Tuesday, February 3, 1998
Current Social Security plan full of flaws
SOCIAL SECURITY Increase in senior citizen population will cause
system to fail
By Matthew Gever
Americans should be angry with President Clinton, not because he
may have played target practice with an intern’s dress, but rather
with his desire to increase spending on Social Security. What
Clinton fails to realize is that Social Security is doomed to
bankruptcy regardless of how much more money he wants to waste on
it. Instead, Social Security is a program that would be better off
in a privatized system.
There are a number of problems that exist with the present
system in this country. Social Security was enacted during the
Great Depression and was structured to fit the economic conditions
of the time. However, since that time, the economic conditions of
the country have changed, yet the program has remained static. What
worked then does not necessarily work now. In addition to this, one
out of every 30 people was over 65 at the time. At the present
time, that ratio stands at one out of every five people that are
over 65. The percentage of the population over 65 will continue to
increase as the Baby Boomer generation hits its golden years. What
will result from this is more people receiving benefits, with fewer
people paying into the system. Therefore, with fewer people paying
into Social Security, the amount that each individual pays will
have to increase. It is estimated that 50 percent of the next
generations’ income will have to go to Social Security in order to
keep it afloat.
In addition to these problems, there is the handling of Social
Security funds themselves. As soon as funds are paid into the
system, they are spent. And rather than being spent on anything
useful, the revenues are wasted on other government programs. The
money is not saved, and instead is replaced by government IOU’s the
amount of which exceeds any potential that the government has for
reimbursement.
A better approach to Social Security lies in privatization. A
shining example of the superiority of a privatized pension system
is the Chilean system. In 1980, Chile privatized its social
security system. Under this system, workers contribute 10 percent
(with up to another 10 percent optional) to private pension funds
that they own. The worker has the right to choose from any one of a
number of companies that specialize in pension funds. This creates
competition among these companies to provide higher returns and
lower commissions. Chileans’ receive an average annual return of 13
percent on their investments, which allow them to retire in
financial comfort.
In addition, the Chilean system creates another source of
financial capital and stimulates economic growth. Chile’s gross
domestic product has grown at an average of 5.4 percent annually in
the years since this system was put in place, compared to 3 percent
in the years prior. The privatization of the social security system
has turned the Chilean economy around, while allowing workers to
retire comfortably.
Overall, Americans would be better off in a privatized system.
Social Security in its present form is doomed to failure. Drastic
changes are necessary if any of us ever hope to be able to retire
in comfort.