Social Security Debate

History and Debate of Social Security

Broadly, the term social security refers to social insurance programs providing protection against socially recognized conditions such as disability, old age, poverty and unemployment. Different countries utilize different systems for protecting against these conditions. When used in the United States, the term social security generally refers to the federal Old Age, Survivors and Disability Insurance program though the Social Security Act, as it has been amended, actually provides for additional programs, such as Medicare (Health Insurance for Aged and Disabled) and Unemployment Insurance.

Social Security as an American social insurance program is funded through dedicated payroll taxes that are deposited into special trust funds established for that purpose. The United States Social Security program is the largest government program in the world in terms of dollars paid. The payment of retirement benefits is the largest single component of the Old Age, Survivors and Disability Insurance program. The amount of benefits a worker is entitled to upon retirement depends on the worker's age at retirement and his earnings history. Revenue from payroll taxes has been the primary source of revenue for this program since its inception.

Social Security Debate Controversy

Social security is controversial for several reasons. For instance, because workers pay payroll taxes on their earnings up to a certain amount, high earners whose income exceeds the cap pay a lower percentage of their total income in payroll taxes. Therefore, critics argue that lower paid workers bear a disproportionate burden of the payroll taxes, which are seen as regressive. As a result, critics argue that Social Security serves to redistribute wealth from the poor to the wealthy. Moreover, because persons who are wealthier also generally have higher life expectancies, they are more likely to receive Social Security retirement benefits for a longer period

Others criticize the social security system as a pyramid scheme. These critics contend that each generation of retirees receive benefits that exceed the amount they paid in and that are, in fact, subsidized by the payroll taxes of current workers. These critics argue this system works as long as each generation of workers is succeeded by a larger generation of workers. When a large generation of workers retire, such as the post World War II baby boomers, retire, the generation of workers that follows them will not be able to keep up with the costs of the system. Proponents of the system assert that social security is not a pyramid scheme because its revenue stream is transparent. Unlike the social security system, true pyramid schemes distort the sources of their revenue. Furthermore, because social security is funded through taxes, the taxes can be raised or additional sources of revenue may be identified. These factors also differentiate the United States Social Security system from a true pyramid scheme.

The social security system has also come under attack by critics who claim workers could receive a better rate of return on their investment if they could invest the amount of their payroll taxes into the private sector rather than into the public retirement system. Proponents of the system, however, assert that individuals have differing abilities to invest these monies and that the private investment sector may result in outcomes that are less favorable so that retirees run out of money before they die. With funds dwindling, the social security debate is now at full swing in the U.S.A.

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