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The criticisms of Social Security, or “Insecurity” as some have labeled it, have been discussed and now the issue about how to revise and fix these problems must be firmly addressed by the Government in its all-knowing, all-powerful stature. The Federal Budget for the US Government for the Fiscal Year of 1998 and it’s supplements address the aforementioned problems but state no incipient actions to solve any grievances or future obstacles, as predicted by the Office of Management and Budget, the Congressional Budget Office and many other private organizations, including Dow Jones (OMB, Budget – Perspectives 23-31). The 1998 Budget section for Social Security reports that all of the segments of the OASDI Trust Funds would be insolvent by 2029, “but it does not constitute an imminent crisis” because the Social Security Trustees measure the Administration’s well-being for a period of 75 years. Obviously the baby-boomer and generation-X generations are in danger of not receiving Social Security benefits being paid in taxes right now.

Unofficial proposals by legislators and leading financial experts have been proposing solutions for many years now, but they either do not have the power to introduce them or are politically apprehensive. These proposals include, but are not limited to, privatization of social security in stocks, Personal Security Accounts (PSAs), raising taxes – lowering benefits, Cost of Living Adjustments (COLAs), and abolishment of many Social Security benefits.

The most controversial and popular proposition offered has been that of privatization of some parts of the social security system. By this approach the government would invest 40% of the Social Security surplus into Wall Street on numerous private and public stocks. This would give Rose 4 the Administration “a $1.3 trillion stake in Corporate America by 2020″ (McNamee). This system would allow workers to also invest at least 11% of payroll taxes in their own accounts. Under the boldest plan, proposed by the Clinton Administration’s Advisory Council on Social Security, exactly 50% of the retirement fund would be “replaced with mandatory personal security accounts”, which would be invested in stocks or bonds (McNamee). The other 50% would finance basic government benefits for all retirees. The privatization of accounts could theoretically reduce the length of time before the trusts go insolvent by substituting savings accounts for some part of Social Security’s PAYG system. This would ensure that the government would have a surplus of funds for entitlement expenditures. By 2020, PSAs could hold assets worth around $6.0 trillion dollars if put on the market within a few years. “Such a huge balance [just for benefits] would give a kick to the nation’s capital stock and [spur] growth” (McNamee). But the Advisory Council and others have come up with this plan not to balance the economy, just fix Social Security. The Council and Social Security Trustees have concluded that if nothing else is done to reserve funds for the upcoming insurgence of retirees, Social Security will exhaust the trusts by 2029, and PAYG “taxes will cover only 75% of promised benefits”. To ensure solvency for another 75 years Congress would have to choose now to privatize, raise “the 12.4% payroll tax, cut benefits”, or all three (McNamee). The limitations of privatization also come into play when considering the best reform platform.

Questions arise as to how the government could do this without taking over the market and the consequences if there were a crash. Putting SS funds into the stock market for higher returns is agreed to be a very likely idea, but would individuals be willing to obey a compulsory law requiring letting the government manage funds on the stick market? There is also no true way to insulate investment planning from political pressures. If the market fell, the funds invested would go down also, and if they succeeded too well the stocks would raise interest rates on debt, hurting the economy (Business Week, How to Resecure SOCIAL SECURITY.). Compulsory saving in stocks would also require tax increases or cuts in government spending (Samuelson). Privatization, though, may be worth a try. Currently, the US Government can afford to experiment; as there exists no immediate SS crisis, and if funds are not raised for saving the benefits being paid after the trusts go bankrupt will not be at paid at 100%. A small amount of investment therefore definitely seems worth a try.

The next practical solution is seen as the very risky, at least to politicians hoping for reelection. That is the raising of the already high payroll tax at 12.4% and the lowering of benefits Rose 5 to save for the coming tide of retirees and entitlements. This controversial move would ensure that Social Security would be paid in full for at least 75 years, but is challenged greatly by those already on OASDI, who have strong political footholds. Interest-group politics can weigh in greatly. The American Association of Retired Persons, for one, pledges to keep Social Security as a government guaranteed plan. Labor, too, is opposed. Free-market agencies and business would favor any change, however (McNamee). Neither the Executive nor the Legislative Branches of the government are anywhere near willing to make a move like raising taxes and/or lowering benefits because of this.

A very practical, and yet controversial, method being proposed for saving is that of lowering the Cost Of Living, or making a Cost Of Living Adjustment (COLA). Last year it was discovered that the consumer price index (CPI) has been over-stating the annual cost of living by 1.1%. Social Security payments are directly tied to the CPI and determine the annual payment amounts. In

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