The Social Security Reform
... up to a max of $87,900. Just a fun fact: If an individual makes more than $732,500 a year then that person’s tax (12.4%) for Social Security stops at $87,900 and can not get any larger. For an overall view of this 12.4% tax a whopping 13.4 billion from the nation’s net income tax is paid on Social Security benefits. In 2004, the total income of the nation was a whopping 631.9 billion, while benefits consisted of 47.5 billion, and the administrative expense was 4.6 billion. The nation’s net income of $152.8 billion was invested in additional equivalents of U.S. Treasury bonds. At the end of 2004 the Advancement of Developing Industries (OADI) Trust Funds were worth more than $1.6 trillion dollars. When tax revenue comes to the U.S. Treasury it is distributed to the two types of Social Security Trust Funds. The first is the Old Age and Survivors Insurance Trust Fund. The second, is the Disability Insurance Trust Fund. In 2003 alone, $533.5 billion dollars were collected in tax revenue for Social Security. (Pat Conover, 1) In a country where a majority of the population does not believe that they will ever receive any money from the Social Security, changing perspective is necessary to save the system. With individual accounts, every worker would have a vested interest in a growing economy. By 2042 the so-called Trust Fund will be exhausted and Social Security will only be able to pay 73% of promised benefits to retirees. The surge in retirees in the near future from the Baby Boomer generation will cause a surge in benefit payments from the system. Because of the surge of retirees, in just 15 years the system will be paying out more benefits than it can collect in taxes. (Berna Brannon, 1). The people who are trying keep the Social Security current system say that Social Security is as safe as the economy of the United States. The Social Security trust funds are completely invested in the equivalent of U.S. Treasury bonds. Should a decline in tax revenues result from a bad economy, this would be a problem that touches all society, not just Social Security. Social Security helps the economy in hard times because the benefits paid by Social Security continue during periods of hard times and serve as a stimulus to the economy to counter-act downward pressures. Finally their largest complaint about the proposed reform suggests that the price tag for introducing individual accounts could require around $2.0 Trillion or so over the next decade. (aflcio.org, 1). The most popular reform option involves the introduction of individual accounts of some sort that workers would own, control, and be able to leave to their heirs. While there is no disputing that some kind of reform must be introduced soon, there is substantial debate as what any reform should entail. The “$2.0 Trillion or so” transition cost is not a new cost; it is simply a turning an implicit cost, future promise benefits into an explicit one. Instead of stopping and chocking about the “$2.0 Trillion or so” to reform Social Security, in reality, the number t...