Is Social Security System Failing?
Social security system is a government system that provides monetary assistance to people with inadequate or no income. This is due to the belief that the society in which a person lives should help them to develop and make most of the advantages which were offered to them in the country. Everyone, as a member of society, has a right o to social security and is entitled to realization, through national effort and international co-operation and in accordance with the organization and resources of each state, of the economic, social and cultural rights indispensable for his dignity and the free development of his personality. It may also refer to the action programs of an organization which are aimed at promoting the welfare of the population.
In June 1934, Franklin Roosevelt appointed a Committee on Economic Security to report and make recommendations on the task of “furthering the security of the citizen and his family through social insurance”. The committee issued a report in January 1935 urging the establishment of a social security program stating, “A program of economic security as we vision it, must have as its primary aim the assurance of an adequate income to each human being in childhood, youth, middle age, or old age – in sickness or health. It must provide safeguards against all hazards leading to destitution and dependency.
Roosevelt sent a message to Congress requesting Social Security legislation. Bills were introduced in the house and senate and Roosevelt signed the Social Security Act into a law on August 14, 1935
The original social security act included not only federal old age benefits but also grants for to the states for the blind, dependent children, public health, maternal and child welfare and compensation for unemployment. With time, it has been expanded to include medical care, medical aid and the State Children’s Health Insurance Program (SCHIP) and supplementary Security Income (SSI).
Most people count on the social security system to provide them income when they retire. It serves as a retirement plan, an insurance program or an investment account. However, there is no trust fund, insurance policy or retirement account and o contractual rights to receive the benefits. With this in mind, the social security system fails at a primary objective aspect.
The social security system has failed to maintain its promised maximum tax rate of 3 percent on income up to $3000 a year as promised in 1936. It was initially promised that this rate would be the highest one would ever pay. This rate however seen significant increases over time which is not as initially planned,
Social security system has seen imminent cash shortfall for the program. In 193 the program was rescued by a combination of tax increases and reduced benefits. Since 2010, it has needed to be saved and it has experienced deficits and some of the taxes collected did not go to retirees. Congress hasn’t made any progress to solve the situation and this spells bad news to the tax payers. There are trillions of dollars of unfunded obligations. With the program failing to remain solvent over the years its future unknown.
The social security system has failed at providing an adequate return on investment. The initial aim was, “what you get from the government plan will be more than what you will have paid in taxes”. According to Geoffrey Kollmann and Dawn Nuschler’s “Social Security Reform” (2002), this was true at one point but is no longer the case. For average income workers who retired at age 65 in 1980, they were able to receive their retirement benefits of the combined employee and employer shares of their social security taxes plus interest within 2.8 years, those who retired at age 65 in 2002 will take 16.9 years to recover their benefits while those who will retire in 2020 will take 20.9 years. The failure here is that most of them may not even live long enough to recover the amount they paid in Social Security taxes for over the years.
Social security system has failed to provide a realistic retirement age. The original age to receive full benefits was 65 years. For those born 1943-1954 the full eligibility age is 66 years. For those born after 1960, it is 67 years.With technological advances, better health education, growing access to medical care and improved pharmaceutical options, life expectancy has improved greatly. The initial architects of social security did not predict that life expectancy would improve as much as it has over the years. This has posed a big problem as people are now living longer and are able to draw social security payments for an extended period of time and the population of senior citizens eligible for social security payments has risen greatly.
Falling interest rates have dealt social security a major blow. It has been a blessing to consumers, business owners who now can now expand, hire and make purchases at low cost and homeowners who are able to purchase homes at low interest rates. The effect on fixed income savings like social security is totally different as they yield very low interest and the program may have to use its reserves to pay beneficiaries.
Demographic changes have seen the worker to beneficiary ratio fall. There aren’t enough workers in the workforce to replace the retiring citizens. The big surge in number of eligible beneficiaries means that there won’t be enough payroll tax revenue coming into the program to fund the growing number of retiring beneficiaries. This makes the social security system fail.
