Social Security1 :: essays papers

Social Security1 Social Security is a federal redistribution program that collects payroll taxes from current workers to provide pensions for current retirees. Since the government is expecting a large amount of retirees within the next twenty year, they have proposed four plans to save Social Security. The four proposals are reducing benefits, increasing the retirement age, raising payroll taxes, and privatizing part of the system. Today's Social Security taxes crowd out other savings. Fixing the trust fund by raising taxes or cutting benefits would be fairly simple, but both approaches would only make Social Security an even worse deal than it is now. Approximately 75 percent of American workers pay more in Social Security taxes than they do in income taxes. Based on the Social Security Administration's own assumptions, payroll tax rates would have to increase from 12.4 to 19.5 percent for promised benefits to be paid. Although such tax increases might be sufficient to pay promised future benefits, the economy would suffer severe consequences. Raising Social Security taxes enough to keep the government's entitlements promises to future retirees would require doubling or tripling these taxes. That means taking 30 to 40 percent of every worker's wages just to pay retirement benefits. Such tax hikes are not economically or politically feasible. Social Security reform must not reduce the benefits of current retirees. In addition, it must allow Americans of all income levels to build a nest egg for the future. Real reform will also guarantee that all workers receive an adequate minimum retirement income. The benefits of current retirees must not be reduced. Washington has a moral contract with those who currently receive Social Security retirement benefits, as well as those who are so close to retirement that they have no other options for building a retirement nest egg. Any real reform plan must guarantee in law that seniors receive every cent that they have been promised, including an accurate annual cost of living increase. As a first step to saving Social Security for future generations, Congress should pass a law giving every already retired American a contract that provides a legal guarantee of his or her Social Security retirement benefits. Finally, current workers should have the choice of either joining a Social Security system that includes personal retirement accounts or remaining in the existing system and taking whatever benefit is available at the time that they reti re.