FREE ESSAY ON PRIVATIZE SOCIAL SECURITY

PRIVATIZE SOCIAL SECURITY

Privatize Social Security: Americans are Smart Enough to Invest for Themselves
The beginning of the 20th century was a very hard time for America and its citizens.
After the Industrial Revolution and the Great War came the Great Depression. The economy
was crashing, and crashing fast; the stock market crashed twice in one week, thousands of
people were laid off, and businesses went bankrupt. These were definitely the hardest of
times and the people were looking for help. On June 8, 1934, President Franklin D.
Roosevelt announces to congress that he intended to provide a program for Social
Security. He created the Committee on Economic Security to study the entire problem of
the economy and to provide any recommendations that would help congress make a
legislative consideration. In early January 1935, the committee gave the report to
Roosevelt and on January 17 he presented it to congress. On August 14, 1935 the Social
Security Act was pass into law by President Roosevelt. The act was to help people in need
of general welfare and pay retired workers age 65 or older a continuing income after
retirement. The program later change to include unemployment insurance, old-age
assistance, aid to dependant children, and grants to states for medical care. In 1939,
the program was amended to include payments to the spouse and minor children and
survivors benefits pay in the event the worker suffered a premature death. This is pretty
much what Americans know as Social Security today and the program has been relatively
unchanged since it was stared over sixty years ago (Social Security History). 
This program was definitely needed during these hard times; no one can really argue that.
However, most people today discuss Social Security more than ever: it is argued in
congress, it is talked about on the news, and it is debated in political elections.
Americans feel that they can do better investing their hard-earned money themselves. Most
American's feel that Social Security will not be there for them when they reach their
retirement age. Social Security is in serious trouble and the United States must act fast
before it is too late. One solution that would benefit the American people is to
privatize the retirement portion of the Social Security Program.
Social Security is in deep water; it is so deep that it could possibly be bankrupt
sometime in the next century. Gary Burtless of National Tax Journal stated that "The
trust funds will begin to decline and, under most plausible forecasts, will fall to zero
well before the middle of the next century" (399). This should frighten just about every
working person in America. In fact it frightens so many people that it has really become
a hot issue in congress, it is debated more often between our congressman and senators,
and it is a major concern of President Clinton. This reason for this is simple; Social
Security is in trouble and everyone knows it. One of the most shocking groups of people
to notice that the Social Security program is in trouble, are senior citizens. 
James L. Martin's 1997 article "Personalizing Social Security" shows that senior citizens
are in favor of privatizing Social Security. His interviews with senior citizens lead him
to believe that most senior citizens do not want Social Security for themselves but for
their children and grandchildren. He states " . . . seniors' most valuable assets are
their children, their grand children, and their great grandchildren" (29). So, Martin has
decided to start 60 Plus, a senior citizens group trying to find a simple solution to the
problem of Social Security. They do this for the sake of their children and their
grandchildren (29). However, senior citizens are not the only group who has decided to
act on the problem of Social Security.
Martin also discusses that President Clinton and his Social Security Advisory Council is
taking measures to find out what to do about the problem with Social Security. The last
time a president studied Social Security was back in 1983. Ronald Reagan Social Security
Reform Commission stated that Social Security would still be working for the next 75
years. If this is true then why has President Clinton started another commission so soon
in the 1990's? The answer again is simple: there is still a problem. President Clinton's
council is stating that there is definitely a problem and they agree that it should be
privatized (29). 
Taxes are what keep Social Security going. Social Security tax will need to be raised
significantly in order to keep the current Social Security Program working. Laurence J.
Kotlokoff and Jeffrey Sachs "It's High Time to Privatize" states that " . . . we need to
raise, immediately and permanently, the combined employer-employee OASDI payroll tax rate
by 50 percent-from 12.4 percent to 18.4 percent-to avoid having to raise the tax rate by
a much larger percentage down the road" (16).
The book Social Security and Retirement discusses some very interesting points about the
tax problems of Social Security. What happens when the economy is not doing so great and
workers are laid off? When people are unemployed it effects the cost of Social Security
revenues. "For every one million workers who were laid off for a single month in 1980,
approximately $100 million in anticipated employee and employer taxes to Social Security
trust funds were lost" (29). 
