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Social Security Reform Term Paper

"Some people say Social Security is not in trouble, just like some thought the titanic was unsinkable," the ads state. The commercial also says that "if nothing is done," Social Security will "go bankrupt." Progress for America" spent millions of dollars promoting Bush's reelection campaign, according to an article in the New York Times (Justice, 2005). The current commercial, which opens "with a scene of a fog-shrouded iceberg," will run on "national cable channels for weeks," the Times' piece stated.

The Democrats have countered with ads of their own, according to the Associated Press (Raum, 2005) on Sunday, March 13. The Democrats call Bush's proposal to privatize Social Security "a risky privatization scheme." The Democrats' Saturday radio broadcast on March 12 featured the grandson of President Franklin Delano Roosevelt (James Roosevelt Jr.). He said: "In 1935, my grandfather signed the Social Security Act into law, ensuring that Americans retired with financial security." But "unfortunately," he continued, "President Bush and Washington Republicans" do not share the belief of "the guiding principle that America's workers deserve a secure retirement."

Roosevelt and other Democrats complain that privatizing Social Security will punish workers "in times of long market downturns," because the investment Bush is talking about on the Wall Street market wouldn't deliver as high a return as it would in economic boom times, the AP story pointed out. The article also mentioned that the most recent AP poll shows the Bush Social Security reform proposals gaining only a 37% positive result from the public.

The AARP (American Association of Retired Persons), the largest advocacy organization for senior citizens in America, states on its Web site: "We oppose creating accounts out of the contributions workers currently make into Social Security... [because such accounts] actually worsen Social Security's long-term financial health, draining revenues out of Social Security at the very time boomers begin to retire."

Moreover, the AARP continues, "such individual accounts are expensive - they will cost about $2 trillion." What that means for workers is they "would have to pay twice to create this new system..."

In the "Frequently Asked Questions" section on Social Security, the AARP is asked, "Wouldn't women do better with individual accounts?" "No," AARP answers; since women tend to have lower earnings and more years out of the paid workforce, they would have fewer dollars going into their accounts" from those years of work.

What are some proposed solutions to the Social Security system?

Business Week reporter Paul Craig Roberts writes that Social Security "can be fixed without raising taxes or saddling the dollar with a debt burden it cannot sustain." How? He alludes to a plan put forward in 1981 by a deputy assistant director in the Treasury Department (Stephen J. Entin) that changed the "initial benefit formula from wage indexing to price indexing." What that means is that "real benefits would still rise, though more slowly." And it would work, Roberts believes, "if U.S. wages continue to outpace prices."

Denver Post Washington Bureau chief John Aloysius Farrell suggest a number of ways in which the Social Security might be repaired and made whole:...

are not presently in the Social Security system, and putting them in would cut the shortfall by 9%, Farrell believes; c) "raise the payroll tax"; a 1% hike in payroll taxes (FICA) "would keep Social Security in the black" but only for 75 years; d) "raise the retirement age" to 70, in gradual increments (by 2083), would lower the shortfall by "38%"; e) "change the indexes" (also suggested by Business Week's Roberts.
It should be noted, as Douglas Holtz-Eakin (director of the non-partisan Congressional Budget Office) suggests in Farrell's piece, that even if the Social Security shortfall was whittled down to a manageable size, Congress could still take the cash from the trust funds to compensate for deficits, "to spend for other projects, leaving the government in no better shape than when the trustees redeem their Treasury bonds.

The AARP believes in the following solutions for Social Security: a) "increase the cap on taxable wages" (proposed by others in this paper); b) "diversify the way part of the trust fund assets are invested to increase the rate of return."

What does the conservative publication the National Review say about raising the "cap" on earnings that are subjected to Social Security taxes? "This terrible idea is being peddled to Republicans as a compromise... [and] looks like a slippery first step toward eliminating the cap altogether, as happened with Medicare" (Reynolds, 2005). The National Review supports the Bush privatization idea: Giving workers the opportunity "to divert - voluntarily - part of their payroll tax to a personal account is crucial," Reynolds writes. Indeed, he continues, those who advocate "reform" without "adding choice and ownership are actually just proposing various ways of saddling young people with higher taxes and lower benefits."

The Social Security "trust fund," Reynolds reminds readers, "is not a pile of cash. It is just a bookkeeping gimmick in which one part of the government promises money to another part of the government."

References

AARP (American Association of Retired Persons). About Social Security: Frequently Asked

Questions About Strengthening Social Security. 13 March 2005. Retrieved at http://www.aarp.org/socialsecurity-about/articles.

Craig, Paul Roberts. "Private Accounts: Right Idea, Wrong Time." Business Week 3923

2005): 39-41.

Farrell, John Aloysius. "Fixes abound, but choosing is tough." The Denver Post 13 March 2005: E1.

Justice, Glen. "Group Opens $2 Million Drive for Bush Social Security Plan." The New York

Times 13 March 2005. Retrieved at http://www.nytimes.com.

Raum, Tom. "Bush Attacks Social Security 'Scare Ads'." Yahoo News: Associated Press.

13 March 2005. Retrieved at http://news.yahoo.com.

Reynolds, Alan. "Myths About Social Security." National Review (2005): 40-41.

The White House. "Strengthening Social Security for Future Generations." Retrieved March 13, 2005 at http://www.whitehouse.gov/infocus/social-security/index.html.

Sources used in this document:
References

AARP (American Association of Retired Persons). About Social Security: Frequently Asked

Questions About Strengthening Social Security. 13 March 2005. Retrieved at http://www.aarp.org/socialsecurity-about/articles.

Craig, Paul Roberts. "Private Accounts: Right Idea, Wrong Time." Business Week 3923

2005): 39-41.
Times 13 March 2005. Retrieved at http://www.nytimes.com.
13 March 2005. Retrieved at http://news.yahoo.com.
The White House. "Strengthening Social Security for Future Generations." Retrieved March 13, 2005 at http://www.whitehouse.gov/infocus/social-security/index.html.
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