American Government - Personal Statement Example

American Government Discuss the proposal to privatize Social Security. One aspect of that plan is to allow individuals to invest most, if not all, of their own money into investments, rather than into the Social Security System. Given recent economic events, discuss whether this plan will be effective. How would this plan affect you? Do some additional research on this topic (how Social Security can be changed or if it should remain as is) and include it in your discussion. Include citations or URLs for your work to receive full credit To rationalize privatising Social Security, it is argued that in 4-5yrs there will be more retired people in the US, than people working and paying taxes via FICA for OASDI.

It is feared only a percentage of payment of benefits will be raised from FICA taxes, thus causing an imbalance that will need to be found from the Social Security Trust Fund, which as years go by will diminish. Recent economic events have increased levels of unemployment; meaning less people are paying into the Social Security system. Some may invest into an unsuitable private system or none at all; this raises questions as to what would happen to them and their surviving relatives in the event of disability/retirement or death, thus the effectiveness of privatisation is doubtful.

For those who invest privately, this may mean better benefits are paid, than the Social Security system offers (Shipman, 1995). However, an element of risk concerns private investment, whereby people could lose out if private companies collapse/become bankrupt due to the economy (or due to dishonest investments), and that amounts paid could vary according to stock markets (Campbell and Feldstein, 2001). If Social Security is privatised, I will need to give greater thought to the future, much earlier.

Private plans need to be put in place to ensure financial stability in retirement, and in case of long-term disability or death. These plans would need carefully researching to find a stable and trustworthy company; depending on how much control/guidance the government give. Social Security could be changed, benefits paid out could be reduced; this may lead to people living in poverty. The age at which a person can receive benefit could be increased, i.e., ‘gradually raise the retirement age’ (Arnold et al, 1998, p.383) this would link in with longer life expectancy (Diamond and Orszag, 2005), but is unfair if people are forced to take early retirement.

Benjamin Friedman suggests that the current system cannot continue, ‘unless payroll taxes rise sharply;’ (Aaron, Shoven and Friedman, 1999, p.vii) this would seem a fairly logical solution to the perceived problem rather than privatisation, although this may not be popularly received. Word count = 354 words References Aaron, Henry J., Shoven, John B. & Friedman, Benjamin M. (1999). Should the United States Privatise Social Security? Cambridge, MA: MIT Press. Arnold, R. Douglas, Graetz, Michael J & Haydock Munnell, Alicia. (1998). Framing the Social Security Debate: Values, Politics and Economics (Conference of the National Academy of Social Insurance) Washington, DC: Brookings Institution Press.

Campbell, J. Y. & Feldstien, Martin S. (2001) Risk Aspects of Investment-Based Social Security Reform Chicago, IL: University of Chicago Press. Diamond, P. A. & Orszag, Peter R. (2005) Saving Social Security: A Balanced Approach Philadelphia, PA: University of Pennsylvania Press. Shipman, William G. (1995, Aug 14). Retiring With Dignity: Social Security Vs. Private Markets (Washington DC: Cato Institute, Aug. 14, 1995) Retrieved from http://www.cato.org/pubs/ssps/ssp2.html