Social+Security+Reform

Social Security Reform Alyssa The term, in everyday speech, is used only to refer to the benefits for retirement, disability, survivorship, and death, which are the four main benefits provided by traditional private-sector pension plans. In 2004 the U.S. Social Security system paid out almost $500 billion in benefits. By dollars paid, the U.S. Social Security program is the largest government program in the world. According to most projections, the Social Security trust fund will begin drawing on its Treasury Notes toward the end of the next decade (around 2018 or 2019), at which time the repayment of these notes will have to be financed from the general fund. At some time thereafter, variously estimated as 2041 (by the Social Security Administration) or 2052 (by the Congressional Budget Office), the Social Security Trust Fund will have exhausted the claim on general revenues that had been built up during the years of surplus. At that point, current Social Security tax receipts would be sufficient to fund 74 or 78% of the promised benefits, according to the two respective projections. No candidate for major office from either of the two major political parties has suggested that Social Security simply be eliminated, or overhauled without regard to the impact on the financial expectations of current or near-future recipients of Social Security benefits. There are countries other than the U.S. that have set up individual accounts for individual workers, which allow workers leeway in decisions about the securities in which their accounts are invested, which pay workers after retirement through annuities funded by the individual accounts, and which allow the funds to be inherited by the workers' heirs. Such systems are referred to as 'privatized.' Currently, the United Kingdom, Sweden, and Chile are the most frequently cited examples of privatized systems. The "Commission to Strengthen Social Security" (CSSS) issued a report in December 2001 (revised in March 2002), which described three alternative plans for partial privatization: by workers into private accounts for investment in stocks, bonds, and/or mutual funds. PICA and voluntarily placed by workers into private accounts for investment. ("Bush's Plan") maximum of $1000, could be voluntarily placed by workers into private accounts for investment Revenue raisers 1. Raise the cap to 90% of taxable earnings Approximately 43% reduction in shortfall PRO:Affects only 6% of taxpayers. Can be phased in gradually. Not a new tax, restores prior policy. CON:It's a tax increase for higher earners. PRO:A gradual increase would maintain 75-year solvency. CON: Tax increase would adversely affect workers. This amounts to a reduction in the benefit to high wage earners so the pros and cons are purely subjective. PRO:Improves tax progressivity, affects only 1/2 of 1% of all estates. CON:Would alter the president's tax-cutting plans. shortfall PRO:Makes Social Security universal, with all sharing obligations and benefits. CON: State and local governments employees might get less retirement benefits. PRO:In the most optimistic scenario, the trust would earn higher returns on its investment. CON: Since the US government has a debt, this amounts to borrowing money in bonds to invest in the stock market, or margin trading. Cost of transition between $600 billion - $3 trillion. Less likeley scenarios involve lower or negative returns. ** Cost trimmers ** PRO:Saves money. CON: This would set the standard of living afforded by Social Security to the level the individual could achieve at their date of initial benefit. The current plan allows for an increased standard of living based on productivity increases made in the US economy. PRO:Links retirement more closely to life expectancy and increased worker health since program inception. CON:Reduces benefits. Unfair to those forced to retire early but not otherwise elegible for other Social Security benefits. PRO:Could eliminate shortfall. CON:Reduces the growth in scheduled benefits over time.
 * Plan I: ** Up to two percent of taxable wages could be diverted from PICA and voluntarily placed
 * Plan II: ** Up to four percent of taxable wages, up to a maximum of $1000, could be diverted from
 * Plan IH: ** One percent of wages on top of FICA, and 2.5 percent diverted from PICA up to a
 * 2. **** Increase payroll tax rate ** 100% reduction in shortfall
 * 3. **** Raise taxes on benefits ** 10% reduction in shortfall
 * 4. **** Preserve tax on estates over ** $3.5 **million** 27% reduction in shortfall
 * 5. **** Extend coverage to newly hired state and local government employees ** 10% reduction in
 * 6. **** Invest a portion of the trust funds in indexed funds  ** 15-45% reduction in shortfall
 * 7. **** Adjust the COLA  ** 18% reduction in shortfall
 * 8. **** Increase normal retirement age to  ** 70 36% reduction in shortfall
 * 9. **** Index benefits to prices, not wages  ** 100% reduction in shortfall