Social Security
COM/156
July 3, 2011
Linda Dell’Osso Social Security
On August 14, 1935, President Franklin D. Roosevelt signed the Social Security Act into law. Creating this new law allows workers, at the age of 65 and older, to receive an income that would continue after retirement. The benefits that each worker receives are based on contributions taken from each paycheck. The payroll contribution taxes finances the payments that retirees received monthly. “The program's finances are based on the relationship between the number of workers paying taxes and the number of retirees receiving benefits,” (SSA, 2011, p. 1). With the high rise in unemployment and the number of Baby Boomers reaching retirement age, the social security “annual cash surplus” is facing distinction.
President Franklin D Roosevelt established a Social Security Board (SSA), consisting of John G. Winant, Arthur J. Altmeyer and Vincent M. Miles, (SSA, 2011). The newly established board provides information to the public, along with employers and employees, about the reporting of earnings and the availability and distribution of benefits. The Social Security Board remained an “independent agent” until 1939. During administration changes, the Social Security Administration, which operated under the Department of Health and Human Services, replaced the social security board.
The main purpose of the social security system was to provide income for workers in their senior years. This income was to protect the workers and their families from poverty or certain events that can happen in their lives, such as death or disability. The social security system is financed through payroll deductions from workers, employers, and people who are self-employed, and the benefits are based on a person’s earnings.
Over the past 70 years, changes are taking place with the social security system mainly because of demographics. Without meeting the changes, the burden of providing benefits for the new retirees will fall on the next generation.
Because the life expectancy of an individual is longer, the social security system is facing a crisis. In 1935, the average life expectancy of an individual was 12 ½ years more but today that number has been increased to 17 ½ more years.
Social Security has become an important part of life for most senior Americans. Compared to the number of recipients in 1940, which was more than 222,000, there are more than 50 million people living on social security benefits today.
The social security trust fund will run out of money by the time young workers, born after 1970, reach retirement age. If changes are not made to the social security system before the young workers reach retirement, their benefits will be about 75% of the promised benefits. To eliminate this problem, plans are in progress to reduce the dependency on the social security system for survival. Options to invest for retirement with payroll tax contributions will reduce the dependency on the social security system by younger workers. According to the Social Security Administration, the Baby Boomer generation, people who were born between 1946 and 1964, began to retire in 2008. From 2008 until 2025, more Baby Boomer will reach retirement age. With the increase in the retirement age and the number of retirees along with the decrease in the number of people working, the payroll tax contribution will shrink.
One of the main issues of the Presidential Campaign in 2000 was Social Security Reform that would affect younger workers born in 1950 and later, allowing them the opportunity to invest in an account for their retirement.
President George W. Bush, who was elected as the 43rd president of the United States in 2000 and re-elected in 2004, appointed the “President’s Commission to Strengthen Social Security,” on May 2, 2001, (SSA, 2011, p. 1). The guidelines issued by the president for the Commission were to “preserve the benefits of all current retirees and those nearing retirement, return Social Security to sound financial footing and offer personal savings accounts to younger workers who want them,” (SSA, 2011, p. 1). Critics of President George W Bush’s social security reform stated that the meaning behind this reform is to “privatize and ultimately gut Social Security,” (Koulouris & Medeiros, 2010, p. 1). Some believe that privatization is meant only for certain Americans, mainly the rich, while other middle-class Americans will face poverty by investing in the stock market.
Social Security contributions are not set up in individuals accounts and do not allow workers to earn interest. The social security contributions made by each worker pay the benefits of current retirees. According to the United States Government Accountability Office, the main problem that the social security system is facing today is “paying out more cash in benefits than it receives in revenues,” (GAO, 2005, p. 1). Although most Americans do not agree with the privatization of the social security system, everyone agrees that something need to be done to fix the problem.
Social Security reform is still an important issue for the present government. In the State of the Union Address on January 25, 2011, President Barack Obama, who was elected in 2008 and the first African American president stated, "To put us on solid ground, we should also find a bipartisan solution to strengthen Social Security for future generations. We must do it without putting at risk current retirees, the most vulnerable, or people with disabilities; without slashing benefits for future generations; and without subjecting Americans’ guaranteed retirement income to the whims of the stock market," (White House, 2011).

In his committed efforts to strengthen and protect social security, President Obama’s budget will produce ways for all Americans to participate in a retirement plan by proposing automatic enrollment in IRAs and simplifying the rules that will allow them the option to opt out. He has “called on Congress to work on a bipartisan basis to preserve Social Security as a reliable source of income for American seniors,” (White House, 2011, p. 1). With the increase in unemployment, which means that the contributions taken from each worker paycheck will decrease, young workers are facing challenges in their standards of living. The amount of benefits that young workers will receive at retirement will be lower than the present generations. With the social security system facing extinction, younger workers should look at other options for investing for retirement.

References
Koulouris, B. & Medeiros, M. (2010). The Last Time They Attacked Social Security: Articles from the Struggle in 2005. Retrieved June 20, 2011 from http://www.socialistalternative.org

Social Security Administration. (2011). Retrieved May 18, 2011 from http:/www.ssa.gov
Social Security Reform Center. (2011). Retrieved May 18, 2011 from http://www.socialsecurityreform.org

U.S. Government Accountability Office, (GAO). (2011). Retrieved June 2, 2011 from http://www.gao.gov

White House. (2011). Seniors & Social Security. Retrieved June 18, 2011 from http://www.whitehouse.gov/issues/seniors-and-social-security