America’s Social Security Crisis
Social Security has been around for a while(since 1935), but it’s going to have to change in order to survive through its 100-year anniversary. Before we discuss these possible changes and their pros & cons, here is a brief description of what Social Security is and why its imminent doom matters to working Americans.
Social Security is basically a program that takes a 6.2% chunk out of every worker’s paycheck and puts it into two giant trust funds. Once these employees are old and retired, they get all of their contribution(and more) back in the form of a monthly check. The system works because there is a constant cycle of current workers paying for the previous generation; although participation is mandatory, every worker benefits. Furthermore, the legal retirement age is constantly being raised, and penalties for taking money out of the fund increase for younger people. While early retire-ers can get payments as early as 62, they’ll be heavily reduced, meaning some recipients won’t get their full money’s worth. So, what’s the problem?
Think about it: how does everyone get more money than they put in? The answer: they can’t. Both trust funds have been steadily shrinking, and by around 2035, recipients will only be able to cash in 75% of promised benefits(they’ll still earn money from yearly tax revenues). Due to the increasing number of Americans that live to a ripe age, anyone born after 1968 will miss out on money rightfully earned. In fact, a growing amount of Americans doubt they’ll receive any form of payment.
There’s the problem. The question is, what can be done? According to the Motley Fool, there are three possible solutions. The first is to change nothing. The second, to cut benefits. The third, raise taxes in order to continue paying benefit levels at the status quo. The problem with the first option is that millennials still face the problem described earlier: their lack of a guaranteed payment. By the time they retire, they’ll face over a 20% cut in benefits, which is alarming given that “80 percent of Americans of all age groups say they plan to rely on Social Security in a substantial way or rely on it somewhat.” Unfortunately, there are difficulties with the other proposed solutions. Change will be difficult to implement, as there will be a large group protesting either decision. Those who are receiving benefits now would be staunchly opposed to the second option because it disadvantages them, while those who will receive them in thirty years would tend to act to ensure they will be around then. The older generation wants to cash in all the benefits they’ve spent their careers paying for, while this one aims to avoid losing money from raised taxes only to see less of it in the future. With both groups unable to win, compromises must be made, and all working Americans will inevitably end up with less in their pockets.
It seems that no matter what, Social Security payments will be severely cut. Regardless, any solution will only be temporary; 15% cuts will only let the program keep running for another 70 years, giving less to this generation anyways. There really is no solution except to completely overhaul the program in a way that will keep it solvent for a very long time, or slowly discontinue it. Unfortunately, nobody has come up with a plausible solution just yet.
In times like these, we should question the entire basis of social security to begin with. In this case, the government can be compared to a parent keeping a child’s allowance for safekeeping. The premise seems slightly ridiculous: Social Security shouldn’t be a mandatory tax. Americans may have better ways to save for retirement, and poorer individuals aren’t earning enough to save for the future to begin with. As seen in Nickel and Dimed by Barbara Ehrenreich, workers could better spend their money in the present, while they’re still earning it.