Taxes are a serious problem for Social Security and most Americans can not stand it when
the government calls for more taxes. If left alone the Social Security program will not
be able to go on with out raising taxes significantly. A number of sources indicate that
the current tax percentage is 12.4 percent and in order to keep Social Security going the
government will have to raise taxes by approximately 50 percent. This is something that
Americans will not stand for.
Social Security in American is unfair. When President Roosevelt first thought of Social
Security, America was facing hard times. The whole idea behind the program was to help
out the poor, who could not find a job and also help out the retired worker who could not
afford to live with out a job. The idea was a very good one and definitely was need at
the time; however, since then times have changed significantly. People are more
financially stable, they are investing more, and they are planning for retirement. The
poor or financially unstable people are the ones that need this program the most. The
problem with Social Security is that it is designed for the financially stable workers as
well. According to George J. Church of Time Magazine he states that Social Security is
"Robin Hood in Reverse". He feels uncomfortable with the fact that he still receives a
Social Security check even though he has made enough money to live comfortably. He might
as well be robbing from the poor and delivering to the rich like Robin Hood did, only in
reverse. Church also states that the poor pay more into Social Security than the rich. "
. . . Tax is levied-at a rate of 6.2%--on only the first $65,400 of income, so those who
earn more pay much less than 6.2% of their total earnings. The working poor pay the full
6.2% on every cent of their meager wages" (24). This is totally unethical, Social
Security is definitely not fair and America's conscience should have a big problem with
this.
Kotloff and Sachs state another reason it is unfair, it is because the system
"redistributes large sums from men to women, from single people to married couples, and
from two-earned couples and singles to single-earner couples". Kotloff and Sachs give an
example,
" . . . a 40-year-old single man earning $25,000 in 1997. For this man, the life time net
tax from participating in Social Security measured as of age 65 is $397,000 . . . For
him, participating in Social Security is equivalent to arriving at age 65 with $397,000
less in assets-a fantastic sum for some one earning only $25,000 a year. The
corresponding loss for a single women the same age and with the same earnings is $14,000
less-because, on average, women's greater life expectancy allows them to collect benefits
longer than do men" (16).
This is just one example of many reasons why the current Social Security Program is
unfair. The People must be made aware of this unfairness. Most people are not aware of
how Social Security works and how the trust fund is distributed among the people. If
people were aware of this unfairness they would definitely seek a change in the Social
Security system.
What can we do about the current Social Security program? Obviously there are problems
with it. Should America abolish the program all together? No way, that would leave a lot
of people homeless, poor, in need of medical care, etc. What America needs is an option
to Social Security? Surveys have show that most people believe that there is a problem
with Social Security and most agree the only why to fix it is to give people the option
to privatize the retirement portion of Social Security. Privatizing Social Security works
and there are countries already moving in this direction. These countries include most of
Europe and South America. Chile was the first to suggest this and most financial gurus
laughed them at. Now Chile's retirees are one of the most financially stable in the
world. 
One of the reasons why it would be better to privatize Social Security is because the
current program's rate of return makes the program an increasingly worse investment for
today's young worker. More and more people in the United States are starting to invest
their money in the stock market, mutual funds, savings accounts, bonds, etc. They feel
that they are smart enough to take care of their own investments and do not need the
government to take care of them like children. They also do not feel comfortable with
living on Social Security when it comes time to retire. James K. Glassman from US News &
World Report writes about how the governments help is not need for people whom now how to
invest their money for retirement. Currently Social Security returns an average of 1 to 2
percent, so this is why people feel they can do better investing themselves and do. He
feels that the problem with the system is that it has always forced American workers in
to anteing their hard-earned money so that we could someday get back what we pay in.
However, today it is a lot less money than what people pay in (29). Glassman illustrates
"The Cato Institute calculates that a low-wage ($12,600 a year) worker born in 1950 will
receive $631 a month in current dollars from Social Security at retirement. But if the
retirement portion of payroll taxes went instead into stock, the worker would have an
annuity yielding $2,490 a month" (50). If most people knew this they most likely would
not want to count on the government to invest their hard-earned money for only $631 a
month.
Glassman also points out the risks involved with the stock market. Because some people
are not well educated in the stock market or because it can be a bit confusing to
understand, people tend to be a little reluctant to invest their money. But investing
long-term in the stock market is almost no risk at all. According to Glassman, "Since
1926, according to Ibbotson Associates of Chicago, stock returns have been negative in 20
out of 71 years" (50). Glassman also raises a good question on whether Americans, given
the opportunity to put down a percentage of their salaries into private pension plans
instead, can they invest wisely? He states that "The Chileans do; the British Do . . .
