Nowadays, Social Security is taken for granted, whereas in the first half of the twentieth century the very concept of social security was yet to develop (Brown, 2015, p. 3). Berkowitz and DeWitt (2015) emphasize that it is the most prominent social program to date (p. 261). However, certain experts have questioned its long-term financial viability. Certain modifications should be introduced that would increase the sustainability and cost-efficiency of the program.
Initially, the social security program was one of the instruments designed to cope with problems in American society, revealed by the hardships of depression (Brown, 2015, p. 6). The critical issues at hand were unemployment, health problems, and the problems of the elderly. In 1935, President Roosevelt outlined the proposed constructive changes devised to protect against the damaging effects of economic instability. The main principle of the proposal put forward by Roosevelt consisted of providing income to the employees aged 65 and older throughout the remaining years of their life (Brown, 2015, p. 10). The Social Security Act was adopted in 1935.
The cumulative remuneration earned in commercial and industrial jobs since 1937 served as a basis for the calculation of the monthly benefits. Martin and Weaver (2015) emphasize that the initial social security plan provided relatively small benefits, which would be due only in several years (p. 3). The amendment of 1939 modified the original formula, specifying the average wages instead of cumulative wages. However, two basic rules stipulated by the Act of 1935 are still valid today: social benefits are closely tied to covered employment and in the case of low-income workers benefits constitute a substitution for the higher percentage of income (Martin & Weaver, 2015, p. 3).
In recent years, the critics have claimed that the social security program will not maintain its viability in the nearest future, and can result in an economic slump (Berkowitz & DeWitt, 2015, p. 272). The level of current financing is insufficient, which can lead to the inability to pay off all the promised benefits in the years to come. Moreover, the program’s solvency has been questioned since 1989, and the prognosis has been rather bleak (Berkowitz & DeWitt, 2015, p. 274). Given the problems with long-term financing, certain modifications aimed at the system’s improvement can be introduced.
The conservatives propose decreasing the income guarantees as a possible solution, as well as obliging the employees to set aside certain income percentage for the private pension plans (Berkowitz & DeWitt, 2015, p. 272). Certain critics believe that raising the retirement age can improve the system’s financial viability. However, for those working in manual labor and other physically straining fields, this proposal does not seem fair. Adjustments of the system of benefit calculation are also proposed, which would cut the costs, and improve the situation with long-term financing. Some also suggest excluding certain categories from the pool of beneficiaries, such as wealthy workers. However, this solution may result in payroll tax withdrawal by the wealthier participants. Presently, the most challenging problem for the social security system is the demographics. As the post-war generation of “baby-boomers” retires, it will be increasingly difficult to maintain the income inflow (Berkowitz & DeWitt, 2015, p. 275).
Indeed, various solutions put forth to reflect the relevance of the problem. In light of the pressing issues, expanding the benefits is a reasonable idea. Lifting the tax cap on high-income earners would lead to substantial savings in favor of low-income workers. Another possible solution is raising social security taxes. Brandon (2013) indicates that increasing the current employer and employee tax to 7.6 percent would efficiently solve the problem of financing deficit (para. 2). Finally, raising the retirement age is a solution which is appropriate due to the growing life span.
Lifting the tax cap on high-income earners, raising the payroll taxes for both employer and employee, and raising the retirement age is rather controversial, but inevitable solutions. However, by raising taxes, people are left with fewer amounts to spend on their family’s pressing needs, such as food, clothes, and education. Moreover, according to AARP Public Policy Institute (n.d.), increasing the tax cap to 90 percent has certain disadvantages, namely, it would significantly affect middle-income taxpayers while affecting the high-income earners to a lesser extent (p. 2). Concerning the retirement age, it would be reasonable to increase it except manual labor workers and those working in dangerous conditions. However, it poses significant difficulties. By introducing such a distinction, it is necessary to predetermine the dangerous working conditions and distinguish them from non-dangerous. Otherwise, it could lead to misinterpretations and unreasonable demands from certain categories of workers (Coy, 2016, para. 10).
All things considered, the current condition of the social security system in the US is not sufficiently progressive. Certain modifications should be introduced to improve its viability and provide for the next generation of taxpayers. Raising the retirement age, increasing taxes, and lifting the tax cap are several possible solutions to the problem. However, as these proposals entail certain difficulties in implementation, they should be thoroughly tailored to fit the needs of society.
AARP Public Policy Institute. (n.d.). Reforming social security, option: increase the payroll tax cap. Web.
Berkowitz, E. D., & DeWitt, L. (2015). Social Security. In D. Béland, C. Howard, & K. J. Morgan (Eds.), Oxford handbook of US social policy, (pp. 261-279). New York, NY: Oxford University Press.
Brandon, E. (2013). Five ways to fix social security. Web.
Brown, J. D. (2015). An American philosophy of social security: Evolution and Issues. Princeton, NJ: Princeton University Press.
Coy, P. (2016). How to raise the retirement age for people who want to work. Web.
Martin, P.P., & Weaver, D. A. (2015). Social security: A program and policy history. Social Security Bulletin, 66(1), 1-15.