Mini debate 2: Social Security Policy
Should Social Security be Privatized?
Yes: Mebane Youmans
Social Security policy:
Should Social Security Be Privatized?
Yes
President Franklin D. Roosevelt’s
Administration developed Social Security as a means for protecting and insuring
the American People against poverty and unfortunate circumstance beyond his or
her control, such as old age, termination of employment, disability or death of
provider (Dye 101). This program established a mandatory investment in a
government provided insurance policy, which would provide benefits upon the
event of the unfortunate circumstance. Unfortunately, this program has not been
executed as efficiently as originally planned. The government used current
taxes collected from wage earner to pay-as-you-go and cover current benefits.
“In other words, each generation agrees to support their elders and in turn,
expects their children and grand children to support them when they are old”
(Botsch). The problem is that the Social Security System is, as President Bush
stated in his State of the Union Address, “headed for bankruptcy” (NBC5
News.com).
It is predicted that in 2018, Social Security Taxes
will not be enough to cover the current provided benefits (FAQ CATO). People
today are living longer than in the 1930’s and 1940’s; the life expectancy rate
has increased from 61, in 1935, to 77, in 2000 (Dye 104). This creates a
situation where the dependency ratio (“the number of recipients as a percentage
of the number of contributing workers”) has gone from 10 workers: 1 retiree, in
1935, to 3:1, today, and is predicted to be 2:1 by 2030 (Dye 104). Majority of
politicians recognize Social Security as a vital program and see the need to
“save” this policy through some sort of reform.
One such reform effort lies in Privatization of
Social Security. Privatization suggests allowing workers to choose to take up
to four percent (4%) of their current fifteen and three percent (15.3%) of
payroll tax and put into a volunteer private account thus investing in stocks
and bonds as a retirement fund or as savings for the future (Hird 58). This
program would allow individual workers to have more choice in how their taxes
were spent and how their money was invested.
The benefits to privatizing Social Security come in
high returns. The private sector provides the opportunity to accrue unlimited
returns on investments during the lifetime of the individual (FAQ CATO).
According to Michael Tanner, director of the CATO Institute Project on Social
Security Privatization, the average wage earner could earn approximately
one-half a million dollars more than the benefits they receive from Social
Security by investing the same amount paid in taxes into the private accounts
(Hird 69).
Also, each individual would own his or her private
account, similar to a portfolio, at the time of retirement assets can fund his
or her retirement or can be inherited by descendants at the time of death. This
opportunity cannot be found in the current Social Security system. If a man or
woman works his or her whole life and believes the money taken from his or her
check will be there when he or she retires, but he or she dies all of the money
he or she has put into the government’s insurance policy is lost (Hird 70).
Low-wage earning individuals will also see an increase
in personal wealth. By investing in these stocks and bonds, these workers
create a portfolio or personal account which will have value and wealth. Thus,
those who may not have the cash wealth will have wealth in stocks and bonds
(Hird 70 and FAQ CATO).
Individuals are also given a choice in the
privatization policy. The American people pride themselves on independence, we
value independence. This policy gives each worker the right to decide what kind
of retirement or unexpected insurance he or she wants. Younger workers will be
given the right to choose to take up to 4% and place it in a private account
and then he or she can decide how to invest this money. Thus the individual is
no longer reliant upon the Federal Government to provide for his or her future
(FAQ CATO).
This policy will also create jobs for American people
and wealth for low-wage workers. The tax money now currently being spent on the
benefits of the aged, instead will be invested into companies and bonds which
will in turn increase the economy and increased jobs will result of this
investment (Reeves). Such investment will also improve the overall economy by
providing increased saving and investment (FAQ CATO).
Should Social Security be privatized the economy
would see a boost, individuals would have more independent choice, would have
the possibility for higher returns, would gain more wealth which they could in
turn leave to their children. Overall, the possibility for positive results
would lead one to chance the unknown and reform a failing system.
Work Cited
Botsch, Carol. “Introductory Lecture to
Welfare Policy”. Lecture. Introduction to Public Policy. Department of
Political Science.
“FAQ on Social Security”. The CATO Institute. http://www.socialsecurity.org/reformandyou/faqs.html
.
Dye, Thomas R. Understanding Public Policy, 11th ed.
Hird, John A., Michael Reese, Matthew
Shilvock. Controversies In American
Public Policy, 3rd ed.
“Bush Makes Case for Social Security Reform”. NBC5 News.com.
Reeves, Scott. “Bush Addresses the State
of the Social Security”. Forbes.com.
No: Angela Hamilton
The 1935 Social
Security Act has been voted by Americans as one of the 10 most influential
documents that helped shape Americans beginning in 1935 and until now. Social Security has protected Americans
through various types of programs including retirement benefits, dependent
benefits, survivor’s benefits and disability benefits. These benefits do not fluctuate with the ups
and downs of financial markets. They
are automatically adjusted for inflation and tax consideration. Many people including the president insist
that the Social Security system is facing serious financial problems, and
action is needed soon to make sure that the system is sound. However, some claim that there is sufficient
funding to meet obligations until 2052.
Some financial authorities believe the current level of funds is
sufficient for a longer period. The
questions that remain to be answered are:
is Social Security in need of reform and privatizing the answer?
