Social Security Need Reforming

Social Security Need Reforming

The Social Security program is the largest program operated by the federal government. Social Security represents more than 22 percent of all federal spending.

It is an outdated program designed in the 1930s, greatly expanded yet structurally unaltered in 70 years. Social Security is headed for a financial crisis that will affect everyone, young and old. What is wrong with Social Security cannot be fixed by just adding more money. It does need to be reformed. The reasons for reform are many; however, there are five reasons in particular: the financial loss experienced by the poor and their families, the high poverty rates for single women when they retire, the financial loses that are incurred by married couples in retirement or death when both spouses have worked, the low return every worker receives from their contribution, and the changing demographics.

In 1935 President Franklin Delano Roosevelt signed the Social Security Act and the first benefits were given on January 1, 1942. What an individual received was, as it is now,based on earnings, not contributions. Initially, not all workers were included. Farmers, domestics, casual laborers, seamen, government workers, employees of non-profit organizations and self-employed were not covered. In 1939 a survivor’s benefit was added.

The Supreme Court in 1937 ruled that the Social Security Act was not an insurance program. The program would be a pay-as-you-go system and monies could not be earmarked. The Social Security tax is just another tax and individuals have no personal claim to any monies taxed for this program. In fact, Social Security is an income redistribution program, or as some would call it–welfare. Americans have been misleaded by the rhetoric of the program, e.g. FICA means Federal Insurance Contribution Act.

In the 1940s Social Security expanded to include farmers, most self-employed, domestic servants, federal workers not covered by federal pension, and residents of the Virgin Islands and Puerto Rico. Survivor’s benefits were increased and expanded. The ceiling on taxable earning was increased. From the beginning the Social Security Program gradually expanded until the 1970s whenthe program’s structural problems began to show.

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The response to the early signs of the Social Security problem was raising taxes, reducing promised benefits, taking high-income retirees’ Social Security benefits, requiring more exempt employees to participate and gradually raising the retirement age from 65 to 67.

The Social Security program in its very existence implies that people cannot be trusted to take care of themselves. However if this were really the case a law could be enacted to require people save a portion of their income. Even if individuals would not comply and found themselves in old age without means, the state could provide welfare–a pay-as-you-go program. Individuals are taxed on the pretense that they are personally saving for their old age with the taxes going into their personal saving account. The consequence of the Social Security deception is that the program has produced unfair and unjust outcomes.