American Economics Essay Research Paper A Report — страница 2

(Boskinp.122) PAYING OUT BENEFITS Social Security benefits increased 142% in the period between 1950-1972.not only the elderly, but many of the survivers, the widows and children, ofthose who paid into theSocial Security system, have received social security checks. Thesechecks have paid for the food shelters, and in many instances thecollege education of the recipients.Unlike private insurance firms, the United States Government does nothave to worry about financial failure. Government bonds are consideredthe safest investment money can buy-so safe, they are considered “riskfree” by many financial scholars. (Stein p. 198) The ability of theUnited States Government to raise money to meet the requirements of thesocial security should be no more in doubt than the governments

abilityto finance the national defense, the housing programs, the StateDepartment, or any of the other activities that the federal governmentgets involved in.By paying out benefits equally to all participate in Social Security-that is by not relying so heavily on total payments in making thedecision to pay out benefits, the system is able to pay benefits topeople who otherwise may not be able to afford an insurance program thatwould provide them with as much protection. One of the main reasons forthe government’s involvement in this program, is its ability and itsdesire to provide insurance benefits for the poor and widowed, who underthe private market, might not be able to acquire the insurance tocontinue on a financially steady course.The government, then, is in a totally

unique position to pay outbenefits that would be out of the reach of many American families. Another great advantage of this system, is the ability of the government to adjust the benefits for the effects of inflation(Robertson p.134) INFLATION AND SOCIAL SECURITY Private insurance plans are totally unable to adjust for the effects of inflation with complete accuracy. In order for an insurance company to make this adjustment, they would have to be able to see forty-five years into the future, with twenty-twenty vision. When a private pension plan currently insures the twenty-year-old worker, it can only guarantee a fixed income when the worker reaches sixty-five and a fixed income is a prime victim of inflation (Robertson p.332) In order to adjust for that inflation, the private

insurance firm would have to be able to predict what the inflation rate will be from the moment the worker is insured until the day he dies, and then make the complex adjustments necessary to reflect this in the pension plan. An inflation estimate that is too small will result in the erosion of the workers retirement benefits. Because the government, unlike the private insurance firm, can guarantee that it will exist well into the future, and willhave the continued income of the Social Security tax to draw upon, itcan make on-the-spot adjustments for changes in the inflation rate. Someadjustments, in fact, have been automatic in the recent years, thereforerelieving the pensioners of the periodic worry of whether this yearsbenefits would be adjusted, or whether the level of

payments wouldremain stable, thereby, relative to the cost of living, making thempoorer that ever before(Stein p.28). In the face of the government’s ability to make those necessary adjustments and to continually finance the Social Security program, many opponents of the system argue that the government programs are driving out the private insurance industry. The statistics remain otherwise. SOCIAL SECURITY FINANCING The social security tax is one of the fewest taxes in the United States, and the only federal tax in the country, that is given for a specific purpose. All other taxes are put into another fund, so that welfare programs, defense, space projects, and the other categories of government spending are all financed from one giant, uncategorized bowl of tax

revenues(boskin p.62). When the Social Security system was first established, it was felt that a direct payroll tax, based on the pay of the worker and paid both by employer and employee, would be the fairest way for the people that were currently working to pay benefits to those who weren’t working, as well as to provide for some future requirements and disabilities. Therefore, a specially constructed payroll tax was used to fund the program. By measuring the amount taken in by the tax to the amount, not only that is taken out, but to the amount that will be taken out in future years, opponents of the Social Security system make the case that the system will be unable to keep itself in such a manner indefinitely. And, if Social Security were a private insurance program, it