With the current administration deadlocked in issues such as wars in the Middle East and healthcare reform, one ominous concern surely looming on the eve of 2010 is the subject of the social security. Social Security is a social insurance program funded through payroll taxes, and it provides benefits for retirees and the disabled. The subject of the matter is that the Social Security Administration (SSA) has projected that the Social Security funds will be depleted by 2037. This is especially alarming because it is a four year decrease (from 2041 to 2037) since 2008.
Despite the social benefits these entitlement payments provide to its recipients there are many problems that must be addressed with the program to ensure to its longevity. As stated before, the program may dry out completely; this in part because of an influx of Baby Boomers retiring while the number of paying workers decreases. These recipients are receiving benefits for a longer amount of time because the average life expectancy is increasing. To add to this, the current recession has contributed heavily to the rise in the unemployment rate, greatly hindering the program’s ability to earn much needed income through payroll taxes. Faced with increasingly harder times, many workers are opting to retire early and claim benefits. In 2009, the SSA has found that 2.57 million people have requested benefits, an 18% increase from the previous year. The number of those applying to receive disability payments has also increased, up 16% (2.6 to 3 million) from the previous fiscal year. To add fuel to the fire, a 2009 report released by the Social Security Board of Trustees estimates that benefits paid out will exceed revenues by 2016. This information, in conjunction with the fact the $2.4 trillion currently in the Social Security reserves are essentially government bonds, makes the future for the program look quite dire.
The current state of the economy and the current operations of the program are not conducive to the survival of Social Security. Even if the condition of the economy lets up, the present path the program is on will inevitably see to its demise. What must happen in the following months is that the Obama administration must take a hard stance on the issue and actually produce a long-term plan to fixing Social Security. Many of the ideas presented thus far are “short-term efficient” and would not fix the overall problem.
There are many small initiatives that can be taken during the course of reform. For one, the government may raise the Social Security payroll tax from 12.4% to 15%. This would increase the income going into the program. They may also increase the age for retirees receiving benefits from 67 to 70, which would decrease the payments going out of the program. While these are direct initiatives, they could also carry out indirect initiatives that would help sustain the program. The government could provide higher tax rebates and credits for families with multiple children. The idea of doing this is to encourage couples to have families. More children will of course add to the workforce later on. Fostering education and the development of new technologies within the US would surely bolster the workforce with new and brilliant minds. A competitive American workforce will lead to economic prosperity.
While these ideas may not be the outright solutions to the problem, it is agreed on both sides of the aisle that there must be something done. In its current state, Social Security does not have a fighting chance. Through strict measures of reform, the program may be able to dig its way out of potential financial ruin. Only then will the younger Americans of today’s workforce receive the entitlements payments they will eventually deserve.
Bibliography:
• “The next great bailout: Social Security,” Allan Sloan, CNNMoney.com
http://money.cnn.com/2009/07/29/news/economy/fixing_social_security.fortune/index.htm?postversion=2009073009
• “Forecast: Social Security to be depleted in 2040,” Associated Press
http://www.msnbc.msn.com/id/12580846//
• “Alarm Sounded On Social Security,” Amy Goldstein; the Washington Post
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/12/AR2009051200252.html
• “Social Security Applications Almost Double Because of Recession,” Jonathan D. Salant; Bloomberg.com
http://www.bloomberg.com/apps/news?pid=20603037&sid=auyVsU9FRcts
• “Kiss Retiring At 67 Goodbye,” Joshua Zumbrun; Forbes.com
http://www.forbes.com/2009/05/12/social-security-taxes-business-washington-retirement.html
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