Social Security: A Little History
What is Social Security?
Social Security is a government-guaranteed retirement program. It insures that when people grow old and can no longer work, they will be able to provide for themselves. It also provides assistance for children who's wage-earning parents die, and for people who have been productive members of society but who become disabled through disease or injury.
How Did It Get Started?
After the collapse of the stock market in 1929 triggered the Great Depression, a number of programs were started up to help with mass unemployment and hunger. Able-bodied people were put to work by the Public Works Administration. For people in need who were too old, too young, or physically incapable of working, Social Security was created.
Why Do People Get Benefits?
Originally it was believed that in such a great nation as the United States, no one should be left destitute. Results showed that having more citizens able to contribute to society, even if they could not work a wage-earning job, improved overall life from both a community and economic standpoint. Today it is one of the most popular government programs of all time.
Where Does The Money Come From?
All Social Security funding comes from "payroll taxes." Employee wages and salaries up to $76,000 a year are taxed at 6.2%. Additionally, employers contribute another 6.2% above the wages they pay, for a total of 12.4% of all wages going into the Social Security trust. Unlike income taxes, payroll taxes are taken directly from paychecks and are not refundable.
When Will The Money Run Out?
It won't. Based on long-term economic projections, the Social Security trust should be fine for 50 years or so. At that point, some experts project that the number of people retiring will demand more money than payroll taxes can provide. Depending on birthrates, immigration and wages, that may or may not be the case. A lot can change in 50 years.
What Happens If There Is A Problem?
Should an actual shortfall in benefits show up on the 20-year outlook, the quickest solution is to raise the cap on payroll taxes. Many Americans earn more than $76,000 a year in salaries and wages, but earnings above that amount are not considered when funding the Social Security trust. Other easy solutions include raising the retirement age a couple of years, and starting a "means testing" program designed to scale benefits down for people with other significant sources of retirement income.
What's This "Crisis" I've Been Hearing About
It's a made up problem designed to hustle public support for the privatization of social security. It's a deception. There's really no other way to put it, unless your idea of a "crisis" is something that might or might not be a problem that's not very hard to solve in any case, and is fifty years off in the future. Sounds like someone's trying to make a mountain out of a molehill.
Why Do People Want To Privatize Social Security?
There are two main reasons people are backing privatization:
Privatizing Social Security means allowing individuals to place some or all of their payroll taxes in the stock market or other investments. That would result in trillions of dollars flowing through Wall Street brokerages. Since they make their money by taking commissions on the money they broker, this is very good news for them.
Many conservatives, especially the new-wave of conservatism associated with President Bush, do not trust the United States government to do anything. They want as much of life as possible privatized. This is because they believe that "market forces" are better at governing than representative government. They've already enacted legislation to begin privatizing our schools, prisons, national parks, even the military! Social security is just the next logical step.
Why Is Privatizing Social Security A Bad Idea?
Privatizing Social Security defeats the purpose of keeping it safe from the ups and downs of the market. It began almost 80 years ago as a way for Americans to protect themselves from the economic disaster triggered by a stock market crash. Now Wall Street and Conservative Ideologues want to tie it back to the stock market. Does that make any sense?
Social Security is good because it is what it says: secure. Which is more likely to be there for you in tough times: the US Government, or a winning stock portfolio? Which is a more secure place to put your trust?
Free enterprise is a brilliant thing, and it's a big part of what has made this country great. Many people get wealthy by investing in the market, by starting their own businesses, by being entrepreneurs. But free enterprise is also risky. If your nest egg is tied up in the market, and you find yourself old or disabled in a down market, you may find yourself without any nest egg.
The bottom line: Social Security should remain independent from the ups and downs of stock markets and corporate America.
What's So Good About Social Security?
There's only one way that we can actually ensure a decent retirement for every American, and that is to make our economy more efficient. Historically, this has happened through both market innovation and strong government investment in national infrastructure. For instance, government research led to the creation of the internet, an invention that has dramatically improved worker productivity.
We need to make sure that a high level of government and private investment continues to go into health care, research, basic science, energy independence, and education. By ensuring a more productive society with entrepreneurs who aren't scared to start companies for fear of their families losing health care, we will easily be able to tackle long-term problems like this one.