What Are the Benefits of Privatization of Social Security?
Since its inception, a move to privatize Social Security has been a major debate in the United States. Proponents of the measure point to a number of reasons, namely unfair practices and personal responsibility. Also, the fact that the system faces economic turmoil by the middle of the 21st century supports the arguments for privatization.
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Function
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According to "Free to Choose" by Milton Friedman, a Nobel Laureate economist, Social Security programs simply redistribute wealth from poor individuals to wealthier taxpayers. This is because the 12.4 percent tax is only on roughly the first $100,000 earned by people, meaning those who make more do not pay the same percentage.
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Considerations
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People who die before age 62 do not reap any of the rewards from the system since they cannot take the benefits. With a privatized system, a person controls the money in the account, meaning, even if you die, that money eventually goes to the next-of-kin.
Features
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Ekaterina Shirley and Peter Spiegler, from Harvard, address the concerns of women involved in the Social Security system. Women work fewer years than men, thus generate less earnings in retirement. In addition, women live longer, making it more likely they will reach poverty.
Time Frame
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As the Baby Boomer generation enters the Social Security system, it is projected that a deficit of 10 to 15 percent will occur. In addition, by 2037, it is estimated that any existing surplus will be exhausted, causing the system to go bankrupt.
Significance
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According to Michael Tanner from the Cato Institute, the way Social Security is set up does not support personal responsibility. Beneficiaries are dependent on the actions of 535 politicians in Congress and the Executive Branch. Privatizing the system would make taxpayers more responsible for their own funds.
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