Learn something new every day
More Info... by email
Social Security privatization is a movement to eliminate, or reduce, the United States' Social Security program, in favor of private retirement accounts. This has its roots in the economic prediction that the government plan will be operating at a deficit by about the year 2016. Both those in favor of privatization, and those opposed, agree that this potential problem must be remedied through reforms.
Social Security is a system of social insurance that is intended to support the elderly, disabled, or survivors of those who have worked in the United States. The program was put into place in 1935 by President Franklin D. Roosevelt. Under the plan, taxpayers pay a portion of their income into the system, and, in return, are paid a portion of it back when faced with disability, a death in the family, or their own retirement. It is structured so that current taxpayers support those who paid the tax in the past, meaning that the money paid today is used today.
Like any proposed major reform, there are two sides to the social security privatization argument. One side believes that privatization will help to fix the deficit, and give citizens more control over personal retirement funds. The other side believes that keeping the system as a fully government run program will protect the people from poor investments, and therefore protect the overall future economy.
The conservative tradition in the United States is one that typically supports social security privatization, with the Republican Party as well as third parties — like Libertarians — tending to lead this charge. The proposed privatization would take the funds that are currently put into the Social Security system and put them into an account similar to an Individual Retirement Account (IRA). Taxpayers would have some control over the direction these funds take, a point that supporters of social security privatization believe should be preserved.
The other side of the argument is led by the liberal tradition of the United States, including the Democratic Party and independents, like the Green Party. They believe that Social Security is best kept under the watchful eye of the government in order to protect the citizens from market fluctuations and investment mistakes. Supporters of this believe that protecting the funds will also protect the people, and contribute to the overall health of the economy. These people often point out that placing today's collected revenue into private accounts could mean that no funds will be available for those who are currently receiving Social Security benefits.
Generally, all people involved agree that changes must be made in the coming years to prevent financial disaster caused by the predicted deficit. Some with a central ideology believe that one solution could be partial social security privatization. As the debate on this matter continues, it remains to be seen what the ultimate remedy to this problem will be.