Social Crisis: Impending Disaster for Social Security and How We Can Fix It

During the early half of the twentieth century President Franklin Roosevelt set in motion events that would create an economic crisis for American Government. Social Security began as a way to ensure all saved for retirement, yet in our modern era it has become a system where the young pay for the expenses of the elderly. As time goes on and the demographic of the nation changes and there is a smaller ratio between the amount of retirees and those who pay social security taxes, the problem of Social Security must be faced. As President George W. Bush said in the 2003 State of the Union "We must make Social Security permanently sound, not leave that task for another day''[1] Ben Bernanke, Chairman of the Federal Reserve said that "[r]eform of our unsustainable entitlement programs should be a priority... the imperative to undertake reform earlier rather than later is great."[2] As an answer to this call for reform there are a great many proposals currently in Congress to combat the issues arising from Social Security, ranging from government funded programs tied in with personal private accounts, to full privatization of the system. In order to understand what changes will be made to the system, be it partial privatization or full, the current Social Security system must be looked at.

The current Social Security system receives funding via the Federal Insurance Contributions Act (FICA). This Act creates a payroll tax that is paid for by both employee and employer equally. There are both retirement and disability benefits for those who are covered by FICA. Though it was not originally intended to be a pay-as-you-go system, it does currently resemble insurance plans which follow such a system. This system is going to end eventually when the expenditures of Social Security can no longer be met by the income through FICA. The nation is becoming older and there are not as many young people to pay for the old as there once was. When the current population reaches retirement age the Social Security system will be used up and new ways of ensuring retirement must be implemented.