Social Security Reform Is in Trouble - Essay Example

Social Security Reform It is no big secret that Social Security as we know it is in trouble. Economists are trying to formulate solutions at the time of this writing. Here, we weigh the pros and cons of three such options and choose one method to restoring the stability of the program. The options presented include restoring the trust fund, means testing, and privatization. Each option is reviewed individually. To restore the trust fund, we must either increase the age for full benefits from 67 to 70 or reduce benefits to higher earners or all earners (Quadagno 1982).

Increase revenues by raising payroll taxes. We might also raise the income tax. Better standards of living have allowed people to live longer and in better health. These steps may help maintain confidence in the long range stability of Social Security. Nevertheless, age discrimination could become an even greater factor, the poor and the young could be adversely affected most. Means testing would cut benefits to the richest retirees (Quadagno 1982). Many of these individuals do not need any government support.

Overall support for Social Security could fall if people thought they might be paying in without any sort of return. Privatization means proving a small basic benefit supplement with most retirement income coming from individual contributions to a personal security account (Quadagno 1982). People might receive a better return on investment, but low income workers would have less to invest. Plus, some might invest poorly and lose their savings entirely. In such a scenario, it is the worst case that could be most damaging.

Thus, we should eliminate the most frightening worst cases. Is it worse for to subject more people to age discrimination while burdening the poor and young, or is it worse to risk losing public favor of the Social Security program? It seems the former is worse. Is it worse to risk losing public favor of the Social Security program, or is it worse to risk unequal treatment of retires. The latter seems worse. By this method of elimination, we have come to see means testing as the most viable method for Social Security reform.

Nevertheless, our research has revealed an interesting forth option. It is called the 7.65% Solution (Smart). It proposes total investment of the Social Security tax (6.2%) and Medicare tax (1.45%) and permanent elimination the FICA tax. When the investment income of the trust fund is great enough to cover Social Security, the employer FICA tax will be eliminated. As it grows, the investments are applied to pay down the national debt. The 7.65% solution develops a retirement plan for each worker that is greater than our current system can promise.

Economists are trying to formulate solutions to the Social Security dilemma now. Here, we have weighed the pros and cons of three such options and have chosen a method to restore the stability of the Social Security program. Wether we choose a traditional solution or a more innovative one, American workers everywhere will be affected. References Quadagno, J. (1982). Aging & the Life Course: An Introduction to Social Gerontology (4th Ed.). McGraw-Hill, New York. The Smart Act. (2008, February 21).

Securing Medicare and Retirement for Tomorrow – Bill Summary Sheet. Retrieved from http://www.thesmartact.com/pdf/SMARTACT-billsummary.pdf