Calvert Hall College High School
Towson Maryland
Teacher: Mr. Kropp
The Impact of Social Security Reform
By Ryan Kelly
11th grade
Social Security [reform] has become a major issue for all citizens of the United States. … Social Security was originally established in the early 1900’s to provide for those in our country suffering from the Depression, but [now it] has begun to deteriorate. New plans, promoted by President Bush [have been presented] to solve this issue and save the U.S. from financial collapse. There are still problems with the reforms; however, and debates upon how best to eliminate the problems affect everyone. …
Social Security originally helped to alleviate the pressure of the Great Depression on the union, but soon the problems in its design will begin to harm our economy. The Social Security Act was encouraged and passed by President Franklin D. Roosevelt as part of efforts to relieve the Great Depression. The act saved the country from near collapse during this economically strained time and, as it has grown, has helped many who need the governments support to survive, such as single mothers. One of the reasons for Social Security’s continuing success was the large population of young people, known as the “baby boomers”, and the short life of those who were receiving benefits. However, as the U.S. has grown and technology improved, many beneficiaries are living longer. Between 2008 and 2025, there will be a large increase in retirees and there will be a larger proportion of beneficiaries to workers than there was in 1935. Increasing percentages of taxes are used to provide for Social Security, while government debt increases. If this system continues as it currently runs, those who invest into the system will find that it collapses before they receive the benefits they are entitled to. Reform is necessary to protect our economy and livelihoods, despite the successes of the early stages of the program.
Social Security reforms that are currently being considered create PRA’s or Personal Retirement Accounts. Social Security currently invests in an increasing number of workers with higher pay to support its expenditures, but since there has not been enough new workers, the system is failing. PRA’s would allow workers to use part of the money that is being taken for Social Security and invest it into stocks. The accounts would be controlled, to some extent, by the government, which would limit them to more conservative investments. This would keep the market from fluctuating due to higher risk investments and would allow the government some control through the required asset managers. The majority of the proposed reforms would guarantee the minimum benefits already given by the government. Since the stock market tends to grow over time, this would produce extra money for most investors. The part of the fund the government holds would be used less if stocks were successful and people earned above the guaranteed amount. This would allow the government to relieve the deficits with the funds the government would receive preventing large increases in taxes. Statistics have shown that even if the worst financial crashes were repeated right before a worker received their benefits, they would still gain more money than under the current program. This would help seniors who have had financial problems under the existing system. The many reforms also include the possibility of buying the guaranteed amount as a pension, instead of simply withdrawing it monthly, and letting seniors use the surplus. The PRA’s are private accounts, so they would be transferable as part of estates if there was any money left over, helping to support younger generations instead of the money going to the government. All of these advantages show that Social Security reform can do a great deal to improve the average U.S. citizen’s financial status in retirement.
Despite the large benefits, there are problems with this possible reform. Some of the plans that have been proposed do not have all of the guarantees mentioned earlier, such as the minimum amount to be provided by the government. Disability benefits are also in question, since they are considered separately from retirement and most plans do not include extending the reforms to them. While workers with small incomes do receive large benefits from the plans, asset management firms would charge a great deal compared to the amount of their transactions, so separate holding agencies would be necessary to help them invest their money more efficiently. The ability to switch the allocation on of a fund would also be limited, although the restrictions would probably be small. A major problem is the timing of the reforms. While seniors are guaranteed the benefits they worked for by the government and young people like myself would have early access to the PRA’s, there are arguments over how to integrate middle age workers into the system. Another problem with many of the current plans is President Bush’s refusal to raise taxes when the money might be necessary to support the system before the reforms effects could begin relieving the debts. These problems are the reason that many different Social Security plans are still being discussed by Congress, keeping us from completely overcoming the economic problems.
Social Security Reform is a necessity in today’s world. The old system has become harmful, as well as obsolete, and will lead the U.S. to financial ruin if it is continued. The new system has a number of benefits that are needed in today’s society, such as a good possibility of increased income, a relief of financial strain, and the ability to inherit accounts. Problems do still remain and there are issues to be dealt with, but to secure our country’s financial status and the retirement of its citizens, politicians must press on. Through reform, retirement can become easier and supporting seniors will be less of a burden on contemporary workers.