Social Security
Social Security is defined as a “government program designed to provide for the basic economic security and welfare of individuals and their dependents” (“Social security”). In the United States, Social Security is a system of “public programs designed to provide income and services to individuals in the event of retirement, sickness, disability, death, or unemployment” (“Social Security”).
Today’s Social Security programs are the result of a bill that was established by President Franklin Delano Roosevelt, or FDR, as a part of his New Deal program. This act was signed into law on August 14, 1935 and was called the Social Security Act (Wolfe). In order for this plan to be successful, it had to be “supported from ‘contributions’ in the form of taxes on individuals’ wages and employers’ payrolls rather than directly from Government funds”. The act brought about many complex administrative challenges, such as “authorizing the Social Security Board to register citizens for benefits, to administer the contributions received by the federal government, and to send payments to recipients (Ourdocuments.gov).
The act also established many different programs. The six original programs were Old-Age Assistance, Old Age Benefits, Unemployment Compensation, Aid to Dependent Children, Maternal and Child Welfare, and Aid to the Blind. Only two of these programs, Old-Age Benefits and Unemployment Compensation, are operated as social insurance programs, while the others were created to support and supplement the two insurance programs. The social insurance programs were financed when the federal government deducted taxes from workers’ and when the states collected a tax from employers. The Old-Age Assistance and Aid to the Blind programs were meant primarily to supplement Old-Age Benefits. The Maternal and Child Welfare program funded health-care programs for mothers and their children who were living in poverty. Finally, the Aid to Dependent Children provided support to children with only one parent, or those living with relatives other than their parents. (“Social Security”)
Due to the growth of the economy and the technological advances that had occurred since the Social Security Act was made into a law, there had to be some changes made to the original act. These changes were called amendments. There were more than twenty amendments to the Social Security act since 1935. “One of the first amendments, passed in 1939, added benefit support for the dependents of retired workers and for survivors of deceased workers” (“Social Security”) Another amendment, passed in 1953, created a new form of Social Security that is still in effect today, the Old-Age, Survivors’, and Disability Insurance or OASDI. An amendment passed in 1965 created Medicare which also included the system of Medicaid (Infoplease.com).
These different amendments created many programs, still used today, in order to support those whose are involved with Social Security. These Programs are OASDI, Unemployment Compensation, and Supplemental Insurance Income. The Old-Age, Survivors’, and Disability Insurance helps the elderly, the survivors or deceased worker and the disabled. This specific program is financed by the taxes on earned bankroll incomes that were placed on employees, their employers and the self employed (“Social Security”).
The Unemployment Compensation program is only for temporary use for those who have recently lost their job. This program pays about 50 percent previously earned by the worker, depending on the amount of the original wages. The length of time in which this benefit is issued may vary from state to state, but every state is required by federal law to provide the qualified recipients with up to 26 weeks of financial support. The factors affecting the length of time in which the unemployed person receives benefits may depend on the amount of wages earned as well as the number of weeks worked over the course of the previous year. There are exceptions, even to individual state laws, when a person is unemployed for an extended amount of time the benefits that have been received may continue up until the length of up to 39 weeks (“Social Security”).
The Supplemental Security Insurance program, or SSI, provides support through payments to elderly, blind and disabled individuals with little or no income. The amount of support provided depends on the income of the recipients and their families. This program is used by the government as “a safety net for the working and retired poor” (“Social Security”)
Another important program was established in 1965 in order to better the social security system. Medicare is a “national health program in the United States for persons aged 65 or over and the disabled” (“Medicare”). There is also a special compensation for those of all ages, who experience End-Stage Renal Disease (Medicare General Info). Medicare is funded through a tax on the earnings of employees, and that tax is matched by the employer (“Medicare”). Medicare has three different programs that are designed to help the people who receive benefits from Medicare. The first of these programs is hospital insurance. This type of insurance does not require a premium to be paid and supplies participants with coverage of inpatient care in many different healthcare facilities. The second program is medical insurance. Medical insurance does require a monthly premium for most people and covers medical services such as physical therapy and occupational therapy. The third, and final, program is Prescription Drug Coverage. The Prescription Drug Coverage program offered by Medicare may require a monthly premium and is available to all with receive Medicare benefits. This program helps people by providing lower prescription drug costs and keeping the costs from escalating in the future (Medicare General Info.)
