The Privatization of Social Security Essay -- Social Security Privacy

The Privatization of Social security measures Many passel dont understand how the Social trade protection administration reallyworks. in that location are no separate Social Security accounts set up for eachtaxpayer to which he contributes his Social Security tax each year. Manypeople believe these accounts exist, that the money they pay into theiraccounts grows each year until retirement, and when they retire they getback what they paid in with interest. This is not true. Most people areincognizant of the fact that our current Social Security system is apay-as-you-go program, which means that the revenue the federalgovernment raises each tax year for Social Security benefits is paid outthat same year to beneficiaries. Many economists believe that our Social Security system is in need of amajor overhaul if todays workers are to receive future benefits. Thomas R. Saving, Director of the Private Enterprise Research Center atTexas A&M University says, What is wrong is that the Social Securitysystem was never set up to be a sound investment-based retirement system. Karl Borden, professor of financial economics at the University ofNebraska recently wrote, Social Security is an unfunded pay-as-you-gosystem, fundamentally flawed and analogous in design to illegal pyramidschemes. Government accounting creates the illusion of a trust fund, but,in fact, intemperance receipts are spent immediately. Robert M. Ball, former commissioner of Social Security said, Some ofthe trust fund money should be put into the stock market. I lack to do itto get a better return for the Social Security system. Historically,long-term government bonds have had a real return, after inflation, of 2.3 percentage a year, compared with 6.3 percent for stocks. Paul W. Boltz, economist for the T. Rowe Price mutual fund said, Whenwe examine the pending financial crisis of our Social Security system, wefind, in effect, the characteristics of a government sponsored Ponzi-typeschem e. Michael H. Cosgrove, of the Dallas-based newsletter, The Econoclastsays, masses need to take the responsibility of investing their own fundsfor their retirement. The Social Security system assumes people cant makethat decision and government can do it better. The result is a bankruptSocial Security System. These economists believe that by investing ... ...oss would have to be made up either by hiking taxes, increaseborrowing or drastically cutting benefits to current retirees. Thepresent Social Security system faces a long-term shortfall of between 1percent and 4 percent of total payroll, depending on your projections offuture economic growth. But the existing pay-as-you-go system could berendered solvent by a judicious confederacy of increasing the retirementage by two or three years and slightlyraising taxes. Also there is the question of whether to privatize the entirely system, orwhether to add a second tier. We might keep the basic system butsupplement it with sel f-directed IRA-like funds. The basic tier would be redistributive and pay-as-you-go. The subsidiary layer would be private and based on individual contributions. A further question is who bears the luck when investments go sour.There is no such risk under the current system. The stock market lookslike a great retirement vehicle in the 1990s, but it wasnt so reliablein the mid-seventies and 1930s. The program was deliberately designed as a socialguarantee of retirement income, not a system of government-mandatedprivate savings.