Introduction
Social security is an insurance program where workers pay when they are employed. Moreover, the employers pay a matching contribution to the programs. Therefore, social security’s guaranteed benefits are available to support workers and their families after retirement or after they lose their career due to disabilities or death of a breadwinner.
The social security program is one of the most successful insurance programs. However, lawyers, politicians, and even professionals who try to analyze the issue have misunderstood it. Therefore, this paper tries to explain and differentiate social security from a pension that is paid to support the income of retired employees because it is also designed to ensure and protect the families of the deceased workers.
Social Security issues
Social Security issues address a number of groups of people who include people with disabilities, retired employees, as well as the survivors. To start with, disability is a big issue of social security. There has been a challenge while trying to reach disabled people with the message of the benefits that they can get from social security (Seipel 69). Disability insurance is a social security program that was introduced to provide cash benefits to people with disabilities.
That is, it makes monthly reimbursement to individuals who are no longer able to do any job due to impairments, which are expected to continue for a year or which are likely to bring about the passing away of the individual. However, the benefits are based on a person’s preceding earnings. Even after lowering the amount that a person needs to pay to be eligible for the cover, the issue of poverty has been a limiting factor since many individuals find it hard to get extra coins to cater for that program.
Payments are made to the handicapped person together with the dependent family members. For an individual to be eligible for these benefits, one must have worked in jobs that are covered by social security schemes. This requirement is another issue that filters individuals who can benefit from the program. It means that many other disabled people cannot access it if they have not been in the job market to enroll for the scheme.
After successfully getting Disability Insurance (DI) for a period of two years, individuals then qualify for Medicare. The majority of people who benefit from this program have multiple disabling conditions. In fact, out of about ten million individuals who got disabled employee benefits at the beginning of 2012, 31 percent had cerebral impairments as the major disabling condition or principal diagnosis.
Despite the many complications that people encounter, in addition to their efforts to join the program, there is no follow-up to find out whether they have had satisfaction with it or not.
The second issue concerns the retired employees. Social security introduced the retirement insurance plan to take care of the retirees. It offers retirement application forms that an individual can fill through the internet. These forms can be accessed and filed online at the convenience of an individual. However, there is much delay when one waits for feedback on approval after providing the required details. The program provides a basis of the giving-up-work income that ex-workers complement with retirement funds and investments.
Benefits alone cannot provide a sufficient and comfortable level of living despite them being adjusted to about 1.7 percent to keep up with the cost of living (Lavery and Reno 43). Social security benefits are comparatively modest both in dollar amounts and in relation to retirees’ previous income. However, the benefits are significantly imperative for the households receiving them. About 90 percent of both married and unmarried persons of age 65 and above receive social security benefits as their main source of income.
However, reaching these people in a timely manner has been an issue. As such, they are ensuring consistency has been a burning challenge to social security since a one-time failure to cover the eligible individuals can be such a significant hitch to them.
The reason why social security is such a large portion of income is that most Americans above the age of 65 do not receive income from pensions, private employment, or from jobs in state or local government (Lavery and Reno 54). Besides, for the individuals who receive pension income, the amount is too minute to keep up with the price growth after retirement despite the presence of automatic cost of living adjustments.
The majority of individuals think that social security is only for retirement programs. It has been a challenge while trying to communicate the scope of services that one can get from social security. Very few people from rural areas lack even a hint about the existence of social security. There is a need to create awareness that social security also takes care of survivors who include people who are left by their parents when they die or are retrenched.
Social security helps by providing income to the children where their parents lose a career through death or incapacitation. Therefore, 98 percent of children can get benefits when their parents die. When an individual dies or loses a job, members of the victim qualify for survivor benefits. These members include the divorced, the deceased siblings, and the dependent parents. As an individual does the job and caters for social security levies, he or she gets acknowledgment towards social security reimbursement.
Therefore, the amount of time that individuals require to do the job on behalf of their households to qualify for social security survivor reimbursements is determined by their age during the death of the person. However, no individual is required to do the job for more than ten years to be appropriate for the program reimbursements (Dattalo 240).
Under an exemption decree, if an individual passes on after having done the job for only almost two years just before he or she is bereaved, reimbursements can be made to one’s kids and the party that takes the burden of raising them. In the case of separated couples, if a male partner passes on, the previous companion who has more than 60 years can enjoy the payback if the matrimony had been working for a decade or more.
One’s accumulated wages determine the total amount that relatives can receive from the program. This implies that the more an individual makes, the more the reimbursement. The maximum value an individual can get in terms of benefits per month is about 170 percent of the deceased’s benefit amount.
Wrong Decisions made by the US Government towards Social Security
Social Security is a complicated system that has forced many retirees to consider many options in order to establish the option that will maximize their lifetime benefits. However, the US government policymakers have made it difficult for individuals who try to appeal for various benefits.
For instance, if a person is claiming for social security disability plan, various unnecessary aspects are applied. For example, the probability of getting benefits increases with age. In fact, an individual with age of 55 is more likely to be listed for impairment in relation to a younger person.