Roosevelt falsely promoted Social Security as a savings account for old age with contributions held by the government for the benefit of the worker in his old age. John Attarian explains in his book “Social Security: False Consciousness and crisis” that most people especially politically powerful elderly believe this. However, the program is an integrational wealth redistribution program. This falsification makes it a failure as people do not know the real motive.
Social security failed the test of constitutionality in the way it was passed into on Act. The federal government did not have the constitutional authority to establish a retirement system, a pension plan and savings account or investment plan; to provide disability, death or survivor benefits; or to force all citizens to fund these programs whether or not they wanted to participate.
Successes of the Social Security System
Social security has succeeded in solving identification issues that appeared earlier on with the creation of a national ID card without which one can’t open a bank account. There have been 34 versions of the Social Security cards and the identification issues that plagued version prior to the 18th version which was issued in 1972 have ceased to appear.
Social security has succeeded in increasing the cost of hiring workers and lowering real wages. This comes about as the money paid by businesses in Social Security taxes could have gone to wages. This is due to the “employer’s share of the Social Security and medicare taxes that have to be paid. Division of the salary is all a labor expense and doesn’t affect the employers. However, employers may have to absorb some of the tax which raises the cost of hiring and reduces the number of jobs in some competitive labor conditions.
Throughout history, private charities, churches and organizations care for the poor, sick, aged and the infirmed. With time, government funds began to supplement and finally replace private giving. Social Security system managed to successfully shift charity work from the private sector to the government sector, from families to state and from volunteerism to coercion.
With Social Security in place, people can look to the government for income after retirement. This has discouraged private savings which reduces investment and money that would be invested in private sector activities is channeled to the treasury for redistribution of wealth.
Social security has successfully delivered the highest bidder a large voting block of senior citizens who flee from any candidate who proposes to reform the Social Security system. This way, the government has a way of maintaining the allegiance of the elderly.
Social Security has succeeded in eliminating the culture of individualism that was distrustful of the government and resisted adoption of socialism that was already in place before America’s Great Depression. This is because it has created dependency on the government largess, which leads to more and tighter government controls. Many of the retired citizens depend entirely on the government for income and makes them dedicated to maintaining and expanding the system.
Social Security has succeeded in launching the modern welfare state. When the Social Security Act was signed into law, Roosevelt said that it represented a cornerstone in a structure which was being built but was by no means complete. He valued the program so highly. Social Security has gone on to become the single biggest spending category in the current federal budget forming the cornerstone of the welfare state.
Social Security has succeeded in creating a large government bureaucracy. Four years after the program’s creation, 12000 employees worked in the Social Security Authority (SSA). It takes a lot of employees and money to administer the program. The SSA is headed by a commissioner assisted by nine assistant deputy commissioners, 40 associate commissioners, actuaries, lawyers, directors, inspectors general and a staff of almost 60000. The agency has a headquarters, there are 10 regional offices, six processing centers and approximately 1260 field offices. It operates on its own administrative adjunction system, which has original jurisdiction when claims are denied in part or full. Decisions are issued by administrative-law judges and senior adjudicators throughout the country.
Social security has not only succeeded in keeping the elderly out of poverty by giving them retirement benefits but it has also succeeded to draw older citizens from the labor force. This has freed up job positions for the younger population and ensured that buying power would remain strong in times of high unemployment.
The successes of Social Security system outweigh its failures hence it can be viewed as a successful program. However, it could use some reform for it to be something to brag about.
Geoffrey, K. & Dawn, N. (2002) “Social security reforms”
John, A. (2002) Social Security: False consciousness and crisis
Lawrence, M. V. (2013) “Future of freedom” Freedom Daily Archive
Roosevelt, F. D. (1935). Presidential Statement Signing the Social Security Act-1935
UN General Assembly. (1948) “universal declaration of human rights” (217 [III] A). Paris.