My logic paper.
(Originally posted on MySpace: April, 28, 2005) I know, this is a lousy essay. The assignment didn't allow me to do much. But here it is anyway:

The Debate Over Social Security Reform


In 1995, amidst all the talk of government reform, privatization, and “spending cuts”, that were touted on the news every day, there was one program that no one dared to talk about reforming: social security. No matter how radical their plans for reforming medicare, AFDC, or any other government program, politicians would also be careful to say very clearly “We won’t touch social security”. Many journalists commented that social security was the “third rail” of American politics, a program that everyone on both sides of the aisle wanted to conserve in its present form without hesitation.

It is amazing how much things can change in a decade. With president Bush safely secure in his second term, he is now determined to make social security reform one of his top priorities. To that end, he has recently finished a speaking tour in which he has trekked across the country, trying to convince Americans of the value of enacting personal accounts in the social security system. As a result, politicians and the media are now discussing social security reform on a regular basis, something that was unthinkable ten years ago.

But should such a reform be made? Or are things better off just the way they are now?

In this essay, I will discuss arguments made by both proponents and opponents of personal accounts. In the end, I will discuss why proponents of the idea have better views on the issue.

The case for personal accounts.

The reasons why some policy experts favor reform is easy enough to state: If nothing is done to change the current situation, in 2018 the social security trust fund will begin to run a deficit. (Sahadi, CNN/Money) This means that the system’s current treasury bonds will have to be cashed in, thus creating a new cost to the federal government. Unfortunately though, the government doesn’t have any extra money to spare, as it is already in debt several trillion dollars and cannot find enough money to fund even it’s current expenditures. (MSNBC.com) As such, something must be done to come up with the extra money to deal with the problem. Either taxes must be increased or benefits must be cut in order to make up the shortfall.

But proponents of private accounts point out another problem with the system. This is not the first time the social security system has been in trouble. In fact, the system has had periodic crises throughout its history. The last time it was in danger of becoming insolvent was in 1983. Back then, Congress’ solution was to raise the retirement age and increase the payroll tax. (Sahadi, CNN/Money) As such, social security began to cost more and give less benefits to americans than it ever had before. A similar fix this time would only put off the problem for a few more decades, at which time congress would be faced with it once again. At the same time, they argue that if americans had been free to invest their money in stocks and bonds, instead of having to pay social security taxes, they could have gotten a much better return on their investment. As such, they believe it is the “pay as you go” principle of the system that is the real problem. Instead of current taxes going to pay for current retirees, they argue that ideally a citizen’s social security taxes should go into a private account owned by him that will gain interest and provide for his retirement. Of course, recognizing that doing so would result in there being no money to pay for current retirees’ benefits, they argue instead for a compromise in which a small part of the tax money would go to a private account and the rest would go to pay for current benefits. In exchange for the private accounts, workers would give up much of their future government provided social security benefits. As such, the government would greatly reduce its future liabilities while giving workers a greater retirement income. (Tanner, Cato Institute)

The case against private accounts.

Although many policy experts think private accounts are a great idea, others are dead set against it. There are two arguments they make against the idea: First, private accounts will not fix the immediate problem. Taxes will still have to be raised or benefits will have to be cut for current retirees. In addition, private accounts actually make the current situation worse, since every dollar that is diverted into private accounts is one dollar less that can be used to fix the current problem. As such, additional funding must be secured to pay for the loss generated by the private accounts themselves. Most likely, this funding will be secured through government borrowing, which just begs the question as to how that money is going to be paid back. Second, no one knows exactly how much money workers will make from private accounts. Depending on how good their investment decisions are and how well the economy performs, there is a whole range of possible outcomes they could be faced with. It’s even possible that they could make less money from private accounts than they could from the current system. As such, some experts are completely opposed to private accounts. (Anrig, Jr., Wasow, Social Security Network)

Why proponents have the right idea.

Despite the arguments against reform, I think proponents of private accounts have the right idea. They are concerned, not with short term fixes, but are instead trying to develop a long range plan to fix the social security system once and for all. In addition, they are trying to increase the freedom of citizens to make decisions about their own retirement, instead of forcing them into a system where they have no control.

Although private accounts will have to be financed through government borrowing, it will result in lower government spending in the long run due to lower government provided benefits. As such, it is still the most responsible decision to be made.

In addition, the argument that people may make less money with private accounts isn’t very convincing. Under the current situation, social security benefits will have to be cut in order to keep the system solvent. Most likely, taxes will be increased as well. In the future, when the next crises arrives, taxes will go up and benefits will go down once again. As such, it is a no-win situation as long as we don’t create private accounts. Besides, even if there was a chance that one could make less money with private accounts, one could mitigate that risk by being a conservative investor. As long as the citizen has the power over his own money, he has nothing to fear.

In conclusion, I think we should deal with the problem permanently and in a way that increases the freedom of americans. Private accounts are the best decision to make..

Works cited.

1. Jean Sahadi. "Social Security Reform: A Guide."CNN/Money. 8 Jan. 2005. 17 Aug. 2005

2. "U.S. Budget Deficit Expands to $412.5 Billion" MSNBC.com. 14 Oct. 2004. 17 Aug. 2005

3. Michael Tanner. "The 6.2 olution: A Plan for Reforming Social Security." The Cato Institute Project on Social Security Choice. 17 Feb. 2004. 17 Aug. 2005

4. Greg Anrig, Jr., Bernard Wasow. "12 Reasons Why Privatising Social Security is a Bad Idea." The Social Security Network. 14 Dec. 2004. 17 Aug. 2005