Social Security Reform, Essay Example

Social security program

In recent years, the issue of social security programs has been frequently headlining the recent political arena globally. It is noteworthy that president Obama has established a National commission that will look into the congressional interest. Thus, the commission has been operational since February 2010. Some of the ideas that the reform has include the mandate to operate the social system from 1930s social insurance systems to the current investments and personal savings after the 401(k) s and IRAs. The reforms cite the established objectives that surpass the ability of not only improving the equity of benefits but also the required adequacy. Social security reforms provide a long range of financial outlook. It is noted that the trustee funds will be exhausted in the year 2037, and so 78% beneficiaries will be payable by the evidence of the receipts (Wychnne 431). Precisely, there is a projection that there will be an increase in the elderly person between the years 2010 to 2030. Thus, this will be an increase of 78% for elderly people supporting the above social system. Coincidently, the fund trustee of the projects warns that there will be a deficit in the year 2015. There is government notion that they may not be dependable by the retirees. Therefore, the government has to increase the national savings, and so this calls for the redesigning of the social systems. Some argue that only fundamental changes will be necessary for the restoration of the long-term social system solvency. Six social security reforms were formed during the 110th congress. In this regard, five security reforms aimed at establishing individual accounts, but unfortunately, none of the congress received congressional measures.

The pros and cons of social security privatization

Despite of the varying ideas on the social system programs, the fact remains that the program does not only have cons but also have the pros. However, the above were evident after some research by trustees and the involvement of the government on the above matters. First, social security system privatization will encourage the saving as well as work which will positively contribute to the development of the country’s economic growth. In addition, the program will require the reputation of the fixes due to the regular feature of the advanced funding in the current security program. Thirdly, it is wise to note that private investment lessens the government opportunity in the use of the social security surplus for the current deficit cover. Another pro is that the privatization will automatically discourage the capability of the government in the use of social security funds as sources of revenue. Further, privatization will emphasize the importance of funding programs such as the Medicare. Finally, the privatization of the social security program will ensure the support and confidence in the program (Gruber 123). In this regard, the young workers will develop confidence in the social security program, which is the same confidence the current members are enjoying.

Cons of the social security programs

Despite of thousands of the pros on the social security programs, there are several factors opposing the above phenomena. For instance, those who oppose insist that there will be threatened insurance on the workers and their family pertaining to death or disability. More so, they still argue that the return rates on the available social security system can be misleading. Therefore, social security protection values will be neglected. Another identified factor for cons of social security programs is the fact that the emerged transition will worsen the current problems in the social security program. Another issue that does scare the concerned individuals on the privatization of the social program is both the insolvency and the funds diversion. Here, they affirm that funds from the social security system will be misused hence resulting in loss of revenues. Apparently, revenues pay the current retirees; therefore, its loss leads to lose of retirement benefits. It is noted that the economic growth will be dampened with the private accounts. Debts and fiscal deficits will increase significantly and this can further the weakening of the future of the social security funds (Feldstein 235). Finally, there will be a long-term risk in the fiscal program when creation of the private accounts is enabled. Another factor that is considered as cons is that, benefit will depend on the investment skill unlike the obvious work history. However, this factor is considered as negative to many members. In addition, privatization in the country will increase the level of living standards in the country since each person will have the ability to manage his funds without the direct involvement of trustees. In conclusion, the provision of social security programs is responsible in the early decline of the work force participation of older individuals. It is evident that if the social security systems provision is changed and then induced, then the early retirement will playa vital role.

The consequences of the social security reforms

Notably if the country saves the pension contributions effectively, it can experience the future growth of wages and productivity. The above will considerably reduce the return on capital. In addition, the above wide impact in the economy will affect the lifetime pensions and wages of the workers in successive generations. Another effect of the social security is that it can cause the increase in the national savings over a wide spectrum of life. Thus, following the above, there will be a notable increase in wages and domestic stock. Research has evidently identified that the workers whose retirement will be due by 2035, will experience a higher benefit of high taxes initiated under the approved policy. However, the above illustrates the effect of the social security systems on concerned individuals.

