The social security system has been, according to some, in danger of collapse an

Question

The social security system has been, according to some, in danger of collapse and insolvency for some time now. Since 1950 the number of workers supporting one retiree has fallen from 16.5 to 3 while the tax assessed against wages has increased from 1% of income up to $3,000.00 to 6.5% of the first $106,800.00 plus 1.45 % of all earnings for Medicare. The taxes are assessed against both the employee and the employer. It is expected the number of workers supporting one retiree will continue to fall and that taxes will probably have to be raised as well as the age at which a retiree can receive benefits. Discuss the following proposals advanced to “solve” the looming economic crisis concerning social security:

(A.) Privatization of social security

(B.) Means testing

(C.) Elimination of cost of living adjustments

Explanation / Answer

A) In 1950 the number of workers that support one retiree was 16.5 and now it is reduced to mere 3, which is pretty worriesome. If 3 people work and government collect the taxes from these 3 people it will pay one pensioner, This is devastating economics, It is clear indication that government is living beyond its means, So privatization of this system can help get rid of some inefficiences, But privatization of such huge system can result in political unrest and riots could break out

B) Means testing, It is clearly beyond any government means if just 3 people work they pay taxes they would be paying relatively very high taxes, which is depriving their development, This is just unacceptable in modern socities. 30% of ones income will just go to pay pension of an old man whom you do not know, This scenario is unacceptable for any working class citizen

C) It would solve the problem to certain extent, but demands for revision will come from pensioners, However in all the three policies listed above this is by far the best policy, But low inflation in western world will create problems as general price increase is almost absent in western world.

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