Kathryn Wright- morning session. The Social Security Act was put into place by President Franklin D. Roosevelt on August 14, 1935 . This provided a safety net for people who are unable to work, due to age or medical problems, and was paid for by deductions from American workers’ paychecks. Currently, the large debate is how Social Security will be paid for in the upcoming years. In Naked Economics, Charles Wheelan introduces the stark reality that “Americans are having fewer children and living longer… there are fewer workers to pay for every retiree…” . With Social Security being a “pay-as-you-go” ideology, if the amount of retirees outnumbers the workers paying for their checks, the entire program will collapse. In fact, Investopedia predicts that by 2033, the Social Security bank account “will only have about 77% of what it should pay out that year” . There are seemingly only two solutions: make the retirement age higher, or increase the payment made by the workers. Either way, the budget for Social Security needs to grow enough to protect the future retirees. Another proposition that has been made is to simply either make the economic “pie” smaller or larger. A small pie is considered a larger government in which each “slice” is equal and people pay more to get more in return. This means people pay a large sum of taxes to get free college, health care, retirement, and so on. On the opposite side of the spectrum is a large pie; this is a smaller government with “unequal slices” that people pay less taxes and get less back from the government
itself. This can also be referred to as “supply-side economics,” when lower taxes increase revenue; consumers will work and spend more with less taxes and “that greater growth will make up for the lost tax revenue” . The debate is centered around which policy promises to yield the best reward for Social Security. Do we get taxed much heavier and get benefits farther down the road? Or do we try to grow the economy as a whole, even if some pieces are uneven? Wheelan says that “lower taxes can lead to more investment, which causes a faster long-term rate of economic growth” . Based off this ideal, cutting taxes and making the government less in-control of redistribution of income and other programs, the economy would theoretically grow faster. This would lead to paying back debts, like America’s current national debt balance of $18.96 trillion, and increasing Social Security’s bank account in the future. Although the smaller pie would treat everyone equally and proposedly keep everyone protected, “a growing pie, even if unequally divided, will almost always make even the small pieces bigger” . The larger pie would arguably both pay back debts and generate increased amounts of funding for Social Security. Even though the low taxes would seem to make the problem worse, high tax rates often discourage spending and lead to less government revenue . There is not one entirely correct answer to the debate, but there are certainly more options than simply increasing taxes or raising the retirement age. The real question is whether we get there with smaller pies of equality or larger pies of disproportion.
- “Social Security.” Social Security History. Accessed June 18, 2017. https://www.ssa.gov/history/hfaq.html.
- Charles Wheelan, Naked economics: Undressing the Dismal Science (New York: W.W. Norton & Company, 2010), 215.
- Folger, Jean. “Why is Social Security running out of money?” Investopedia. August 01, 2014. Accessed June 18, 2017. http://www.investopedia.com/ask/answers/071514/why-social-security-running-out-money.asp.
- Amadeo, Kimberly. “Does Boosting Supply Create Economic Growth?” The Balance. Accessed June 18, 2017. https://www.thebalance.com/supply-side-economics-does-it-work-3305786.
- Charles Wheelan, Naked economics: Undressing the Dismal Science (New York: W.W. Norton & Company, 2010), 99.
- Charles Wheelan, Naked economics: Undressing the Dismal Science (New York: W.W. Norton & Company, 2010), 76.
- Charles Wheelan, Naked economics: Undressing the Dismal Science (New York: W.W. Norton & Company, 2010), 96.
- Blog, Vendo. “Cross sale choices…big or small deal?” Inside Vendo. October 07, 2015. Accessed June 18, 2017. http://blog.vendoservices.com/vendo-blog/2015/01/16/2015115cross-sale-choices.