax revenues, extending the retirement age, or increasing the cut off for SSI taxes

Answer 3

There are basically three types of financial systems.
1. Pay as you go- This means money earned today is payed out today or very at least very quickly. The best example of this I know of is simply buying something with cash.
2. Borrow-as-you-go. This means that instead of paying for something immediately you use credit. The simplest example I know of is the credit cards most people have.
3. Pay in advance for a future reward. One of the best examples of this is when you buy a gift card. The card is worth so much money that the recipiant will be able to use at a future time.

Our Social Security system uses a combination of the first two systems. Money earned by and taxed from today's young and middle aged people is given in the form of Social Security to today's elderly. When today's young and middle aged people become ready for Social Security they will receive it from money that has been taxed from the young and middle aged of the future.
Unfortunately, there are times when those that need to receive Social Security checks outnumber those that pay the taxes that fund Social Security. Some money can be saved through direct depositing the money but not enough.
It is not so much that the money does not exist but today's population has seen increase in illegal immigrants over years past years. ILLegal immigrants can't be taxed because they don't have a Social Security number and taxes are hooked into your Social Security number. This is why you have to provide your Social Security number when you get a job or win a significant amount of money.

Answer 4

Pay as you go should apply to the financing of all government programs including the war. At this point the government has robbed the social security to pay for other things and has borrowed from other governments like China to finance the war.
Pay as you go would be that we pay all of our expenses from the taxes we collect.
The history of the government has been that most of the time when we have had a Democrat as a President we have had balanced budgets, but the Republicans have caused us to go into debt.