Social Security Today and in the Future
Social Security Today and in the Future
Author
Institution
Introduction
Social Security has been one of the most fundamental programs in the United States. Its origin can be traced to 1934, when President Roosevelt established the Committee on Economic Security and charged it with the responsibility of examining the necessity for an economic security system that would offer income to the disabled and the elderly. The committee’s plan was the Social Security Act, passed by the Congress in 1935. It offered a monthly benefit to individuals above 65years who were not working (Landis, 2011). This benefit would be paid after retirement, with the amount to be paid being based on the payroll tax contributions of the individual. In the initial Social Security Act, the monthly benefits were supposed to start in 1942, with the social security paying out one lump sum amount to anyone that was retiring. The payback sum was offered to individuals that were paying to Social Security but did not have sufficient contributions that would allow them to vest in monthly benefits (Landis, 2011). Roosevelt’s vision was that the Social Security program would get rid of poverty from elderly Americans allowing them to retain their independence and dignity.
Will social security be viable in the next 20-30 years?
There have been concerns pertaining to the viability or social security or even the possibility that it will be around in a few years’ time. Indeed, a large number of people in their 20’s, 30’s and 40’s have not bothered to include it in their projection of retirement income. It goes without saying that these concerns are founded, especially considering that the United States national debt is close to $17 trillion (Landis, 2011). Indeed, these concerns are deepened by the fact that the Social Security Administration has itself stated that if no changes are made to the system, it would only have the capacity to pay about 77% of the current benefits by 2033. This means that baby boomers should not be too concerned about the viability of the trust fund as it would not be expected to go broke until around 2033. In fact, even after that point, scholars have noted that the payroll tax will be there to take care of a minimum of 75% of the anticipated benefits all the way to 2087 (Landis, 2011). Of course, the viability may be even more enhanced in case there are changes in the economy over the next two decades, coupled with the enactment of legislations that would enhance the Social Security’s outlook. While it is quite possible that Social Security will still be around to benefits Generation X and Y, the key issue would revolve around determining the level of benefit that would be expected especially considering that there are numerous varied factors that would have an impact on this figure (Landis, 2011). For instance, while the system may still be financially sound, an individual’s personal benefits would still be determined by their lifetime earnings, length of time within which they worked, as well as the available category of work in their careers.
Recommendations
Unless urgent measures are taken, the immense changes in demography will cripple the Social Security, especially considering that the pledges made by the program can simply not be kept. Currently, the expenditure of the program on beneficiaries is higher than its collections with the deficit expected to persist in 2015 in case the trust fund’s interest is excluded and in 2025 with the inclusion of the interests (Landis, 2011). It is projected that the trust fund may be exhausted by 2037 unless urgent measures are taken.
First, a more progressive benefit formula should be adopted slowing the growth of future benefits especially for higher earners. The current systems allows for the calculation of benefits in a progressive three-bracket formula offering beneficiaries 90% of the first $9000 average lifetime income, 32% of the next $55,000, and 15% of the remaining income to the taxable maximum. The benefits can be slowed by moving to a progressive four-bracket formula where the payments would be 90%, 30%, 10% and 5%.
Alternatively, poverty should be reduced through provision of an enhanced minimum benefit to low-wage earners. It is imperative that a new special minimum benefit offering full career workers with not lower than 125% of poverty line in 2017 and thereafter being indexed to wages. It is imperative that the reform of Social Security ensures that the program has the capacity to continue meeting its fundamental mission, which is the prevention of individuals that can no longer work from falling to poverty (Landis, 2011). In this regard, it is imperative that a new special minimum benefit that offers full career minimum wage workers with a benefit that is equal to 125% of poverty line in 2017, as well as wage-indexed after that. This minimum benefit would proportionally phase down for workers that have less than 30 years but over 10 years of earnings.
The implementation of these programs, however, is bound to have hiccups especially due to political machinations. However, this is not supposed to be limiting especially considering that both sides agree on the importance of the program, as well as the need to ensure its sustainability. Forming a committee that would align the strategies of the two sides of the political divide would ensure the implementation.
References
Landis, A. (2011). Social security: The inside story : an expert explains your rights and benefits. United States: Andrew S. Landis.
