Is there any problem with the current Social Security system? Should an update of the current system be addressed or should we simply ignore it and just see what happens? Why was it a failing system when Bill Clinton spoke of it, but a thriving program without any faults when President Bush addresses it only a few years later? What happened? How did the struggling, over-burdened re-distribution system amazingly heal itself? Look, before we can make a single step we have to decide whether we can agree that the program is in a failing flux based on current demographic projections rather than seventy-year-old statistics.
I believe that we should improve and modernize our social security system. Workers currently pay into cover to fund the benefits of current retirees. As medical and technological advances have made it possible for people to live so much longer, these people are spending many more years in retirement. When the current Social Security system was started, it took nearly two dozen workers to pay every retiree. Now, in 2005, it takes less than half of that number to cover today's retirees. As a worker, every dollar you pay goes directly into the pocket of another person. By changing the system and allowing workers to elect to invest a portion of their FICA tax in private accounts, they are not only paying a portion to themselves, but also taking advantage of our incredible stock market to build interest and strengthen the system of the future. Additionally, with some form of individual or private accounts if a retiree dies prior to drawing all accumulated funds from the account, then the remaining balance may be passed on to heirs. In the current system if a retiree dies at an early age, the heirs get nothing…..because there is no distinction on what the person contributed over their working lifetime and there was never any accumulation build up of interest.
If we are set on continuing this socialist program, and I am not advocating its abolition, then I believe we need to seriously consider some major changes. I will start by stating that I am in agreement with the development of personal savings accounts. This will provide a system of investment and growth in place of the current system of simply redistribution. Some changes I suggest in the area of dispersing of funds include providing a needs based formula for retirees. While everyone should contribute to the system, only the needy should actually receive funds in their twilight years. The system was devised to provide a safety net for the elderly and disabled with insufficient or no resources to support themselves so that they might survive without the stresses and horrors of poverty. Certainly we need to teach and encourage individual savings among all citizens starting at an early age. Compounding interest over a lifetime provides the capability to grow modest savings into comfortable nest eggs. Parents, grandparents, and relatives should open accounts for children as early as possible. Every gift-giving holiday, birthday or other opportunity should include deposits into savings. These will be much more valuable than toys and time-wasting, anti-social video games.
The one question I see is that we will have to continue to fund the social security benefits of current retirees (in the old system) during the transition process. We have to replace the money going into private accounts rather than directly to retirees; while allowing those who elect to participate in the private accounts. This can be accomplished by raising taxes for all, or simply removing the cap for people earning over $90,000 annually.
The incorporation of individual accounts seems like a positive change for our country, our citizens and the social security system. Unfortunately, very few people ever participate in savings, investments and retirement accounts on their own. By automatically involving citizens in the process they are taught how to save and encouraged to learn about investing and the wonders of compounding interest. In a nation where so many people choose to live at or beyond their budget, just making it from check to check, largely dependent on credit, how can we not see the benefit of teaching the discipline and great benefits of saving and investing.
Certainly the transition phase will be the most challenging time for the implementation of this plan, and that is why such a debate results. Immediate modernization of this system must be undertaken if it is to survive and continue to serve our nation's most needy citizens and actually provide them with some form of true security. The longer we delay addressing the problem, the greater burden it will be to repair.
