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Social Security should not be privatized.

Introduction

Social Security refers to the program that guarantees income for American citizens

who are disabled, retirees and other survivors (Dion, P410). Currently, more than 160 million

citizens pay into the system with more than 60 million collecting benefits each month. Social

Security has played a vital role in supporting the lives of retirees in the country with monthly

benefits. When senior citizens grow older, they would not be able to work that much to obtain

income. Luckily, Social Security benefits can help significantly reduce poverty among senior

citizen. Statistics have shown that 30% of elders obtain 90% of their income from Social

Security benefits while the other part is from personal income that is saved (Economic Policy

Institute, 2015). Social security programs have become a substantial benefit to the United

States. It accounts for 42% of the total US spending in 2016. If we paid privatized Social

Security, it could be hazardous to the senior population (Economic Policy Institute, 2015).

The components of privatization claim that seniors have the freedom to control their entire

funding through investments, and eventually they will get a higher return in profit.

Some people believe that privatization can help resolve the financial issue of the

system. That is why the Bush Administration has privatized social security in hopes of

profiting and double the funds. Unfortunately, that is not what had happened. Through

privatization, he has put the country in more debt and had decrease funding for the senior

population. When the country experiences more deficits, it had to allocate funding from other

programs to compensate, which have led to a significant crisis. Through this experience, we
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have observed that the stock market is unpredictable, and if it goes down, so will be

privatization of the Social Security funding. That can eventually be detrimental to the senior

population. Therefore, Social Security should not be privatized to protect citizens especially

the senior community.

Privatizing social security will affect the government’s plans on taxes. The

government collects taxes through social security programs. Therefore, by privatizing some

portions, it would reduce the amount of taxes collected by the applications. In addition to that,

social security would be prone to cause more transition costs while in the hands of the private

sector. What’s more, it can lead to uncertainty fraud by encouraging embezzlement in the

side of the private sector thereby hindering the program from achieving its set objectives.

I: Privatizing Social Security will reduce needed revenues for current retirees.

The government of the United States depends heavily on the taxes collected by the

Social Security programs every month. The government uses these taxes to promote the

welfare of disabled people, retirees, and dependent survivors. The government has a

responsibility to ensure the protection of its citizens. Therefore, tax collection in the country

would provide the government with a regular source of income, which can be used to

promote the welfare of the citizen in the country (Weller and Christian, 340). However, when

we privatize Social Security, it could significantly reduce funding. For the provision of

private retirement, disability and survivors insurance will have to decrease its revenue. When

the Bush administrators privatize the Social Security benefits, it resulted in the distribution of

payroll taxes to private accounts, which have significantly reduced the benefits by 44%. That

means that if a 15-year-old person in 2005 decided to retire in 2055, he or she could lose

more than $160,000 of benefits (ProCon, 2017). Also, privatizing Social Security can also

increase the national debt that will need to be fixed by more government spending. In the past,
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Bush has implemented the plan of privatization which has caused the country over $160

billion per year. That has ultimately increased the country's debt by more than 40% (ProCon,

2017). Therefore, triggering a significant economic crisis because privatizing Social Security

will lead to less funding for retired individuals that means, it is better to leave Social Security

as it is without making any significant changes. Many people in the country are likely to be

discouraged from saving in the social security if the program were transferred to the private

sector. Because when people lose trust in the private sector, they will raise concerns about

paying funds in the social security program. The government depends heavily on the funds

young people spend in the program which is used to pay the beneficiaries who have retired. It

is vital for the youth to pay for such funds to promote the welfare of those people who are

already receiving their retirement packages (Solomon and Lewis, 10). However, if some

portion of the funds were transferred to the private sector, it would be difficult for the

government to sustain the member already receiving funds because there would be

insufficient funds for the beneficiary.

The government has a responsibility to provide maximum social and economic

welfare for all of its citizens. Social Security ensures there is the maximum welfare of the

employee making the program to be effective in the country. However, if the application is

left to be controlled by the private sector, it would affect the welfare since the private sector

would be more concerned about collecting funds with little concern on behalf of the citizens.