Nevertheless, the social security programs can affect the nation as a whole in various ways. According to the increased life span of the American natives and the baby boom aging, the social security will run bankrupt. Thus, it will not essentially meet the retirees’ obligations. Therefore, the above should be rectified by the insolvency timings as argued by the republicans and the democrats’ debate. It is evident that that the system is underfunded and so, some changes should be corrected to strengthen the running of the business (Botman 123). The following factor will facilitate in the strengthening of the system: the tax to increase revenue as well as to cut the paid out benefits.

Precisely social security does not only consider the elderly retirement funds but also is concerned with the whereabouts of the less fortunate in the society. Here, the social security funds program has formulated the disability insurance where they have set aside money that will enable to boost and develop the lives of those who are physically challenged.

Social security programs overview

Every industrial nation across the world is experiencing the rapid aging of its population. Due to this increased aging process, the life expectancy is increasing. It is noted that in some countries the labour force of individuals between 60 to 65 year have drastically fallen as after as 75% over the previous years. Thus, the decline above magnifies the population trend, after which there is increase in the retirees in relative to the numbers of those who are working. Therefore, with the rate at which people are aging leads to a frequent retirement of working population. Due to the above, there is pressure on the financial solvency as well as social security systems around the entire world. Uniquely, there is a contribution of the labor force withdrawal with the provision of the system itself. These essays involve the research done incorporated with the evidence from eleven countries portraying the above phenomena. This evident the fact there is a strong correspondent between the departure from workforce and the benefits of the available age. It is evident that the social security programs do provide generous benefits of retirement at young ages. On contrary, the provision of the social security program can sometime imply the large penalties on the financial earning beyond the obvious early age social security retirement. Precisely, in many several countries, the cause of the early retirement is the employment and disability. In America, the social security programs are a basic element part for more than 65 years now.

Considerably, a small amount of money is taken from your paychecks. This goes on for several years and this does not only as you money but also makes one to earn credit. However, after the retirement, there saved money will come back to your pocket depending on the credit earned. Considerably, social security programs are very vital to many working people since this act can make one earn credits, which will give one a secured retirement. Three elements of the person who value social security programs are mainly the pension benefits, investments, savings, and social benefits. Financial research emphasizes that one needs almost 70 percent in order to get pre-retirement that will comfortably sustain the pre-retirement living standards. With the average savings, researches affirm that the equivalent retirement benefits will be 40 percent. Here it is mandatory to supplement ones benefit with the saving, pension as well as investment.

Further, despite of benefiting the retired workers only, the social security programs also offers financial support to the young workers. Luckily, despite of the social security helping you with financial support they also assist the family who are in an income crisis caused by the death or disability a wage earner in the family.

Social security reforms

Notably, several factors that the government has to reform in order to rectify the social security reforms. The factors below analyses the reforms restoration. Following the increase in the retirement age, the buy in policy experts initiate a slow increase in the retirement age. Therefore, one is entitled to earn full benefits security. On contrary, the social security experts emphasizes the fact that the growth pace is rapidly increasing in life expectancy. The above illustrates that the retirees are more benefits than how much the systems can afford.

Another factor is the benefit levels that reduce growth. In this case, the progressive indexes will not only affect the promised benefits by lowering the income but also lower the benefit of the future middle and the high-income workers (Wychnne 120). Further, the higher income workers not entitled to wages but to the inflation. The above, will in one way or another affect the reduction of benefit. The reduction will base from the expected levels since wages tent to grow slower than the inflation.

Another factor is to raise the payroll tax. This is another fundamental solution on the reformation of the social security programs. Following the above, it is essential to increase the social security programs tax. The tax will be imposed on the payroll wages rate. Again, there may be an increase in the wages subjected to the payroll tax. Another reform on the social security programs matters is the involvement in the retirement accounts based on the individual accounts. This act is done based on the voluntary grounds. Again, this account can be more attractive to the range of workers covered. The above will also affect those who are currently receiving transfers on the ongoing social systems. Generally, the traditional benefits are set to grow in a more slow rate than the required pace at the current formula.

