The Future of Social Security
Who should pay for the old? How should we pay for the old? Should the old work to help pay for themselves?
These questions are not new for governments, but they persist and are becoming increasingly part of public discussion. Just one indication of the growing concern is the media's interest. I used the newspaper search engine LexisNexis to count the number of times the phrase “old-age crisis” appeared in the headline or lead paragraph of major papers. In the five years between 1990 and 1995 it appeared 73 times, between 2000 and 2005, 170 times. Modern industrialized societies expect governments to address these questions, determine the answers, and decide how best to implement those answers.
This chapter unpacks the policy debate over what to do about Social Security's finances and benefits, and describes how Social Security works now and how it came to be the most secure and predictable source of retirement income for American workers. Much of this chapter covers the debate about Social Security's affordability—although antagonists agree on most of the numbers, they draw very different conclusions from them. The proposal to transform Social Security into a system of personal savings accounts—a person's Social Security taxes would go into an account owned exclusively by the individual—is described, followed by an explanation of why most experts believe personal savings accounts will make things worse for Social Security. The political history of the Social Security program helps predict what can be done and what will probably be done to reform it.
Most all workers pay a tax—commonly recognized on payroll stubs as FICA, which stands for Federal Insurance Contributions Act of 1939. FICA