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What is the solution to the Social Security crisis?

By jardinier ·
Already this is a critical issue in America, but will no doubt eventually become critical in other countries as modern medical techniques extend the lifespan of people.

In Australia, in the lead-up to the October 2004 election, Treasurer Peter Costello had a huge budget surplus which he suggested should be kept aside to meet future social security needs.

But Prime Minister John Howard blew the lot in order to buy his way to re-election.

However the issue is one of which the Australian Government is aware, and very concerned.

The episode of "West Wing" that was screened in Sydney this week was dedicated to the Social Security crisis.

Now I know a lot of you have strong feelings about welfare bludgers, but a restatement of those feelings is not what I am looking for.

I am looking for feasible suggestions. This may well include cracking down on welfare bludgers, but the real problem of course is with the ever increasing proportion of the population that is living longer and longer after normal retiring age.

One suggestion presented in West Wing was to extend the age for retirement, but this was dismissed as politically too unpopular.

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Make everyone smoke

by HAL 9000 Moderator In reply to What is the solution to t ...

And they die younger. As well as contributing a massive amount to Consolidated Revenue in Tobacco Taxes.

Col

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World's greatest pyramid scheme

by Salamander In reply to What is the solution to t ...

Any system in which people at the top of the pyramid get more out of a system than what they've paid in, absent any mechanism for interest-gathering, is in danger of collapse.

And for some back-of-the-envelope chicken scratchings to illustrate, assume that the average worker earns about $1,000,000 over his/her lifetime. Assume that a worker retires at age 65, and that he/she has had 10.3% of each check removed by the government for Social Security purposes. Assume the average (American) life span of approximately 77.2 years. Though the actual Social Security formula is more complex, this works out to a figure of about $703 per month in benefits. However, the U.S. average in 2002 for monthly benefits to retirees is about $874.

It appears to me that even people who work consistently throughout their lifetimes are getting a good deal more out of "the system" than they put into it...to say nothing of people who have contributed little or nothing to "the system."

In my opinion, anyone under the age of 30 who is having Social Security taken out of their checks will never see that money again...it should be considered "lost income," for all intents and purposes.

No pyramid can last forever. In most schemes, at the third tier, it falls apart. It's my belief that Generation X will have the task of dismantling the system, once it comes of age to weild a sufficient degree of political power in the U.S.

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An Idea

by ProtiusX In reply to World's greatest pyramid ...

I concur. I am a generation X'er albeit an older one. I am on the back side of thirty and growing old fast. when I was taking economics in school back in the 80's my instructor said that we should not even consider social security as a part of our retirement. So I have not. I have made all my retirement decisions based on my own means of supporting myself and my family when I get to be an old codger like Col.
Now I now the question is what are some ideas to save or redo social security. I think we need to look at what the fund is being used for and what it's purpose is. We have completely changed the original purpose of Social Security and that needs to be addressed. We need to ask our selves whether this is a national retirement plan like it was intended or is it a benefits program for welfare programs. It shouldn't be for both.
Now here's a suggestion that will knock your socks off. The intent of social security was to take care of old people who can't work or who have reached retirement age. If that's the case then I think we should make a cap on income that would say if you have sufficient money to support yourself when you retire you really don't need the 800 bucks a month so we'll give it to someone who does. What I am saying is set a standard that says if a person has over a certain amount of money in their own retirement fund then they should be exempt from receiving social security payments. I am sure there are a lot of folks out there who have a decent retirement plan and still receive social security checks. Now don't get me wrong - I am not a communist or anything near it. I am suggesting that those who are able to take care of themselves do and collectively we all take care of those who can't. I think that is called charity not communism.

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ProtiusX...

by Salamander In reply to An Idea

I concur with your assessments regarding planning for the future. I personally do not figure Social Security into my plans for the future...people in Generation X or thereabouts cannot afford to do so.

Unfortunately, I think that basing benefits on how successfully a person saves creates a disincentive to do so, and would create huge problems down the line. Generation X is a smaller generation than the baby boomers. Social Security was built on the premise that each generation would produce a larger one after it. Unless taxes are increased dramatically, I cannot see how Generation X will be able to contribute enough to support the extended life expectancies of their parents' generation.

I think that a good start, albeit an unpopular one, is to begin cutting benefits across the board, though I think that's only a temporary solution. There is the matter of benefit creep...each politician promises more concessions than the politician before him/her in order to get elected...and we wind up sliding down a slippery slope into a quagmire. No politician in his/her right mind will suggest cutting benefits. Though it hasn't anything to do with Social Security, I was quite annoyed to hear yesterday that Medicare will now be covering lifestyle drugs like Viagra...I mean, really, people!

My temporary "solution" would be to cap benefits so that they would not exceed the amount contributed by each individual to Social Security. I also agree with your comment regarding returning Social Security to the purpose for which it was designed, and move individuals who are not workers to a separate public assistance program. I don't know much about the rules concerning the transferability of Social Security benefits, say between spouses, for example, but I would think that they would need to be re-examined, as well, for the future.

My preference, though, would be to have the system dismantled entirely, and I believe that this will happen within the next thirty years.

I do think that this problem will be one of the big dragons to be slain by Generation X...and I see this creating a huge generational schism in our society. The politicians currently in power will do everything they can to preserve the spoils of this system for their own generation. I only hope that the X'ers will have the will to take it on unflinchingly in the coming years.

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dismantling

by apotheon In reply to ProtiusX...

If Social Security, in present form, isn't dismantled or phased out in the next fifteen years, it will either collapse under its own weight to produce a catastrophic economic crisis that affects far more than just baby boomers, or it will become such a tremendous cash sink for this government that conversion to what is effectively a soviet system will be unavoidable. Thirty years is far too optimistic, I think. Look for the emergency to come to a head in half that time.

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The insidious thing...

by Salamander In reply to dismantling

...is that in fifteen to thirty years, when Gen X'ers have the political power to impact major policy, this generation will have more of a vested interest in preserving the system, due to the contributions they will have made up to that point. It will be interesting to see how that shakes out.

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too true

by apotheon In reply to The insidious thing...

There was a comment in Breakfast Club to the effect that when you "grow up", your soul dies. While I'm not sure that's strictly accurate, it does tie in nicely with the idea that as people get older, they get politically moronic.

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Hmm.

by Salamander In reply to too true

Hmm. Don't think that I'm in a rush to grow up, then. I'm rather attached to my soul as it is.

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yeah

by apotheon In reply to too true

You an' me both, kiddo.

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Wow, we have some agreement

by TheChas In reply to An Idea

Protius,

I never thought I would see any topic that the 2 of us had any basic agreement on.

I also believe that Social Security needs to change from a universal benefit to a needs based plan.

One side note:

While Social Security was sold as and has become a retirement program, it's initial purpose was jobs creation to help end the Great Depression.

Prior to Social Security, it was not uncommon for people to work until they died. Pensions were meager at best, and the stock market crash wiped out many peoples savings.

Social Security was created to provide a means of support so that older workers could retire and open up jobs for younger workers.

Chas

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