Social Security System Should Not Be Privatized

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The present Social Security system operates as follows: payment is made in Social Security while users work. Individuals who have already retired and those impaired are paid benefits with tax money. According to Faradzhov, in the long run, both the Old Age, Survivors, and Disability Insurance program (OASDI) yearly rates of cost rates will climb from current 2020 levels (14.37 and 3.52 percent) (24). Social Security costs are expected to rise to 18.38 % of taxable payroll in 2078, then fall to 17.70 % in 2095 (Ramirez and Lewis 1013). Privatization will replace the current social security system, pay-as-you-go, with a system that is managed privately managed with individual accounts for each taxpayer. Those in favor of privatization think that doing so will result in higher savings rates, larger returns, and bigger retirement benefits. Due to several critical reasons, the current social security system should not be replaced by a mandatory private system.

Employees and their families current insurance protection against death and incapacity would be jeopardized. A portion of the money that covers the current insurance plan might be transferred into personal savings and investments, according to plans to the privatization of Social Security. The payroll taxes available to pay for individual accounts, on the other hand, are assets that are needed to cover current payments to survivors and disability insurance recipients, and also retirement programs. Simple math implies that for each $1 transferred from Social Security systems to individual accounts, the 37 % of recipients who are not retired employees would get a dollar less in guaranteed income.

The creation of private accounts might stifle economic development, putting Social Security’s funds in jeopardy. It was discovered that the state budget deficit would climb by more than 1% of the Gross domestic product each year for the next 20 years, with a maximum increase of 1.6 % of GDP in 2022 (Ramirez and Lewis 1028). According to Cooley and Soares in 2036, the national debt would be grown by a total of 23.6 % of GDP (740). That means that the debt load for each child, woman, and man will be 32,000 dollars greater in 32 years as a result of privatization (Cooley and Soares 735). Privatizing Social Security will significantly raise state debts and deficits, as well as the likelihood of a reduction in national savings.

Without protection from inflation, the purchasing power of seniors’ pensions would plummet during periods of high price increases. Since insurance firms would be exposed to large additional risks as a result of providing inflation coverage, they are likely to demand higher rates than the current 10 percent (Brown, et al. 31) For decades, the US nation has been properly served by current Social Security insurance safeguards. Diluting such safeguards in exchange for new accounts introduces a slew of new dangers while escalating the basically long-term issues that Social Security faces.

Works Cited

Brown, Jeffrey, et al. “Social Security and Financial Security at Older Ages.”Social Security Bulleting, vol. 80, no. 1, 2020, p. 31.

Cooley, Thomas F., and Jorge Soares. “Privatizing Social Security.”Review of Economic Dynamics, vol. 2 no. 3, 1999, pp. 731-755.

Faradzhov, Samil. “Ensuring Social Security at the Level of Local Self-Government.” Reality of Politics. Estimates-Comments-Forecasts, vol. 15, no. 1, 2021, pp. 22-33.

Ramirez, Mark D., and Paul G. Lewis. “Beliefs about Corporate America and the Structure of Opinions Toward Privatization.”Political Behavior, vol. 40, no. 4, 2018, pp. 1011-1034.

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