Half of the country’s citizens depend on the programs after they retire from the workplace

making it essential to have social security as it is the only source of revenue to meets their

demands (Hastings et al., 1730). If the programs were privatized, it would be difficult for the

private sector to meet the requirements of all the citizens in the country as opposed to when

the government manages the programs. Consequently, there is no need for the government to

privatize some of the portions of the social security

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Generally, the social security system is commonly known for its methodology of

operation of pay-as-you-go (PAYG) which implies that taxes paid by the working generation

is used to fund the retirement benefits of the previous generation of employees. Therefore, the

privatization of this kind of system would mean the elimination of the PAYG structure hence

the contribution of each employee would be invested in assets to fund their retirement. Thus,

the retirement of an individual would be fully funded upon retirement other than depending

on the intergeneration income of workers. The elimination of the PAYG system would

negatively impact the high rate of return on the input by preceding generations. Additionally,

privatization of social security would lead to the erosion of the basis of safeguarding

sufficient profits for those who struggled their whole lives. Finally, low-income employees

would not be capable of making enough income to save to maintain the standards of living

they choose upon retirement.

Privatization of social security would enable the American citizens to choose to

withhold a percentage of their income as an investment into distinct accounts. Therefore, this

reform would result into a gradual decrease of younger employees who would choose to

remain in the social security program. As a result of this, workers who are of high-income

groups will not be willing to participate in the social security program but rather set up

individual accounts. Even though privatization may appear more of a rational choice, it

would not serve as a suitable mode of investment of high-income workers. That is because

high-income workers will bail out all their incomes so that they do not have to invest their

savings in balancing the tables for the retirement benefits of the low-income workers.

Generally, this concept would result into a decrease of benefits for low income workers who

decide to stick to the social security systems.

II: Privatizing Social Security will produce large transition costs.

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The idea of privatizing social security would undermine the retirement funds and lead

to insolvency of the programs. Currently, the government ensures that the employees in civil

services pay for the social security when they are still working to ensure they receive the

retirement funds once they retire. However, with the proposed policy to privatize the social

security fund, it would be difficult for the movement to fully realize the benefits to the

retirees due to dispensation from the public to the private sector (Hastings, etal, 1730). Also,

it could take too long to transfer the account from the government accountable to the private

sector making it difficult for the beneficiary to enjoy the fund immediately. Many of the

workers who retire from civil services depend heavily on the social security thus delaying the

funds would affect their lives adversely. What’s more, the problem with privatizing Social

Security is that people would invest the money in stock markets and other investment

adventures. These types of investments are unpredictable and can significantly lower the

funds if the market decides to crash. For example, during the 2008 financial crisis, Dow Jones,

S&P, and NASDAQ have experienced a significant drop. This has resulted in a major

downfall for senior citizens that retired during that year (ProCon, 2017). That’s why it’s not a

good idea to privatize Social Security because it undermines the retirement funds. In addition,

we all know that trust funds will result in insolvency because the cost of the program is

constantly increasing at a faster rate than the payroll taxes. This can get problematic if the

senior's taxes get taken away from the Social Security and into a private retirement account.

This will reduce the funding for future retirement. In the past, there has been a prediction that

if one percent of payroll taxes gets diverted into a private account in 1998, that will result in a

trust fund insolvency by 2015 (ProCon, 2017). Because of all the problems that we have

observed in the past, therefore it is not a good idea to repeat them by privatizing the Social

Security accounts.
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The Social Security Program is one of the agencies of the government, which is

managed by Social Security Administration with close supervision of the government to

ensure the program runs effectively and also meets its primary goals. As long as the program

is still in the hands of the government, it will ensure it promotes the welfare of citizens.

However, privatizing some portions of the Social Security program will lead to the collapse

of the program which plays an important role in promoting the welfare of the citizen. The

program should not be privatized to avert any possible failure of the programs (Solomon and

Lewis, P10). While in the hands of the private sector it would be prone to dismantling due to

a personal interest in the program. Consequently, the test is useful if the current system was

left under the watch of the government to ensure the programs does not dismantle in the

process of being transferred in the private sector.

