The Privatization of Social Security Essay -- Social Security Privacy

The Privatization of loving surety many another(prenominal) quite a little dont understand how the Social Security governance reallyworks. There be no separate Social Security accounts set up for all(prenominal)taxpayer to which he contributes his Social Security tax each category. Manypeople believe these accounts exist, that the money they pay into theiraccounts grows each year until retirement, and when they retire they fastenback what they paid in with interest. This is not true. Most people beunaware of the fact that our current Social Security transcription is apay-as-you-go program, which means that the revenue the federalgovernment raises each tax year for Social Security benefits is paid outthat same year to beneficiaries. Many economists believe that our Social Security system is in need of amajor overhaul if todays workers are to receive future benefits. Thomas R. Saving, theatre director of the Private Enterprise Research Center atTexas A&M University says, What is wrong is that the Social Securitysystem was never set up to be a sound investment-based retirement system. Karl Borden, professor of financial economics at the University ofNebraska recently wrote, Social Security is an un strained pay-as-you-gosystem, fundamentally flawed and analogous in design to illegal pyramidschemes. organization accounting creates the illusion of a bank fund, but,in fact, excess tax revenue are spent immediately. Robert M. Ball, former commissioner of Social Security said, Some ofthe trust fund money should be put into the stock market. I postulate to do itto get a better return for the Social Security system. Historically,long-term government bonds have had a real return, after inflation, of 2.3 partage a year, compared with 6.3 percent for stocks. Paul W. Boltz, economist for the T. Rowe Price mutual fund said, Whenwe examine the pending financial crisis of our Social Security system, wefind, in effect, the characteristics of a go vernment sponsored Ponzi-typescheme. Michael H. Cosgrove, of the Dallas-based newsletter, The Econoclastsays, People need to take the responsibility of investing their stimulate fundsfor their retirement. The Social Security system assumes people cant makethat purpose and government can do it better. The result is a bankruptSocial Security System. These economists believe that by investing ... ...oss would have to be make up either by hiking taxes, increaseborrowing or drastically cutting benefits to current retirees. Thepresent Social Security system faces a long-term shortfall of between 1percent and 4 percent of total payroll, depending on your projections offuture economic growth. But the existing pay-as-you-go system could berendered solvent by a judicious combination of increasing the retirementage by two or three historic period and slightlyraising taxes. Also there is the question of whether to privatize the strong system, orwhether to add a second tier. We might keep the elementary system butsupplement it with self-directed IRA- alike funds. The basic tier would be redistributive and pay-as-you-go. The supplementary layer would be private and based on private contributions. A further question is who bears the risk when investments go sour.There is no such risk under the current system. The stock market lookslike a great retirement vehicle in the 1990s, but it wasnt so reliablein the 1970s and 1930s. The program was deliberately designed as a socialguarantee of retirement income, not a system of government-mandatedprivate savings.