Social Security is a hot topic of debate today, since most American’s believe that the system is near collapse. The trust fund that Americans have been paying into for Social Security is likely to dry up in 2029 due to the large number of baby boomers heading into retirement. Franklin Roosevelt set up Social security to help the people that had worked and Struggled all their lives in honest toil. Social security was set up to accomplish two main goals. The first goal of Social Security is to act as a disability or life insurance policy that protects almost all Americans. Currently, there are seven million survivors of deceased workers and four million disabled Americans that receive income support from Social Security. The second goal is to provide lifetime retirement benefits that rise with inflation. Social Security payments for retirees are needed to keep half of the elderly Americans above the poverty line. A large number of baby boomers believe that they won’t see a dime’s worth of Social Security benefits, and most younger people assume that once they have reached retirement the program will be gone. There have been many proposed solutions to the Social Security problem. A first possible solution is to dramatically change the Social Security Payroll Tax. Another proposal is to change amount of benefits of the provided by Social Security. A third reform proposal includes investing Social Security money in stocks either by the government investing the money or by setting up mandatory IRA investing. Another major development in the future of Social Security is the recent proposals made by President Clinton’s Advisory Committee on Social Security. In January of this year the Advisory Committee on Social Security presented a report of strategies to save Social Security. Shortly after the 261 page report was released there was a huge increase of debates and criticism over the future of Social Security. The issue facing American today is when and how to reform Social Security. Although the American public and political groups are unwilling to accept the burdens of social security reform, extensive reform is needed soon to continue paying the current benefits to American citizens.
A change in the Social Security tax is a possible factor of reform to bring the Social Security program back on track. Currently the Social Security tax is a flat-rate tax paid on all employment earnings up to a specified limit. Due to inflation the limit is increased every year currently it is just over $60,000. This tax is much harder on a lower income individual because the higher income individual is only taxed on their income that is below a certain amount set every year. It has been proposed that if the limit on the payroll tax were lifted, two-thirds of the projected Social Security deficit would be eliminated. Once the limit on the payroll tax is lifted a rise in the tax rate of the employers and the employees by 1.1% is predicted to be enough to solve Social Security’s problems. This is assuming that two evasive actions take place. First the government will have to keep its hands of this extra tax revenue gained by the tax increases. Second the proposed solution will only have a chance to work if it is started immediately while the baby boomers are still able to add a little more cash to the trust fund for there own retirement. This solution isn’t likely to be implemented by today’s political system. The advisory council on Social Security would not pursue the lift of the limit because the support of the wealthy voters for Social Security reform would be lost. Americans are also weary of Social Security tax increases. The middle and lower class voters would also not support a Social Security tax increase. A recent poll by Money magazine found that 70% of the public is unwilling to pay more tax than the current 6.2% rate.
Another proposed solution to Social Security’s problems is a to decrease the amount of benefits received by retirees. The first way to reduce the amount of benefits that are being paid out is to adjust the CPI. Sen. Daniel Monynihan of New York (Dem.) has proposed that