Americans are prudent enough and smart enough to handle their own investments. At any
rate, even if they goof badly, they'll still likely do better than Social Security"
(50).
Some might argue that women should be concerned about privatizing Social Security. The
reason for this is because most working women in the world are still a minority and this
means that they will be paid less than the working man will. This is a fact, however
upsetting this is or however unfair it is; it is none the less true. John Williamson in
his articles "Should Women Support the Privatization of Social Security?" he discusses
whether or not women should support the privatizing of Social Security. He suggests that
women should be concerned. The only women that most likely would not have concern are
those that have high paying jobs. But in most case women do not have high paying jobs and
therefore will have to rely on Social Security when they reach retirement. He feels since
privatizing Social Security involves investing money primarily into the stock market; low
paid women can not afford to take the risk.
Williamson suggests middle-and low-income women are much more dependent on Social
Security because they are less healthy and can not work like upper class women. He states
that "More affluent women can more easily delay retirement a few years if need be in
response to a dramatic drop in stock or bond markets. They tend to be in better health
and have jobs that are physically less demanding than those held by others" (97).
Williamson's argument does not hold water. What he is suggesting is that Social Security
is needed to care for the country's financially unstable women. Does he mean to say that
the financially unstable men are smarter and more capable in investing their money
wisely? Women are just as smart as men are whether they are rich or poor, healthy or
unhealthy. Williamson should realize that women are more involved in the working world
and can do just as well as men when investing. Women need to be aware that they could do
a lot better if they were to take their money and invest it in stocks, money markets,
etc. and that they would be a lot better off then depending on Social Security. This is
the kind of thing that will help women succeed in the business world. If women in other
countries can accomplish this, then so can American women.
Privatizing is working in other countries and is working very well. There are more than
two dozen countries in South America, Europe and Asia that have adopted to, or are in the
processes of adopting, the Chilean-style system of privatizing Social Security. Even
Socialist Sweden is going in that direction. They are going in this direction because
they know that it works. 
It works so well in Britain that they are the most financially comfortable retirees in
the world. The article "Private Security" suggests that if Britain can make it work then
America should be able to make it work. In 1988 Margaret Thatcher allowed British workers
the option of paying a percentage of the earnings into private investments. Today this
amount is up to 5 percent of their earnings and more than 70 percent of the workers are
enrolled in this plan. Because of this, privately funded pensions in the United Kingdom
are better than the government-funded pensions (20). There was also a generous tax relief
that promoted private pension savings in Britain. In addition the capital gains built up
in private pensions are tax-free. British workers enrolled in the private plans do more
than twice as well as those in the government pension plans. During the 1980's the
British private pension plan average return was 9 percent and continues to improve. The
British personal savings rate of 11.5 percent is roughly twice that of the United States.
The bottom line is, if Britain can do it so can America.
Another country that has recognized the need to fix Social Security is France. In the
article by Alexander Dorozynski "French Plan to Bail Out Social Security System" he
discusses that the French are attempting to rescue the failing Social Security program
system. They are planing to tax the middle and upper class families. The families will
have to pay higher contributions in to the system and their savings accounts, insurance,
and capital gains will be taxed in order to receive more revenues from Social Security.
If the United States is not careful this could happen and Americans will not tolerate
this (763).
Social Security is definitely in a crisis and that word is not used lightly. Americans
should be concerned with this because it means the future for their children, their
grandchildren and their great grandchildren. If the United States does not act fast and
fix the problem with Social Security by allowing the retirement portion of Social
Security to be privatized then the program will surely be broke by the middle of the next
century. This should be a major concern for most Americans. The program is also unfair,
most people are unaware of this because they do not realize or even care to realize
exactly how the money is distributed or redistributed among the retired workers. If they
did know they would most likely would want to change the system. Social Security is
outdated and is ready for a change. Private Security or allowing workers to invest their
earnings themselves is better for everyone. Women should not be afraid to invest in the
stock market and are quite cable of making a wise decision just as a man is capable of
making a wise decision. Private security is working throughout the world and can work in
America too. The government must give the people a chance to make decision on their own.
The government will not be surprised by the result; Guaranteed!
Bibliography
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