Burlington High
School
Burlington, Kansas
Teacher: Devra Parker
Social Security
Reform:
What It Means To You And Your Family
By Alan Cardwell
12th grade
After a person retires, which is usually around the age of 65, it is very hard for them to get any sort of income. Since these people are seniors, they have certain disabilities and therefore it is very hard for them to get and hold a job. The government, in the early 1900s, noticed this and, in 1935, they made a program called social security. Social security was their solution to protect millions of workers from poverty in their senior years. Even though all of this sounds nice, like everything, there is a flipside to it. In the modern age of 2005, social security cannot pay the benefits promised as it is far more than the system can afford to pay. According to statistics in the future year of 2017, just 12 years from now, social security will pay out more money than it takes in. This difference will have to be made up by dipping into other government spending, raising taxes, or cutting benefits. Over the next 75 years, social security faces a $27 trillion shortfall. In order to fix this problem, President George W. Bush, has decided to reform social security and make personal retirement accounts that people could build up and cash in when they retire.
The idea of making these personal retirement accounts and reforming social security comes with many pros. One of them is the fact that, when the government needs money, it can get it from the surplus that is made from Social security in order to pay off government run programming. With these personal accounts, however, they cannot touch them as they are privately owned by the people who own them. Another pro is that it can actually pay more in benefits than today’s social security. A reason for this is because under the current system benefits are not guaranteed and in the year 2041, according to the program’s trustees, will be cut by 27 percent when the trust funds (the surplus made from social security) go dry. With reforming social security it does two things: number one is that it lines up benefits with what the system could actually afford to pay. The second is that personal retirement accounts would allow younger workers to enjoy benefits in retirement that are greater than today's social security will be able to pay in 2042 and beyond.
With all of these pros, however, there are cons as well. One of them is that it puts today’s insurance to protect workers and their families against death and disabilities at risk. Another is that it could actually dampen economic growth, which would further weaken social security’s future finances. Also, the idea of this private retirement account has been a failure elsewhere, like in the United Kingdom and Britain. The fact that the odds are against individuals investing successfully makes yet another con. Even though this seems like a lot of cons, there are still more. For example no matter what the market is doing at the time, if it’s high or low, that is what one will get when he retires. Yet another con is that Wall Street would reap windfalls from our taxes. With the personal retirement accounts being made, another government bureaucracy would have to be created, meaning more money would have to be spent to run it. If one is a woman, then it seems as if she would be against this, as women as a whole would be worse off since they work fewer years outside the home, earn less per year, and live longer after retiring. The final con is that retirees will not be protected against inflation.
All of the retirees and the people born before 1950 would not be affected by these tax reforms, but all of the younger generations would. With all of these pros and cons, it certainly seems as if the cons out weigh the pros by a considerable margin. Even though one of the statements made about Social security is that Personal Retirement Accounts would give low- and middle-income workers a chance to build nest eggs to pass on to their children or grandchildren, it seems as if that should be sacrificed at the expense of all the cons.
In the end, I would have to say that I am against reforming social security. I mean it seems nice in the beginning when I read all of the statements and statistics going for it, but when I see all the statements and statistics going against it, then it doesn’t look so good. The main reason why I am against it, is because I am a young man, that honestly knows nothing about investing trust funds into the market in order to get money. I would not want that flaw of myself to be taken advantage over and to leave me with no money for my children and grandchildren to have when I die. Another reason is because I feel as if the lessons learned from the United Kingdom and Britain should show us that making these personal retirement accounts are not a good idea after all. Thus, I am against reforming social security, and wish for it to remain the same so that one day I may have money for my children and grandchildren without having to worry about losing it in a personal retirement account.
Answers To Questions Prompted By The Required Reading
Q1- Explain why some people:
a) claim that there are no social security trust funds
There are several beliefs coming from people on the basis that there is no “Trust Fund” for social security. The program has existed for well over 70 years; it has gone through several changes. One of these changes happened in 1983. This is when the Greenspan Commission came up with a solution to pay for the, soon to retire, baby boomer generation. Their solution to this problem was to Tax the working people more to have more money then what was needed to pay for social security. This would create a trust fund. There was a problem with this plan though; the government wasn’t allowed to save the extra money since federal law states that Social Security has to invest that surplus into treasury bonds. Thus, the government borrows this money out of these treasury bonds for its programs like education and national security. This all in turn points out the blatant fact that there is no trust fund for social security since the government doesn’t save the money made from taxes that are supposed to go to social security.
b) claim that politicians have spent the trust fund money to run the government
As I stated in my answer to the first question: The government borrows the money out treasury bonds, which comes from the Social Security surplus’, in order to pay for their programs like education and national security.
c) claim that the trust fund money is invested
In my first answer I stated that the money from the Social Security surplus is invested into treasury bonds. This is money that the government invests into itself to borrow at later times.
