It seems like Americans have been hearing about problems with the future of the Social Security system for a few years because there are likely to be fewer people working to support the system as large numbers of the baby boomers reach retirement age.
Social Security is a popular program that has lasted since Franklin Roosevelt’s New Deal in the 1930’s. While some have argued in previous years that it needs to be changed, it has been regarded as the “third rail” of politics; shorthand slang for any politician who touches it is inviting political death just as if he stepped on an electrified third rail of old city subway systems.
So, when President Bush highlighted reforming Social Security as a major goal of his second term, one could expect an intense political atmosphere surrounding the issue. Political observers have not been disappointed as the political fireworks have already started.
While the details are sketchy, one of the primary features of the proposal to change the Social Security system is to incorporate private accounts based on the model used by the Thrift Savings Plan for federal employees.
The purpose behind the change is to create an “ownership society” under which workers would set aside some of their payroll taxes into personal accounts that would be invested in securities. This is a significant change to the system in that the people who put money into these accounts would actually own the money; it would not be transferred to government accounts. In theory at least, the private accounts would yield a greater return and give future retirees more money to fund their retirement.
Those that like the current system and argue it shouldn’t be changed contend the system isn’t broken and that any change necessary can be resolved by increasing the payroll tax. Furthermore, say the detractors of the proposed change, private accounts will be too risky and would cut into the cash flow of the existing Social Security system.
Here is your chance to weign in on the debate. Is changing the existing Social Security system a good idea? Does the system need to be fixed and, if so, is using the Thrift Savings Plan a good model for the change?