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Social Security: Why Do We Refuse To Fix It?

Updated on April 23, 2013

What Is Social Security?

The societal attempt to provide some form of social security is not a new concept; indeed, not only is it as old as civilization itself but it is a concept which could be considered a measure of degree of civilization. All through human history, to varying degrees, societies have found ways to care for their unemployed, ill, disabled, elderly and all others unable to fend for themselves. Through the storing of grain, the evolution of the feudal system, the rise of guilds or the beginning of charitable organizations society has tried to provide some form of safety net. Obviously, some methods were better than others; however, historically the social obligation remains to care for those who are unable to care for themselves and to provide members of society some sense of security.

A Short History of Social Security

The Social Security Act was signed into law by FDR in August 1935 during the Great Depression. Initially Social Security was simply retirement benefits for the primary worker, in 1939 survivor's benefits and benefits for the retiree's spouse and children were added. In 1956, during the Eisenhower administration, disability benefits were added. In 1937 workers were taxed 2% on their first $3,000 in earnings. Currently workers pay 6.2% in Social Security taxes and 1.45% in Medicare on their first $113,700 of earnings. Obviously taxes have increased, so have incomes, some dramatically. Over the ensuing years Social Security has been bent, prodded, adjusted, debated, expanded and contracted by the political parties. Whenever it comes time to talk budget inevitably entitlements and defense take center stage, Social Security accounted for approximately 20% of the 2011 federal budget while defense took up 19%. Medicare and Medicaid accounted for another 23% but are tied into the whole health care issue.

Entitlement -- Why Is This A Negative?

Today there is a great debate about entitlements and how America can no longer afford them. Often when the prognosticators and commentators discuss the current economic crisis it seems as if the bane of our economy is the entitlements. Is the ruination of America that there are people who expect to be paid benefits from a system they have spent a lifetime paying into? We all have been hearing the system is going to fail and that we need to fix it for as long as anyone can remember. It seems as if there are plenty of folks to point fingers but very few who want to get down into the muck and work out a solution. The very word entitlement has gained a negative inference as if it is something due an individual merely for being and not because they have worked for it. Are American workers entitled to Social Security? They are – if for no other reason than they paid into it and upheld their part of the bargain. As long as the leaders of this country are more concerned with their own interests and are unwilling to risk political capital this issue will remain insoluble.

Let's Find A Solution

I would imagine there are innumerable ways to make the Social Security system solvent, among them raise the amount of tax, raise the retirement age and/or decrease the benefits. The question is – Who is going to get hurt in order to implement the fix? Anything along the aforementioned lines is going to hurt segments of the population from the bottom up whether it is wage or benefit related. Any solution will be unpalatable to someone but, for the good of America, it might be better to slap one group of citizens rather than gut punch another. I would suggest two ways to increase the amount of money in the pool. First, remove the cap on earnings. Most people pay Social Security tax on their total annual earnings, why doesn't everyone? Second, establish a means test and disallow payments to those with incomes and assets above a certain threshold. These two changes may not make the system solvent but it may take some of the pressure off of the system -- and that nice old lady down the block may be a bit less concerned about outliving her money and maybe she'll feel free to put her thermostat up to 60.


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