The other aspect is the level of education of an individual. If an individual is more educated, the chances of getting benefits radically decrease. The assumption is that the higher the individual’s education, the more probable the person is able to work.
However, if an individual is not more experienced in a certain field of specialization, education is not a factor. This decision criterion is wrong because disability can arise to any individual regardless of whether he or she is skilled or unskilled, or educated or uneducated, thus making the victim unable to execute his or her duties (Lavery and Reno 56).
Another wrong decision made by the US policymakers is complicating social security, particularly among the married couples. It has been difficult for an individual to estimate clearly the benefits that one is eligible to receive. For instance, in case of divorced couples, where one spouse remarries the second or third, with all marriages ending up in divorce, the law is not clear on how much each ex-spouse will get from the deceased benefit.
However, only the ex-spouses who meet the 10-year threshold will benefit from the deceased survivor benefits. This criterion is wrong because the spouses may have children who need help. If their parents did not hold their marriage for the ten years, this decision works to the children’s disadvantage.
A taxon social security is another wrong decision made by the US policymakers. Depending on the social security level, an individual has to pay tax on the portion of one’s social security. The limit of individual benefits that are assessed for taxation is only 85 percent. This limit implies a loss of the revenues of the government. Therefore, it should ensure that this rate is adjusted to 100 percent.
Delaying the benefits for the retirees is a wrong decision. Many individuals are low-income earners. As a result, they may not have the patience to wait from the age of 62 to 70 to get their benefits adjusted to 76 percent for inflation. Therefore, it is approximately 2 percent of the individuals who have the patience to wait this long.
The retirement benefits should be provided to individuals immediately after retirement because a person may not be having other sources of revenues. At the age of 62, one may not be having the energy to work properly. However, taking the social security retirement benefits, this early is viewed as ignoring the fiduciary accountability to be concerned with the future.
Good Policies on Social Security
A social security Insurance program is the largest federal plan that pays more than $750 billion in total benefits to more than 56 million persons. Therefore, the program boosts both the economy of the country as well as the individual states where the benefits are enjoyed. When individuals buy goods and services using their social security benefits, they raise business sales, which eventually help both the firm and the companies supplying the products.
Social security has enormous impacts on the economy than even the dollar in its benefit payments. When the beneficiaries expend their monthly benefits, the effects always flow to the economy. Therefore, when these outcomes were analyzed, the economists came up with a model known as ‘the multiplier,’ which represents the rising effects of payments as they flow through the economy.
To understand how the plan works, one should first understand the role of social security to beneficiaries in addition to knowing how it supports personal consumption (Lavery and Reno 56).
Social security benefits are a source of income for many households. Particularly, the inflation-protected social security benefits constitute a guaranteed income for retirees and their families. Therefore, a good share of the unmarried people relies largely on social security benefits as compared to any other source of income. It is also a significant source of income for disabled employees, particularly those who enjoy disability benefits.
The benefits of social security are always paid regardless of the overall economy. In many cases, they end uprising during a recession. This event is significant for both the beneficiaries and the stabilizing influence of gradual economic recovery. During the recession, payments of benefits support consumption for the beneficiaries.
The fact that most of the beneficiaries spend all or most of their income is a great advantage to the economy through acquiring goods and services such as food, clothing, and health care. However, the tendency to spend from source income is known as the marginal propensity to consume (MPC) from income.
Therefore, the higher expenditure of the benefits among the beneficiaries causes a high impact on the economy because more dollars circulating in the economy. Age also affects the marginal propensity to consume. In fact, older people tend to have reached that stage in life where they spend down their assets as opposed to saving. They are generally assumed to have a greater propensity to consume in relation to the younger generation.
In the case of a multiplier, the process starts when beneficiaries use their social security benefits to acquire goods and services. For instance, a retiree uses part of one’s income to acquire goods from local merchants such as the hardware stores. These local merchants spend the revenue in paying their workers as well as buying more from their suppliers to stock their stores for future clients.
Therefore, these consecutive spending rounds make up a very successful social security in the economy. Tax revenues from social security are a major source of revenue to the centralized, state, and local regimes. The levies may take the form of revenue tax, trade duties, and asset taxes, which increase the income for the government.
Bad Policies on Social Security
A social security program faces bad policies that include running short of money. The program is also affected by so many variables that make it problematic for long-term projections. Data shows that social security is not in crisis by any chance. However, there is no law that requires it to contribute to the federal deficit. Social security cannot borrow. Therefore, it cannot pay benefits if it lacks the revenue to make up for them. This situation reveals the reason why social security cannot be used in the deficit reduction arrangement (Dattalo 238).
There are better returns through private investment. Various lawyers of personal retirement account options are advocating for employees to invest in private capital markets because they yield higher returns as compared to the current social security. Of late, this view has gained enormous acceptance among workers.
The social security program operates at a rate of return in theory. Taxes that are paid to the program by the present employees are not saved to cater for their future benefits. Instead, these sums are instantly paid for the benefits of the present retirees. Therefore, the future retirement benefits for the present employees will depend on the taxes paid by the following generation of employees.