In addition, it would increase the national debts. The country’s debts have risen due to

the government funding of social security in the promotion of its citizens’ welfare. If the

current account were to be transitioned to the privates' accounts, it would require the

government to borrow more in order to fund the program fully, making the national debts

increase rapidly (Nwafor, Ferdinand, P410). Also, transferring some portion of social security

to the private sector would make the government look for more ways to fund the growing

debts of the social security which would increase deficits in the country.

Privatizing social security would create some financial problems in the social security.

Now, the program depends heavily on government support thus there is progress in

promoting the welfare of the employee. Many of the citizens depend on the program to

improve their welfare therefore if the government wishes to transfer the funds over to private

accounts it would mean a number of financial challenges for the program (Solomon and

Lewis, 10). While the program is in the hands of the private sector, it would mean the

government it will withdraw its support on the program then making it difficult for the
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private sector to raise enough amount of money to promote the welfare of the employees in

the country. In addition to that, the people who receive the funds in the country are likely to

suffer due to insufficient funds. In the recent days, privatization has been discouraged due to

high rates of failures in the operation proving that privatizing Social Security would likely

lead to failure in its operation. Over the years, the government has managed social security in

the best ways ensuring that the citizens receive all the welfare as the promised (Samwick,

Andrew, 65). Given this, it would be best if the programs were left to the government to

ensure the programs run effectively and meet the primary objectives under which the

programs were set up. Social security programs serve the interest of many people in the

country and there is a need for the government to ensure maximum protection of citizens’

funds.

III: Privatizing Social Security will lead to uncertainty fraud.

One of the most common issues is that there are unqualified individuals who claim

that they are financial advisors. This is a common fraud that often happens to novice

investors (Wallstreet, 2017). According to the FBI, there were about 1846 fraud cases that

involve investment and financial commodities. These frauds have managed to scheme

thousands of dollars off of investors. The majority of these victims are usually seniors about

the age of 65 (Wallstreet, 2017. Because of these frauds, there has been approximately $17

billions of lost income. This same issue has happened in the United Kingdom in the 1980s

where salespeople advise millions of investors to invest their personal pensions on the stock

market (Wallstreet, 2017). This has created a major loss for the UK system. Because of this,

it is not a good idea to privatize Social Security benefits.

It probably encourages embezzlement of funds as well. Nowadays, Social Security is

managed by the government, which guarantees that all taxpayer funds are used to improve

the welfare of the citizens in the country. The programs are well audited to ensure an
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openness and accountability for the funds. However, if the programs portion were to be left to

the hands of the private sector, it would give rise to many cases of corruption due to less

monitoring by the government. It would be difficult for the government to monitor how the

funds are collected and dispatched to the beneficiaries (Kotlikoff, etal. 540). The government

would need to rely on the published information by the private companies receiving funds

and creating a loophole for potential theft. It would be difficult for the programs to promote

the welfare of citizens if some of the funds, which are allocated to finance their welfare,

ended up being corrupted. It would be of great help if the programs were left to the hands of

the government to promote an openness and accountability in the funds that are collected to

promote the welfare of the citizens in all part of the country.

The mismanagement of funds is also a serious problem. While under the control of

the government the programs ensure all tax payers who are entitled to remit their funds

towards the programs do so without fail. Further, the government ensures that the bonfire

beneficiary of the programs benefits from the funds as per the primary mandate of the

program. However, if the portions of the program are transferred to the private sector, it

would increase chances of mismanagement. The private company would not reach all the

employees who are supposed to pay for the funds, making the program run out of funds. In

addition to that, the private sector would not manage the funds effectively thus making some

of the beneficiaries suffer from the programs (Samwick, 65). Consequently, many of the

funds meant to promote the general welfare of citizens are likely to be used in a different way

than intended. For this reason, it would be best if the program were left under the supervision

of the government to ensure the programs meet their intended purpose.