Social
Security is definitely in need of reform, but the congressional system needs to
really evaluate the options, and consider what is best for the working citizens
of the
In
the face of privatizing social security, I do not agree with privatizing social
security because this could hurt working Americans. Privatizing Social Security
resembles gambling. This program would allow younger individuals to take a
portion of their social security deduction and invest it for the future.
Investing has its ups and downs, and no matter how we examine it there are
chances. It does not matter whether the government invests our money in the
U.S. Treasury bonds, or if we invest in the stock market it’s a gamble. In my
opinion I feel that the U.S. Treasury bonds are perhaps the way to go because
they are safer than the stock market. Privatizing social security is not
necessary, there maybe some changes that are needed, but these changes may
require tweaks to the system.
Social Security privatizing would
have an adverse effect on people with disabilities, survivor’s benefits, and
would lead to future benefits cuts for retirees. In addition to cutting
benefits, Bush’s privatization plan would lead to an increase in the retirement
age, increase the federal deficit and expose retirees to the risk of the stock
market. The only people to benefit from privatization would be the financial
services industry.
In conclusion, one thing we know
about privatizing social security is that it would cost trillions of dollars,
and weakens the system for retirees and the disabled. We as Americans citizens
must protect social security. Diverting money into private accounts will bleed
the social security to death. Privatization is not the answer to saving social
security.
Works Cited
Aiken Standard,
Dye, Thomas R., Understanding
Public Policy, 11th ed., (
Hird, John A.,
Reese, Michael, Shilvock, Matthew, Controversies in American Public Policy,
3rd ed.,
The Augusta
Chronicle,
Rebuttal – Angela Hamilton:
Social
security is a very sensitive issue today, it seems that everything today points
towards social security privation. This issue is causing controversy in all
aspects of the reformation process. Everyone is in agreement that social
security needs reforming, but the question that has everyone consumed is
whether or not to privatize.
Many
people do not understand how the social security system operates, there are no
separate accounts set-up for tax payers to which he may contribute his
social security tax each year. According to my opponents paper the social
security program is a pay-as-you go program, there is an agreement that the
social security system is in need of a major overhaul.
Privatizing social security would take a certain percentage of a persons pay,
and allow them to invest in stocks, and bonds. I do not agree with this because
there is no guarantee with the stock markets, they could be up today and down
tomorrow. They could have the yo-yo effect, I would much rather take my chances
in the pay-as-you go system. It's a gamble no matter how we look at it.
Some
cultures within our society have limited knowledge of the stock market, and are
very unfamiliar with a portfolio. Most people I have encountered thinks a
portfolio is a collection of family portraits. Another thing is the amount of
money needed to establish a portfolio, who has that amount of money if one of
those persons worried about social security reformation. Understanding that
persons of the lower socioeconomic status may have wealth in stocks and bonds,
but they may lack for day to day expenses.
Low
income families will be excluded from this new found wealth due to their
limited liquid assets, education, and socioeconomic status. The predicted
increase in the job market will not benefit the lower income individuals, but
those that have a clear understanding of accounting and other business related
fields.
In
conclusion, the idea of placing 4% of payroll tax in the stock market is an
idea that looks good on paper, but when implemented can and will be proven to
be hazardous to societies' socioeconomic health.
Rebuttal – Mebane Youmans:
My opponent states that Social Security is
protection for Americans through retirement, dependent, survivor, and
disability benefits. However, Social Security will not be able to continue to offer
this protection with the projected bankruptcy. According to Hird, Social
Security will be “unable to meet the demand for benefits likely to arise with
the retirement of baby boom generation” (Hird 57). With the way that Social
Security is headed, cuts in benefits and increasing the retirement age will be
inevitable. Dye discusses the different reform efforts at “saving Social
Security”, in this section he mentions increasing the retirement age and
reducing the benefits as other options to privatization, an option which only prolongs
the issue of the structure of Social Security (Dye 106).
Currently the “reserve funds” have been used by the Federal
Government and Treasurer Bonds have been purchase with this money. These bonds
will have to be paid back to the system itself, which will eventually mean that
the government will have to raise taxes to pay this, as we are already in a
deficit. As we are already in a deficit, Treasurer Bonds are not necessarily
safer, especially since the government does not have the funds to repay this
without raising taxes. Thus unless taxes are raised, which is a politician’s
death wish, the federal deficit will increase no matter what.
Depending upon who you ask, this issue will become a problem
a lot sooner than my opponent estimates. According to CATO, we will begin to
feel the effects of the baby boomers by 2018 (CATO).
The establishment of these personal accounts would give
individuals the right to decide how to spend their money. The government would
not decide which areas of stocks, bonds, or savings accounts your money would
be used. A person who understood this would be smart enough to invest part in
areas with higher return and risk and some with lower return and risk. Also, 2
% of tax money would still be placed into social security. Thus, while there is
some risk, there is also the potential for great return and safer possibility.
Therefore, this is not gambling and it would be the individual worker’s final
decision on how to spend his or her money.
Following the thoughts behind the investment into the
economy, the benefactors would include those who work for the companies
receiving the investments and higher profits and eventual trickle down of
investment would lead to returns for the individual workers. Thus the total
economy would benefit.
The “Bleeding Social Security” would then be replaced by
this system and it’s desert-like nature would be irrelevant.