Financial peril and solutions in U.S. Social Security and Medicare systems
Causes of financial problems in Social Security program.
Increased government borrowing
As a result of the increased government borrowing from the Social Security trust fund, the program has been losing large amount of its finance. This is due to the fact that the government does not treat the money borrowed from the Social Security as its liability, implying that it does not repay it. In this way, it leaves the program with inadequate funds to cater for the retirees. It is expected that with the increasing borrowing trend by the government, more than 4 trillion US dollars will be borrowed from the Social Security fund by the year 2010.
Decline of workers contributions
The decline of the number of workers eligible to make contributions to the program is another aspect that has resulted to the financial crisis in the social security programs. It is vital to note that the number of individuals receiving benefits has exceeded the number of employees contributing to the scheme as a result, the program has been left with a deficit. For example, in 1960 the number of employees who contributed to the program was 6.1.This reduced to 3.3 in 2008.With the current downward trend it is expected that the figure is expected to reduce to 2.2 by 2040(Arno, 2008).
Increased level of unemployment
The reduced amount of payroll tax, which is the primary source funds for the Social Security programs, has reduced due the increased level of unemployment. For example, in 2009 the tax collection was approximately 16 billion US dollars. This figure is projected to drastically reduce to a deficit of 10 billion US dollars. The recent global recession has also negatively affected the operations of the Social Security System. This is due to the high loss of employment and reduced wages and salaries. Taking into considerations the high benefits paid to the US residents per year, the economic downturn negatively affected the monthly contribution of individual employees.
Acquisition and fraud use of benefits.
As mentioned earlier, Social Security and Medicare systems cover wide areas. As a result, some individuals have taken this wide coverage of the system as an opportunity to fraud the Social Security program. As a result, the government has continued to lose large amount of money through such illegal avenues. In order to solve this problem, the administration team which is endowed with regulating the operations of Social Security, employs the (CDI) Continuing Disability Investigations in order to detect any kind of financial loss and illegal acquisition of the benefits granted by the system (Weisbrot et al,2000). Another solution which has been proposed by the top level management team of the social security is the use of other security agencies such as the FBI in order to avoid and diversion of the programs funds to other foreign countries by some individuals.
Social security number theft
Another major avenue that is causing large loss of government revenue and individual benefits is the culture of theft of the Social Security numbers of the contributors. This entailed circulation of emails which required individuals to give personal identification numbers and credit card number. In this way, the persons who were committing these claims were able to access personal data making it possible to defraud the benefits given by the Social Security. It is vital to note that due to the high level of technology that has engulfed the modern world, US government has put in place security systems to avoid loss of funds from both the banking and Social Security systems. To counteract the theft of PIN and personal information, the Social Security top level management led by Commissioner Anne B, gave the inspector general authority to track the perpetrators of the Social Security Systems in the website and to prosecute them. In the same way, as a technique of solving the loss of money for the US employees, the Commissioners cautioned the citizens against giving of vital information such as PIN or Credit card numbers to strange people via the phone or through the internet.
Solutions to the financial crisis in the Social Security programs.
Privatization debate.
The issue of solving the financial problems which have hit the program has been a hot debate from government bodies and economic analysts. The privatization of the program has been debated by the past US government system. Even though privatization has been strongly recognized as one way through which the program can be saved from the financial problems, currently there is no clear procedure that has been attained on how to privatize it. According to the conservatives privatization will allow workers to decide in which accounts their securities would be invested. This implies that workers will be paid through annuities from their own accounts. It will also ensure that the heirs inherit the benefits incases where the workers dies. In addition, due to the success of privatized systems in Chile, Sweden and in the UK, the conservative argues that the same system should be adopted in US.
On the other hand the liberal are anti-privatization. First they argue that the current and the future financial problems in the Social Security system cannot be solved by privatizing it. They also state that any attempt to divert the compulsory payroll tax to individual accounts will only result to more borrowing by the government thus leading to a higher budget deficit for the programs.Secondly they argue that funds saved in the individual workers accounts are not protected from inflation as compared to the contributions to Social Security system.
Opponents of privatization also argue that the initiative will result to emergence of high costs of administering the whole process which will only make the financial problems worse. Similarly, their stand is that the process will only bring about third party firms who will siphon out huge financial resources from the program during their management duties (Koitz and David 2001). Due to the endless debate on the most effective technique to address the budget deficit faced by the Social Security system in US, different stakeholders have come up with other potential solutions to the problem. These include
Increased contribution by families earning high income
This was an initiative that was considered by the current US government under the leadership of President Barrack Obama. The government stated that it was against privatization of the Social Security program. In this regard, families earning more than 250,000 US dollars would contribute more to the program in order to improve its financial performance. Likewise, the current US government resisted any attempt to reduce the benefits or rise the retirement age.
Increased Taxes
This is one of the way through which the financial difficulties faced by the program can be solved as depicted by the proponents of the current Social Security system. They also argue that benefits issued to the retirees should be cut in order to reduce the program expenditure. In the same way, they support upward adjustment of the retirement age so as to avoid future deficits.
Conclusion
Based on the above analysis of the financial crisis experienced by the Social Security system, it is imperative to note that strong laws need to be passed by government in order to bring acceptable avenue to address the program financial difficulties. In this way it will highly benefit the US citizens.Likewise, it will eliminate the diversified political views on the management of Social Security such as the one experienced during the era of George W.Bush and the current government. The former supported privatization of the program while the latter has opposed it.