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It has been a hot topic of debate for several years. However, the Social Security (SS) issue and the necessity for reform has become more crucial. Any time members of Congress begin to discuss tax reform or to create a balanced budget; the conversation typically turns to entitlement spending. The most expensive benefits include Social Security as well as Medicare and Medicaid, health insurance for the elderly and poor. Depending on which side of the debate you find yourself, the fact is when the ‘old-age benefits’ program began, more people were contributing to the fund than those receiving benefit payments.
Social Security reform starts with knowing the facts
Known as America’s pension program, SS accounts for about 25 percent of federal spending. Social Security reform is necessary to avoid the predicted insolvency. Reforming the program is not simple. The payments are mandated by law, and any adjustment will have to go through Congress. Taxes must be raised, or funds must come from somewhere else, to maintain the program at its current level. Additional suggestions for SS reform, have included delaying the retirement age or decreasing benefits.
The primary reason change is necessary is debatable. However, the inherent issue stems from the program’s original set up. Originally founded by President Franklin Roosevelt in 1935 to provide a basic needs income for the aged and disabled. American workers contribute to the program through payroll deductions. The more money put in, the more a person can expect to receive during their golden years of retirement. The challenge is, the number of beneficiaries continues to increase, and the number of people paying into the trust fund is declining.
Numbers to watch
According to Social Security Administration (SSA), 9 out of 10 people age 65 and older receive SS benefits. Those benefits represent over 30 percent or more of their income. Furthermore, people are living longer today than in 1940. In 1940 the life expectancy of a 65-year-old was nearly fourteen years, compared to six years longer today at twenty. There is currently 2.8 workers for each SS beneficiary, however, by 2035 there will only be 2.2 workers for each one. The number of Americans 65 and older will increase from about 48 million today to more than 78 million by 2035.
Anyone with a checking account knows if withdrawals consistently outpace deposits, that account is not sustainable.
Nearly 60 million people received Social Security Benefits for December 2014, an increase of 1.8 percent over December of 2013. Over 62 million Americans will receive nearly $956 billion of benefits in 2017, according to the SSA.
Congress raised Social Security taxes to support baby boomers coming up on retirement in the 80s. That resulted in a surplus, however, by 2010 the payments began to surpass the revenues. The SS trustees predict, the program will become insolvent by 2034, yet the Congressional Budget Ofice (CBO) says it will happen in 2029.
Suggestions to Reform Social Security
Although there are several proposals to fix social security, it must be understood there are no easy fixes or one-size-fits-all. Some say it makes more sense to increase the retirement age than to reduce retirement benefits. Others argue that any change will have an adverse impact on future generations. Nevertheless, it has become sternly apparent that a change must take place. At this point, there are a few sound options for Congress to consider. After all, any changes to SS automatically means a change in the law.
There is a bi-partisan support to fix this fiscal crisis. Republican Sam Johnson of Texas and John Larson, a Democrat from Connecticut began working on a solution earlier this year. Both members of Congress would reduce benefits and increase taxes. However, Johnson’s plan would focus on slowing down the benefit growth for the wealthiest retirees and raise the retirement age. Larson’s plan would focus more on raising taxes.
The Government is set up to be run by “We the People” so it is up to us to let our voice be heard! Take a stand now because regardless of your current age, any impending changes could impact you or someone you love, and for generations to come.
Opinion By Jireh Gibson
Journalist’s Resource: Social Security reform: An explainer
Social Security Administration: Fact Sheet
Featured Image Courtesy of Bruce Bortln’s Flickr Page – Creative Commons License
Top Image Courtesy of Wally Gobertz’s Flickr Page – Creative Commons License