The Future of Social Security in the United States of America The United States believes in taking care of children

and the elderly. This is why public schools, libraries and other facilities exist. Social Security and government assisted medical health care were developed in order to protect and care for our elderly. In October 1929 the Stock Market lost 40% of its value, a staggering $26 billion. The Gross National Product had plummeted from $105 billion in 1929 to $30 billion only three years later in 1932. (Social Security Administration) In response to the enormous outcry of the American people, The Social Security Act was signed into law by President Roosevelt on August 13, 1935. The act was part of Roosevelts New Deal. After several major amendments in 1939, 1941, 1950, 1961, 1972, 1977 and 1983, we have the Social Security that we have today. The Old-Age, Survivors, and Disability Insurance (OASDI) program in the United States makes available a basic level of monthly income upon the attainment of retirement eligibility age, death, or disability by insured workers. The OASDI program consists of two separate parts that pay benefits to workers and their familiesOld-Age and Survivors Insurance (OASI) and Disability Insurance (DI). Under OASI, monthly benefits are paid to retired workers and their families and to survivors of deceased workers. Under DI, monthly benefits are paid to disabled workers and their families. ("2011 Annual Report of the Board of Trustees, Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds " 1) The trend shows that Social Security has doubled almost every decade. From 1940 the recipients were about 240,000 today 54 million people receive benefits from the program. According to The Social Security Administration, on Friday, May 13, 2011, Mark Lassiter the Press Officer for the SSA, published a news release which announced that the combined

assets of the Old-Age and Survivors Insurance and Disability Insurance (OASDI) Trust Funds will be exhausted in 2036, one year sooner than projected last year. (Social Security Administration Press Office) It is promised that in the next ten years the generation of baby boomers (more than 80 million) will retire. Since life expectancy now averages 84 years, giving the baby boomers about an extra 20 years to collect from Social Security. According to the U.S. Life Expectancy Table, at the time the act passed, life expectancy was between 59.2-63.6. (Shrestha 3). In the beginning of the Act benefits were to begin after the average life expectancy. Now, there are an average of twenty years of benefits between retirement age and death. It is no wonder the program is going bankrupt. The way the program works is a pay as you go system. The working class of today is paying the benefits of the retirees of today. Any surplus goes to the Federal Government to be spent away in its general budget. What economists are saying is that the ratio of the current workers versus the beneficiaries will be drastically inadequate to support the program. Because the life expectancy today is so high and the baby boomer generation so large, this Ponzi Scheme is going to fail because there will not be enough workers to fork over the money. Changes in the system made in 1977 and 1983 have converted the program to a partially prefunded system. Now surpluses accumulate and The Treasury borrows the money to finance other expenditures and pays interest in the form of bonds. The advisory council proposes three scenarios: low cost (most optimistic), intermediate cost, and high cost (most pessimistic). (Niggle 792). The first scenario projects the continuation of budget surplus under the current tax system. The second and last scenario would project current account surpluses until the deficits begin in about 2014. These deficits would then be financed by funds from SS trust fund until 2034, when then it will become completely depleted. (Niggle 792).

Various interest groups and the executive branch have proposed fundamental changes in the US Social Security system. These proposals have boasted the privatization of the system. The term includes the current combination of pay as you go to a prefunded system, and changing the asset composition of the systems portfolio from special issue (nonmarketable US Treasury securities toward a heterogeneous portfolio) and allowing private management of at least part of the asset portfolio. (Niggle 791). In a study done by Jie and Junsen Zhang, it is investigated how social security interacts with growth and growth determinants (savings, human capital investment, and fertility.) The empirical investigation found that the estimated coefficient on social security is significantly negative in the fertility equations, insignificant in the saving equation, and significantly positive in the growth and education equations. The study concluded that social security may indeed be conductive to growth through tipping the trade-off between the number and quality of children toward the latter. Furthermore, the empirical analysis conducted in this paper is based on data for a cross section of countries including the U.S. in the last several decades. The empirical evidence suggested that social security tends to stimulate per capita growth by reducing fertility and increasing human capital investment without affecting the saving rate. (Zhang 496) This study showed evidence that differs from the popular view that regards social security as harmful to growth. Most previous studies have focused on the relation between social security and physical capital as if that were the only channel through which social security might affect economic growth. (Zhang 494). In essence, some economists such as Zhang and Zhang strongly feel that social security solves problems that countries without it suffer such as over-population, high illiteracy, and slow economic growth.

