American GovernmentEconomics Essay Research Paper Most of — страница 2

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were not paid due to lack of Social Security income. (Boskin p.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 the Social Security system, have recieved social security checks. These checks have paid for the food shelters, and in many instances the college educations of the recipients. Unlike private insurance firms, the United States Government does not have to worry about financial failure. Government bonds are considered the safest investment money can buy-so safe, they are considered "risk free" by many financial scholars. (Stein p. 198) The ability of the United States Government to raise money to meet the requirements of

the social security should be no more in doubt than the governments ability to finance the national defense, the housing programs, the State Department, or any of the other activities that the federal government gets 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 the decision to pay out benefits, the system is able to pay benefits to people who otherwise may not be able to afford an insurance program that would provide them with as much protection. One of the main reasons for the government’s involvement in this program, is its ability and its desire to provide insurance benefits for the poor and widowed, who under the private market, might not be able to acquire the insurance to

continue on a financially steady course. The government, then, is in a totally unique position to pay out benefits 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 inflaton rate will be from the moment the worker is insured until the day he dies, and then make the complex adjustments neccesary 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 will have the continued income of the Social Security tax to draw upon, it can make on-the-spot adjustments for changes in the inflation rate. Some adjustments, in fact, have been automatic in the recent years, therefore relieving the pensioners of the periodic

worry of wheather this years benefits would be adjusted, or wheather the level of payments would remain stable, thereby, relative to the cost of living, making them poorer 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 governemnt 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