Social Security has changed since Congress first enacted the legislation in For example, disabled workers initially excluded from receiving benefits may be eligible today. However, one feature remains the same. Social Security taxes assessed on current workers are used to provide some retirement income for the elderly, most of whom are no longer in the workforce. Very few workers in the private sector are exempt. At the same time, many liberals felt the program did not go far enough because it did not mandate a massive redistribution of the wealth from high-income to low-income individuals.
FDR, hoping to strike a balance between the two camps, insisted that participants fund the program with their contributions.
In theory, workers are purchasing insurance against unexpected gaps in employment and the infirmities of old age. This element of insurance was crucial to FDR. Meaning that politicians who dare to propose reforms to the system are more likely to damage their careers than see their proposals succeed. A little over 60 years ago, the Social Security Act was signed into law. This historically significant legislation changed how we as a Nation take care of our people. For the first time, there was direct Federal involvement in the welfare of individuals, particularly for alleviating poverty among the aged.
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Stock Advisor launched in February of Related Articles. Get Started Now. Instead, it sweeps everyone into a monolithic, compulsory program, the burdens of which in the form of heavy payroll taxes make it difficult or impossible for many people to pursue private alternatives. Social security programs around the world are currently experiencing serious and deepening financial problems.
In richer countries, populations are aging, which means that the number of beneficiaries is growing at a faster rate than the number of current workers who are financing the costs involved. Therefore, older people are becoming a progressively heavier burden on the worker.
The effect is that, at some point, benefits must be reduced substantially if the collapse of the system is to be avoided. In , there were 16 workers in the United States for every retiree; today that ratio is only 3 workers to each social security recipient, and in 20 years this ratio will have fallen to 2 to 1.
Programs in less developed countries also are in distress despite their having much younger populations. These countries typically have large informal sectors or underground economies—a fact that triggers a vicious circle. Because many people work in the informal sector, payroll taxes collected only in the formal sector have to be higher than would otherwise be necessary.
These high payroll taxes, however, create incentives for even more people to retreat into the informal sector, necessitating even higher rates, which push more people into tax evasion, and so forth.
Libertarians take differing approaches in proposing alternatives to the social security status quo.
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