Along with the Medicare program came another program called Medicaid. Medicaid is a “national health insurance program in the United States for low-income persons” (“Medicaid”). Medicaid was established in 1965 and is available to only to certain low-income workers and families who fit the guidelines set forth by the federal and state governments. This is a state administered program in which each individual state can set specific guidelines as who receives the benefits and how much they can receive. Some of the requirements to receive Medicaid benefits include age, and whether you are pregnant, disabled, blind, or elderly. The Medicaid system is unique in that it pays the healthcare providers directly instead of paying the individual (Medicaid General Info).
Although the many programs of Social Security are designed to help those in need of medical assistance, there are also many flaws to this extensive system that may prevent this from happening in the future. Social Security faces four major problems that may prevent today’s young workers from getting the chance to enjoy the same retirement as their parents will in the years to come. These problems are the “massive future deficits, the inability of workers to build a nest egg and the lack of property rights to their benefits, a poor rate of return on their payroll taxes, and no choice of how benefits are paid” (John). The main concern of the many working people of today is that “as the millions of baby boomers approach retirement, the program’s annual cash surplus will shrink and then disappear” (“Social Security’s Problem”). This is because there were more people born in the baby boomer era than in the next generation. As a result, there are not enough workers to supply the financial needs for the baby boomers. “Recent estimates indicate that the Social Security trust fund will be exhausted by 2041” (“Social Security”). If the cash surplus does disappear as predicted, then Social Security will be rendered incapable of supplying benefits from its payroll and other tax revenues. Many of the young workers of today are concerned that there will be no money left for them to receive Social Security benefits in their later years. If this continues, the end result will be a decline in benefits and the entire economy will have to be adjusted to accommodate the change in Social Security (“Social Security’s Problem”).
There have been numerous suggested solutions to this problem caused by the retirement of the baby boomers. According to socialsecurity.org, “there are only three real solutions to Social Security’s rapidly approaching fiscal problems: raise taxes, reduce spending, or make the current payroll taxes work harder by investing them through some form of personal retirement account (PRA)” (“Finding Solutions”). “Establishing PRAs is the only solution that will also give future retirees the option to receive an improved standard of living in retirement” (John). A reform of social security is not an easy task. In order to reform a system, such as Social Security, some major changes must be made. In creating reform, we must: “create an account structure that uses a portion of existing payroll taxes and allows workers of all income levels an opportunity to build family nest eggs, create a simple, low-cost administrative structure for the accounts that uses the current payroll tax system and professional investment managers, create a carefully controlled set of investment options that includes an appropriate default option, adjust current Social Security benefits to a more sustainable level, create a realistic plan for paying the general revenue cost of establishing a PRA system, and create a system that allows workers flexibility in structuring their retirement benefits while ensuring that they receive an adequate monthly benefit” (John).
Reform is a very difficult action to perform. The United States has faced many setbacks due to the differing opinions of the many people involved in bringing about reform. “Fundamental differences of opinion on how to reform Social Security have thus far kept the government from making any major changes to the system…Given the uncertain soundness of the system, efforts at reform are likely to continue for some time to come” (“Social Security”).
I believe that in order to reform Social Security we need to place more strict eligibility guidelines for those who may receive payments and benefits from Social Security and its associated programs. In doing this, we will help to save the reserves of cash surplus and help the generation of the baby boomers have a happy and comfortable retirement. I also believe that the system should be restructured so that the people who pay more into Social Security for longer periods of time should receive more benefits than those who have only paid a little for very short stints of time. If these suggestions are put into place, Social Security will become more fairly distributed and keep the programs around for many years to come.
Works Cited
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