Even though there are fallacies regarding the privatization of social securities like the

concept that individuals will be able to earn benefit than the government could provide, the

fact is that only the fees involved in agitating millions of small accounts would be
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individually sophisticated as compared to what the government could efficiently capture in

bulk. This is because stock or bond markets will not be able to offer any shortcoming

guarantees. Generally, there would be no emergency framework if retirement ran out due to

fraud thus no alternative for those who shall have diverted their savings to the private system.

The private system would also be regarded a fraud because it will developed too high

overhead costs hence limiting the effective administration of the private plan.

IV: Privatizing Social Security will also lead to social problems like ethical issues.

When people lose confidence and trust, the togetherness and harmony among the

citizens will be reduced. Social Security is one of the unifying factors that bring many

citizens into common funds which they remit their funds; the social programs ensure many of

the citizens commit their funds in the security program thus improving the welfare of the

employee. Most of the employees enjoy one common life when they invest their funds in the

program, bringing people from all walks of life to one common fund that contributes to the

general welfare (Samwick, Andrew, 65). However, with the proposed policy to privatize

some of the portions of the security programs in the private sector, it would disrupt that unity

which has been a tradition in the programs in the country. The discrimination of citizens and

non-citizens maybe affect people’s lives. The programs would be prone to a high level of

discrimination if some portion of the programs were left in the hands of private accounts.

While the program is under the management of the government, it would ensure that all

citizens receive equal treatment. The private sector would hinder some members of the public

from enjoying the services, making it difficult for the programs to meet its set objectives. The

government should ensure the program remains under its care to improve the wellbeing of the

society. It would be in the citizens’ best interests if the programs were left under the watch of

the government to protect the citizens’ general welfare.

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On the other hand, social security provides a sense of equity even for to an employer-

sponsored retirement benefits plan even though it is different. This implies the principal

benefit of the social security system because it demands that individuals save in form of

payroll tax as they work and receive monthly salary of which they are compensated after

retirement. Equity enables people to receive more of what they invest in social security. The

sense of balancing equity and adequacy which is the sole purpose of social security system

would turn into a social challenge following the privatization of social security. The

privatization of social security would generally erode the basis of enhancing equity and

adequacy amongst those who have worked hard all their lives. Other social challenges such

as shorter life expectancy and low rates of marriage would be prevalent because privatization

will erode the social security system of benefits per dollar and it would depend majorly on

racial differences.

Conclusion

In the future, we will witness a major increase in the senior population mainly due to

the baby boomers. The Social Security funding may not be enough. Privatizing Social

Security is definitely not a good idea because it could lead to financial fraud, investment

problems, and reduction in the funding for the retired individual (Pollar, 2016). Luckily, there

are other strategies to help the booming senior population. We can raise taxes and decrease

funding for other programs that don’t need it. For example, we should decrease funding for

college education and use that for the social security programs. A lot of times, college

students utilize the funding irresponsibly, so it would be a waste to use it on them. An

adequate college funding that is enough for tuition can be beneficial. This is mainly because

it will encourage students to take on part-time jobs for additional funding and learn new life

experiences through their jobs (Pollar, 2016). The extra money taken away from college

education can help improve the funding aspects of social security for the baby boomers.
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All in all, Social Security should not be privatized, whether in portion or

whole. Social security plays a vital role in the country. Privatizing some portion of the

program would affect how the programs deliver its objectives to the members of the public.

First, it would reduce the taxes collected by the government. It would dismantle the program,

thereby leading to their own failure. In addition to that, less auditing would encourage

embezzlement of funds in the program. They would not have sufficient resources to meet the

demands of the beneficiary in the country therefore reducing the welfare of the citizens.

However, the government should ensure the program is restructured with the primary aim to

meet the demands of the citizens in the country. In addition to that, the government should

also provide the program with the adequate resources to improve the lives of the beneficiaries.

The programs need to develop the measures that will help to reduce the tax level which the

member pays to the programs.

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Work cited

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