The real issue with Social Security is the poor distribution. The wrong demographics are receiving the benefits. As Niggle quoted, All active labor forces support dependent populations; dependent populations consists of the aged but also the disable and children (not to mention the propertied non-workers and other economically unproductive parasites). (Niggle 797). Niggles optimistic views says the number of children is expected to fall from 0.56 to 0.48 in 2040 and the ratio of non-working adults to workers is projected to rise between now and 2030. Niggle suggests the solution for the crisis is to allocate the funds away from families who have too many children they cant support to the elderly. Privatization also has different degrees of predicted success. There are four categories ranging from very weak to very strong. The strongest (pure privatization) would be 100$ prefunded and all contributions would deposit into privately managed accounts with very few constraints. In this case, no disability or survivors insurance would be offered and there would be no guaranteed minimal retirement income. The complete opposite at the end of the spectrum suggests that the system would remain very similar to its current program except that prefunding would be limited only to an emergency fund. (Niggle 798). (My counterargument with Niggle is that I believe that there cannot be any surpluses because the labor force is outnumbered by the retirees, however his ideas sound very optimistic). There is really no clear answer as to what will happen with the Social Security Administration, but more of a wait and see game. Some argue that the system can be changed by raising the retirement age even higher (after all we are living longer) and raising caps on earnings subject to the Social Security tax and investing a portion income in low risk investments. The Social Security system is a wealth redistribution program that has expanded and expanded. It

should be what it was designed to be: a safety net of last resort. Everything that has been tacked onto it should be eliminated and only people who need it should be able to use it. Promise of a safety net makes people complacent about saving for their own retirement themselves and maybe it is a good thing that appears to be failing because it make people of my generation more conscious of their own responsibility for their future. People like millionaires and billionaires should pay for but not take their social security because they dont need it. The same applies to Medical but that is a different topic. The retirement age should be raised except for those who are very ill or disabled as life expectancy keeps growing. If gas prices go up, all other things constant, prices grow. The same should apply for social security: it needs to rise in proportion to the growth of life expectancy, in other words, go with the flow. The Treasury Department wants to sell bonds to the public, raise taxes and print money. Many are angered by the thought of more taxes and printing money would just increase the inflation rate. The current economic recession is not making things any easier as people are forced to retire earlier. Many fear privatization because too many corporations and banks have failed them before. However, privatizing into investments that take advantage of compound interest is infinitely better than the pay as you go system. The prudent thing to do is to rely on other means of support for retirement such as IRAs, 401K plans and other private retirement funds.

Bibliography
1. The United States. 2011 Annual Report of the Board of Trustees, Federal Old-Age and

Survivors Insurance and Federal Disability Insurance Trust Funds . Washington D.C.: The Office of the Chief Actuary, 2011. Web. 16 May 2011. <http://www.socialsecurity.gov/OACT/tr/2011/I_intro.html#1000302>.
2. The Social Security Administration, "Historical Background and Development of Social

Security." Social Security Administration. SSA.gov, 29/03/2011. Web. 16 May 2011. www.ssa.gov/history/briefhistory3.html 3. Cohn, Laura. "Outlook 2010." Kiplinger's Personal Finance. Jan. (2010): 22. Print. 4. Shrestha, Laura. The United States. Life Expectancy in the United States: CRS Report for Congress. Washington D.C.: Congressional Research Service, 2006. Web. 25 May 2011. <aging.senate.gov/crs/aging1.pdf>.
5. Niggle, Christopher J. "The Political Economy of Social Security Reform Proposals."

Journal of Economic Issues. 34.4 (2000): 789-809. Print.

6. Zhang, Jie and Zhang Junse. How Does Social Security Affect Economic Growth?

Evidence from Cross-Country Data. Journal of Population Economics, Vol. 17, No 3. (2004) 463-500. Print.