Today’s’ social security programs

In alliteration, today’s life in American, social security programs appreciates and identifies the retirement benefits. Almost every native in the America is entitled to 40 percent for the medium earners on the yearly accounts. Apparently, for those who have higher lifetime earnings will benefit with lower than 40 the required 40 percent.ojn the resume of the benefit, this is channeled to the price index of the customer. Additionally, the 50 percent of the retiree is to the married couples, if the total surpasses what they could have received prior to the earnings separation records. Hand in hand, a widow gets a larger of her personal strength and the strength to which the husband is allowed. Besides, the same law applies to widowers. In that connection, there is part specifically dealing with the disabled group which I will not argue upon.

Currently, the manager and older workers are both benefiting from the payroll dues as compared to the year 2004.Thus, the highest payable profit shut up with the typical salary every year. Hence, making the payroll levy income be supported by the moving profit due resulting from exhausting a part of the reimbursement acquired by the higher profit accumulating persons. Recent integration stipulates that, the social security tax proceeds up to 10.9 percent of the chargeable payrolls.  The above goes hand in hand with the 10.6 percent imposed on the elderly age and insurance survivor program. generally, the disability on the other hand are either unwillingly or willingly taxed by the American government as below 1.8 is imposed on the disability while 2.9 percent is taxed for the Medicare. Entirely, the total amount of the tax that the social system programs do tax the disability is 15.3 percent. To curb it all the social security program entails the current tax on revenue being is used to pay the current benefits to its members.

Summary

Unlike the earlier social systems programs it is evident that in current days, the programs have been interfered by the political affairs. To be precise, the above is evident with the decision of social systems being categorized. The category involves the need to privatize where, there are those who oppose and those who propose. Additionally, with the political involvement in the social systems, the future expectations are projected to be worse than the current situation. Therefore, the government has the responsibility to make sure that the normal stability in the sector is attained. Generally, social systems programs have been tempered with and so it requires a vital strategy do effectively do the amendments so that the retirees can enjoy the benefits without doubt (Gruber 30). Further, the projection notes that those people who will benefit more are those who will retire during the 2035 year. Despite of the fact that the private sector is trying to privatize the social system programs, still workers are not ready to embrace the above with the fear of loosing what they had earlier. Another notable issue is that the social security program entails the current tax on revenue being used to pay the current benefits to its members. Therefore, it is clear that the social security program is vital to the development of a nations’ economical stability. Despite of the opposition of the social system program being privatized, it is pertinent for the government to reform the system.

Entirely, the total amount of the tax that the social system programs do tax the disability is 15.3 percent. To curb it all the social security program entails the current tax on revenue being is used to pay the current benefits to its members.

Conclusion

It is wise for the nation to strategize the social system programs since this program plays a vital role in the man population of the country’s economy. Consequently, it is pertinent to advise individuals on the importance of the above phenomena. Beside, with the baby lobby, the only program that will suit the future life is when the parents invest heavily in the social system programs. The government is the basic body that is responsible in the initiating the social system programs. Unlike the previous years where the social system was better, it has grown from better to worse. According to research by the trustees, it is an event that if the government will not look into the matters then elderly people will automatically be disadvantaged (Botman and  Bayoumi 237). Consequently, the above will be possible only if the government decides to tax people. More so, in order to meet the deficit of the required funds to make the social systems stable government should fully be involved. Since working individuals are afraid to embrace the privatization of the social system programs, the government bears the responsibility to offer education to its natives. It is mandatory for the government effectively to initiate this program in order to guarantee the individuals of their secured future. I crown it by urging the government to manage effectively the above reforms in order to eradicate the fear that has engulfed the American natives concerning the safety of the social security system programs.

Works Cited

Botman, Parcsl and  Bayoumi, Tynsom Macroeconomic Effects of Social Security and Tax Reform in the United States .New York.NY: ternational Monetary Fund , 2007.

Feldstein , Martin, and Liebman, Jeffrey. The Distributional Aspects of Social Security and Social Security Reform. Chicago: University of Chicago Press, 2002.

Gruber, Jonathan. Social Security Programs and Retirement around the World: Fiscal Implications of Reform. Chicago: University of Chicago Press, 2007.

Wychnne, Richards. Social security reform : implications for private pensions : report to the Chairman, Committee on Ways and Means, House of Representatives. London: DIANE Publishing. 2008.