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The privatization of Social Security is a proposed reform to reduce or eliminate the US Social Security program in favor of private retirement accounts due to the predicted deficit by 2016. Supporters believe it will correct the deficit and give citizens more control over their pension funds, while opponents believe it should remain a government-run program to protect citizens from market fluctuations and investment mistakes. Both sides agree that reforms are necessary to prevent financial disaster.
Privatization of Social Security is a movement to eliminate or reduce the US Social Security program, in favor of private retirement accounts. This has its roots in the economic prediction that the government plan will operate in deficit by the year 2016. Both those in favor of privatization and those against it agree that this potential problem must be solved through reforms.
Social Security is a social insurance system designed to support the elderly, disabled, or survivors of those who worked in the United States. The program was implemented in 1935 by President Franklin D. Roosevelt. Under the plan, taxpayers pay a portion of their income into the system and, in return, receive a portion back in the event of disability, death in the family, or retirement. It is structured so that current taxpayers support those who have paid tax in the past, meaning the money paid today is used today.
Like any major proposed reform, there are two sides to the Social Security privatization argument. One side believes privatization will help correct the deficit and give citizens more control over their personal pension funds. The other side believes that maintaining the system as a fully government-run program will protect people from underinvestment and thus protect the overall future economy.
The conservative tradition in the United States is one that typically advocates the privatization of Social Security, with the Republican Party and third parties — such as Libertarians — tending to lead this charge. The proposed privatization would take the funds that are currently fed into the Social Security system and place them in an account similar to an individual retirement account (IRA). Taxpayers would have some control over the direction these funds take, a point that advocates of privatizing Social Security believe should be preserved.
The other side of the argument is driven by the liberal tradition of the United States, including the Democratic Party and independents, such as the Green Party. They believe that Social Security is best kept under the watchful eye of the government to protect citizens from market fluctuations and investment mistakes. Proponents of this believe that protecting funds will also protect people and contribute to the overall health of the economy. These people often point out that placing today’s collected income into private accounts could mean that no funds will be available to those currently receiving Social Security benefits.
In general, all involved agree that changes need to be made in the coming years to prevent the financial disaster caused by the projected deficit. Some with a central ideology believe that partial privatization of social security could be a solution. As the debate on this topic continues, it remains to be seen what the ultimate remedy to this problem will be.
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