Question

You’ve probably read/heard some proposals on how to deal with the looming Social Security insolvency issue. (If not, please Google it, and select a couple of articles to learn from.) What do you think is the best approach that you’ve read/heard about? What are its pros and cons?

Answer 1

Ans. Social security has a long known basic math problem: more money will be going out than coming in. Roughly 10000 baby boomers are retiring each day, with insufficient numbers of younger people entering the work force to pay into the system and support them. And life expectancy is increasing. The intergenerational transfer of wealth that's supposed to prevent poverty among the elderly, turns 81 this year. and it's not in good shape. The culprit: demographic shifts.

The problem is that the ratio of American workers to American retirees has been falling for decades, and since 2010 Social security has been running on a deficit in the billions. In its most recent report to Congress, the Social Security Board of Trustees projects that the program's funds will be depleted by 2034, after which only 79 percent of what was promised to American retirees wii be paid out. The sysytem may not be able to pay all of what retriees put in and were promised. So what can be done about Social Security before 2034. The answer, if Social Security needs more money, raise Social Security pay roll taxes so that the programe can keep paying out the promised benefits. This is an effetive option. A Gallup poll found that half of Americans would be in favour of rising taxes in order to fund Social Security, if the alternative was reducing benefits. Unsurprisingly, raising everyone's taxes is not a popular idea among most Politicians. Getting rid of the earning cap would keep Social Security fully funded, politicians should just do that. So one proposed solution is to get rid of the cap and keep the 12.4 percent payroll tax rate, which would mean an estimated $100 billion more taxes a year for the wealthy, who currently pay a smaller proportion of their income compared with poorer families, this would close the current funding gap. There are criticism against the cap also that simply getting rid of cap wouldn't completely solve the problem. Cutting benifits by 17 percent would solve the problem for the next 75 years, but it would short-change current retirees who are counnting on what they were promised. A redution in benefits would likely reduce public support for Social Security, because it would probably lead people to question the fairness of the programe. Another way to reduce the benifits would be to lower the cost-of-living adjustment[COLA], an additional amount of money tacked onto monthly payments according to how expensive it is to buy basic goods that year. Maybe not everyone needs social security equally. We should conduct mens-testing and eliminate Social Security benefits for people who already have enough saved up for retirement. This is how Medicaid works. There are rguments against it also, that it seems unfair. No solution seems fair to everyone, so maybe Social Security should just borrow money from somewhere else so it can pay all of its promised benifits. No solution seems quiet fair enough. So theoretically, the funds could be invested in other way - like being put towrds stock - to generate more revenue. But this is considered an extreme option. The good thing about solving Social Security is that there really are only two basic answer: increase revenue or reduce benefits. In the end , the biggest question might be whether anyone is willing to do anything about it until 2034. After all the 1983 funding rule came just months before expected insolvency, and required bipartisan compromise.