The economic growth projections that were suggested by Mueller about social securities are inconsistent with the projections of the economy. The fact is that future returns can vary. They can be high or low since there is no basis of assuming that the results will be different by any chance (Skidmore 303). Generally, employees in the social security program lack assets or property rights to support their benefits. They end up relying heavily on the interplay of national politics for their benefits.
Therefore, some groups of beneficiaries might become politically unpopular, thus ending up suffering benefits cut-offs (Millar 67). There is the introduction of the transition tax to finance the new system. During the period when employees start paying to the personal accounts instead of social security benefits, one will successfully fund any deficit in social security benefits through increased taxes on employees and their retirement accounts.
The Reasons behind the Social Security Problems and their Causes
Lately, the social security program is running into problems since people currently have fewer children. Since the early 1960s, the birth rate has declined by about 30 percent. It had dropped from about three children per woman to two or three kids.
This situation has caused a major change to the population and distribution of a country. Consequently, it has led to fewer people who can work and/or produce goods and services while at the same time paying taxes to the social security in comparison with the majority of the retired workers who consume the benefits (Dattalo 242).
Age-dependency is another cause of problems in the social security program. The number of people in the social security of age 65 and above is relatively high in relation to the number of individuals in the social security between ages 20 to 64 who have the potential to work. The present level is about 20 percent. It is expected to increase to 35 percent by 2030.
The main causes of these disparities are due to the changing values, lifestyle, and/or the introduction of birth control pills. The future funding of the social security’s program lies in the revolutionary improvement of women’s ways of life.
Another cause is that several people rely heavily on social security finances for their retirement revenue. However, the intention of creating a social security scheme is to prevent older individuals from falling into poverty after employment. Therefore, it was not meant to provide a comfortable life for people. Conversely, 70 percent of retirees who rely heavily on social security is too high to be sustained (Dattalo 242). Besides, the regressive social security tax is 14 percent, regardless of the benefits of an individual.
An employee who makes $200,000 a year pays 7 percent while the one earning $500,000 only pays 3 percent. This type of tax system only makes poor people poorer while at the same time creating high disparities between the poor and the rich.
Solutions to improve the Issues of Social Security
It is apparent that the program keeps on losing significance to persons as time goes on. However, it is wise to take note that gets rid of the program while not sparing the levies that finance it will even make the situation unbearable to people. Since the government understands this fact, it has availed the program to provide a uniform income to older retirees. Therefore, few solutions have been postulated to allow the program to remain in place.
Increasing the Payroll Tax
For more than 70 years, increasing the payroll tax has been tried with no success. The fact is that it only postpones the problem while costing the government a lot of money in the short-term. Moreover, raising taxes cannot be a permanent resolution because deficiency of levy dollars is not the source of the problem. Worse, this concept does not amuse employees (Lavery and Reno 58).
Adjusting the Retirement Age
Rising the retirement age for the individuals has yielded economic hardships. For instance, increasing the age from the previous 65 years to 66 years has led to a reduction of benefits by about 6.5 percent. However, for individuals who have the patience to wait until 67, the loss is only about 14 percent. In addition, adjusting the retirement age intensifies income equality among the income groups (Skidmore 305).
The understanding is that life expectancy has increased, thus heightening the retirement age. It is also criticized in that it is biased with reference to individuals who fairly sacrificed to remit their money, but have to do the job for extra time to get the reimbursement.
Cutting down some Federal Spending Programs
Changing some centralized expenditures will assist in resolving the social security troubles through increasing its financial support. However, politicians have disagreed with this aspect mainly because altering a single department of government can make it unbearable for workers in that department. This situation only requires the social security fund to be self-independent.
Privatization of Social Security Program
Privatization of social security is still an idea that is being debated. However, it is yet to be put in place. This strategy remains the best idea to solve the problem of social security because individuals are given the options to decide how their money should be invested. However, while private investments seem advantageous, these returns are normally overstated in most of the cases (Skidmore 306).
Conclusion
For about 80 years ago, the social security program has paid financial benefits to qualified individuals and families in full and in a timely manner. Therefore, the social security plan has not only contributed to federal deficits but also the growth of the economy through the provision of benefits to retirees, disabled, as well as survivors. However, after having benefited from social security funds in terms of surplus, the government must ensure that it honors its promise of paying back the money so that the program can meet its target.
Therefore, the government must come up with a strategy to get the revenue that is required by either levying additional taxes or cutting from other programs. By making a few modest adjustments, social security can be on a solid footing for many years.
Works Cited
Dattalo, Patrick. “Borrowing to save: A critique of recent proposals to partially privatize social security.” Social work 52.3(2007): 233-242. Print.
Lavery, Joni, and Virginia P. Reno. Children’s stake in social security. London: National Academy of Social Insurance, 2008. Print.
Millar, Jane. Understanding social security: issues for policy and practice. New York, NY: The Policy Press, 2009. Print.
Seipel, Michael. “Social Security: Strengthen Not Dismantle.” Journal of Sociology & Social Welfare 40.3(2013): 69-84. Print.
Skidmore, Max. “Social Security and Its Discontents: A Review Essay.” Poverty and Public Policy 5.3(2013): 301-307. Print.