Which of the above do you agree with and why?
Out of all the choices, I agree with choice b. I firmly believe that the government has been taking money out of social security ever since it was created. It is a place where they think that they can get all this extra cash to fund their programs.
Q2- When U.S. Treasury Bonds are sold where does the money go and what is it used for?
The
money goes to the National Treasury and the
US
government to pay for its programs and, in essence, run the government.
Q3- Why do you think that social security is the only source of retirement income for 22% of those over age 65? How would you change that? Please comment if you know an elderly person who is totally dependent on a monthly social security check
I think
the reason that 22% of people over the age of 65 survive on social security is
because of the position that they are in. Their position is one of low income,
no job, and/or no life savings. I would change this by some how making certain
jobs that are for the elderly only, that would also be able to fit their
disabilities if they were to have any. I have a sickly grandmother whose
husband recently died and is unable to work. Therefore, with her position, she
is unable to get a job, and is dependent on Social Security to survive.
Q4- What is the average life expectancy of an American over age 65 today?
The average life for males over the age of 65 today is about 81.6 years and for females it is 84.6 years.
Q5- What is the average social security benefit in your state? Is it more or less than the average benefit of the state with the largest population in the United States?
It is $944 monthly for the average person in Kansas while in California it is $926 a month. So, Kansas has a higher average for social security benefits then the most populated state in the United States, California.
Q6- In 2003 what was the amount of social security income derived from interest earnings? How much from payroll taxes?
In 2003 social security receives an income of $79 billion off of interest earnings and $472.8 billion off of payroll taxes.
Q7- Who can get full retirement benefits even though they continue to earn income after attaining full retirement age and who cannot? In 2004 what was considered “full retirement age”?
A
person whose spouse has died can get full retirement benefits even though they
continue to earn income after attaining full retirement age and
Q8- Give two examples of “special payments”.
Special payments are payments you receive for work you did before you started getting Social Security benefits. Some examples of special payments include bonus’s, accumulated vacation or sick pay, severance pay, back pay, standby pay, sales commissions and retirement payments or deferred compensation reported on a W-2 for one year, but earned in a previous year. If a person is self-employed an example would be for a farmer, agricultural program payments.
Q9- What benefits does social security provide to people who have not yet reached retirement age?
Spousal Benefits: You can get this if your spouse is at least 62 years old or caring for your child who is under age 16. Children’s Benefits: Your children and even grandchildren who are unmarried and dependent upon you, if you are retired, for their support are eligible for benefits. Divorced Spousal Benefits: When you retire, your divorced spouse is eligible to receive an amount equal to one-half of your PIA, provided the marriage lasted at least 10 years.
Q10- How long does it take a worker under age 24 to be qualified to receive social security benefits?
It
takes at least 10 years from a worker under the age 24 to be qualified to
receive social security benefits.
Q11- Do you think the
social security system needs to be reformed now? Support your answer with facts.
At this
moment in time Social security could last for about another 40 years. So the
need to reform it right now is not very necessary. Bush’s solution to this
problem wouldn’t fix social security; it would just take the responsibility of
the government off of it and give it to the people; hence the phrase,
privatizing social security. Privatizing social security helps only the
government and not the people. The people have to take their benefits into their
own hands and that can create a dangerous problem for them. They are to take the
money of which they would invest into social security and invest it into private
accounts which will or will not gain any headway. If I were to invest $2000
right now into a private account, I wouldn’t be guaranteed that that money will
be there when I retire; the It also doesn’t need to be reformed now because
there is no real solution to the problem yet. We have 40 years to figure
something better out
Q12- Suppose you are a young working person. If you could opt out of the social security system and invest the portion of your pay that would otherwise be invested for you, would you choose to do so? Why or why not?
No! I would not be guaranteed the money of which I invested to be there when I need it. I would feel much safer with a system that the government regulates that guarantees that I will receive the money of which I invest when it is time that I need it.
Sources:
http://www.publicdebt.treas.gov/sec/secfaq.htm
1- Very informative--a (slight _X_ or heavy __) pro reform bias
http://www.heritage.org/Press/Commentary/ed111004b.cfm
1- Very informative--a (slight __ or heavy _X_) pro reform bias
http://www.efmoody.com/estate/lifeexpectancy.html
3- Somewhat informative--a (slight _X_ or heavy__) pro reform bias
http://www.ssa.gov/pubs/10063.html
1- Very informative--a (slight _X_ or heavy __) pro reform bias
http://www.elderlawanswers.com/elder_info/elder_article.asp?id=700
1- Very informative--a (slight _X_ or heavy __) pro reform bias