SocialSecurity is the popular name used to refer to the United States’federal Old-Age, Survivors and Disability Insurance (OASDI) program.The act was passed into law in 1935 by President Franklin Rooseveltand has undergone several amendments over the years. Social Securityis funded by two type taxes, Self Employed Contributions Act tax(SECA) and Federal Insurance Contributions Act tax. The taxes arecollected by the I.R.S and handed over to the Social Security TrustFunds. In the U.S. all salaried income is subject to Social Securitycontributions with exception of income above $118,500 as of 2016[ CITATION Mil14 l 1033 ].
Prosof a Privatized Pension Security System
Overthe years, Social Security has transformed into one of the largestgovernment-ran programs worldwide. It accounts for 24% of Federalspending. From 2010, the program has been paying out more in benefitsthan the revenues it generates. It is projected that Social Securitywould have collapsed by 2034. This paper’s argument is SocialSecurity system should be replaced by a private pension system.Discussed below are various reasons which clearly show whyprivatizing the Social Security system is the best alternative.
Abetter pension system is required since Social Security as it iscurrently, will be insolvent by 2034. The ratio of workers toretirees has been reducing in the recent past and this has reducedthe amount of money available to pay future retirees. Relying on thecurrent system will only necessitate heavy borrowing and tax hikes soas to sustain it. A private pension system will be much better as itwould be funded by existing payroll taxes.
Therewould be an increase in returns on investments if Social Securitywere to be privatized. The average returns earned on privateinvestments are high as compared to the returns earned by SocialSecurity program. Privatizing the pension system will put more moneyin retirees’ pockets than what Social Security is doing.
Aprivate pension system will bring about economic growth. Individualinvestment accounts will earn higher returns and would inject moneyback into the economy. Private accounts will reduce the tax burdenlevied on people by Social Security. With a private system, highreturns would only lead to there being better jobs and higher wages.
Privatizationreduces government bureaucracy, spending, and workforce. MinimizingFederal government’s involvement in the pension system will reducecosts and reduce the U.S. government’s bureaucracy. The SocialSecurity program currently has a workforce of 60, 000 people withover 12,000 offices around the country. The program’s budget is inbillions of dollars. If all these programs were to be managed by aprivate institution, costs incurred by the government and bureaucracywould be reduced[ CITATION Avr16 l 1033 ].
Withprivate accounts, retirees are given the legal right to theirretirement benefits unlike with Social Security. It’s is not safeand certain as compared to having the money in private accounts whichcan be accessed with ease. Investing in low-risk ventures guaranteeshigher returns than what’s currently offered by Social Security.Finally, Social Security taxes are high and excessive[ CITATION Jam15 l 1033 ].
Fromthe above discussion, it’s evident that a private pension system isfavorable compared to the current Social Security program. We shouldswitch to a private system since the current program will, eitherway, be insolvent by itself by 2034. The pros of having a new privatesystem outweigh the pros of retaining the current Social Securityprogram.
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