S o c i a l S e c u r i t y: Can It Be Fixed? by Angela Oberbauer  2005The Preamble To The ConstitutionWe the People of the United States, in Order to form a more perfect Union, establishJustice, insure domestic Tranquility, providefor the common defence, promote the General Welfare, and secure the Blessings ofLiberty to ourselves and our Posterity, doOrdain and establish this Constitution forthe United States of America.The Roots of Social Welfare in the America1. Before the 20th Century, little welfare:public education, veterans of Wars,and for farmers in late 19th Century.2. Somewhat social help with severe depression in mid 1890s.3. The Great Depression: from 1929 throughout early and mid 1930s.4. President Franklin D. Roosevelt elected1932, and his “New Deal Programs ofRelief, Recovery, and Reform”:A. Challenges facing Roosevelt:--Enormous unemployment; 25% across the nation, however,50% in many communities relying on one or two hard-hit industries.B. New Deal Programs: Executive Order, Nov. 1933Created Civil Works Admin.--Emergency Federal employment Federal Emergency Relief Adm.--Few dollars a week to unemployed. Works Progress Adm.--Paid out $55.00 a month--Construction or improvement of more than 20,000 schools, playgrounds, hospitals, and airfields across the nation. Social Security Act 1935.The Birth of Social SecurityWhat is it?1) A Compulsory Old-Age Insurance.2) Public assistance for the needy, aged, blind, and families withdependent children (later, thosewith disabilities was added).3) Unemployment Insurance and Compensation.How does Social Security Work?1) The Act requires the employee (today) to put in 6.20% of wages:maximum earnings taxable of$90,000.00 dollars.This percentage is matched byemployer = 12.40% together2) Plus, Medicare, added in 1960s Great Society Program:A combined 2.90% by both employee/employer with no limit on maximum earningstaxable:--provides medical care for retirees –pays hospital and physicians’ bills--pays for at least part of prescription drug expenses3) Pay-as-you-go transfer system,meaning: Those who are working put into both programs(with equal input by employers)while those who are retiredreceive these benefits.4) Plus, the Act also required employers to put 3% of worker’s salary into an insurance fund toenable the worker to draw fromit in case of unemployment.Suggested Problems for Social Security:1) Baby Boomer generation retiressoon. Fear, less workers putting intoprogram to facilitate outgoing payments to retired populationToday’s Life expectancy:Females 84.3 yearsMales 79.7 years2) By 2025, or latest 2039, retireeswill receive only 75% of benefitsout of Social Security and Medicare.3) Costs for Medicare (and Medicaid: a Federal/State program which subsidizesmedical care for the poor): $443 Billion in 2004, $476 Billion for 2005,$515 Billion for 2006,$558 Billion for 2007.Source: U.S.Budget Historical Tables, April 15, 2004Suggestions to Salvage Social Security:1) Raise taxes 2.20%: would yield80 Billion until Year 2020.2) Eliminate the current taxation capat $90,000.00 dollars to $150,000.This would also generate $80 Billion.Social Security is A Regressive Tax: earnings over $90,000.00dollars are not taxed.--Therefore, the wealthier earnerpays a much smaller portion of salaried income into Social Security than the working poor.--Also, additional earnings of high earners are not taxed for Social Security including: capital gains, rents, royalties, interest, dividends, or profits.3) Raise Eligibility Age from 65 - 704) Increase immigration of skilledlegal workers. Would increasetaxed input into Social Security.5) Partial Privatization:Plan suggested by President Bush and supporters of givingyounger workers the option toincrease the rate of return ontheir portion of 6.20% into Social Security.Opponents argue: --privatization is a threat to Social Security--Stock market is volatile--Benefits for today’s retirees cannot simply be abolishedPrivate Rates of Return on SocialSecurity Contributions:Year Rates of Return 1940 135%1950 24%1960 15%1970 10%1980 8%1990 6%2000 4%Sources: O’Connor and Sabato, 2006; Schmidt et al, 2005-2006; Gingsberg et al,2005; The Department of Health & Human Services, April 2005; Social Security Adm.,News Release, October 19,