Abstract
The purpose of this paper is to discuss the social security system, its advantages, the problem the American society is currently facing and the solution presented by the Bush Administration to it.
Social Security System---What is it?
Social Security benefits are paid from government trust funds. The lion's share of the funds' income comes from payroll taxes. The funds also collect interest on their investments and get credited with income taxes levied on the taxable portion of Social Security benefits. The Social Security payroll tax, the cost of which is split evenly between a worker and her employer, is currently 12.4 percent on the first $90,000 (in 2005) of a worker's annual earnings. All economists agree that the employer share of payroll taxes really comes out of the worker's pocket, since paychecks are reduced by the employer's contribution amount. For the great majority of American families, the payroll tax, not including their employer's amount, is the largest tax they pay.
The trust funds use their income and accumulated investments to provide for nearly all retired Americans. Benefit levels are modest, just above the poverty level. Social Security, though, is the most efficient of all American antipoverty programs. More than a third of all elderly lived in poverty in 1960; by 1995, only 10 percent did an improvement that is almost entirely accounted for by Social Security. Moreover, for fully one-fifth of America's elderly, Social Security payments are their only income, and for a third of the elderly, represent at least 90 percent of their income. Benefits are skewed to be gently progressive, that is to say, the retirement benefits received by a low-income worker will almost always total rather more than he earned by his payroll tax contributions, while the benefit payment received by a high-income worker will amount to rather less than she earned through her payroll tax contributions...........
