Social Program is said to become insolvent by

Social programs originate in order to give tax revenue backto the citizens who pay into the system. They are meant to give back to theworkers who have worked their entire life and wish to live with a stableretirement. In the United States the longest retirement tax pay into plan isSocial Security. The U.S.

social welfare structure has been From the earliestcolonial times, local villages and towns recognized an obligation to aid theneedy when family effort and assistance provided by neighbors and friends werenot sufficient. This aid was carried out through the poor relief system and workhouses.Gradually, measures were adopted to provide aid on a more organized basis,usually through cash allowances to certain categories among the poor.

shapedboth by long standing traditions and by changing economic and social conditions.Meanwhile, both the States and the Federal Government had begun to recognizethat certain risks in an increasingly industrialized economy could best be metthrough a social insurance approach to public welfare. That is, thecontributory financing of social insurance programs would ensure thatprotection was available as a matter of right as contrasted with a publicassistance approach whereby only those persons in need would be eligible forbenefits.

The plan has lasted since 1935 on into the 21st century.However, in the recent years the retirement tax plan has been subject toscrutiny on Capitol Hill as a result of citizens living and working longer evenbeyond the average retirement years. The tax rate itself paid by employers andemployees has also been debated among democrats and republicans. The insolvencyof the program has come to fruition and if nothing is done to ensure stability,the Social Security Program is said to become insolvent by the year 2034.

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Thelong standing retirement program administered by the federal government shouldbe kept solvent in order to achieve its original mandate of securing the longterm retirement of the American worker.  Origination of SSI            The United States experienced a severe economic depression which began in1929 when the stock market crashed and asset prices plummeted. The roaring1920s which had previously built the economy into a boom period had been longforgotten once the depression hit. Runs on banks ran rapid as depositors rushedto withdraw their savings. Farmers and the agriculture industry as a wholeshrank and deflation plagued crop prices in the market. The New Deal waspackage of legislation that was introduced by President Roosevelt during the1930s in order to save the economy from further recession. Beginning in 1932,the Federal Government first made loans, then grants, to States to pay fordirect relief and work relief.

After that, special Federal emergency relief andpublic works programs were started. In 1935, President Franklin D. Rooseveltproposed to Congress economic security legislation embodying therecommendations of a specially created Committee on Economic Security. Therefollowed the passage of the Social Security Act, signed into law August 14, 1935.The Committee of Economic Security was established in 1934 to develop acomprehensive social insurance system covering all major personal economichazards with a special emphasis on unemployment and old age insurance.

            The SocialSecurity Board itself was created in 1935 to administer the program and set thetax rates for workers to pay into. The Chairman of the Board reported directlyto the President until July 1939 when the Board was placed organizationallyunder the newly established Federal Security Agency. The original SocialSecurity Board consisted of the three member Board, an Executive Director,three Operating Bureaus, five Service Bureaus and Offices and 12 Regionaloffices. The law itself established two social insurance programs on a nationalscale. The choice of old age and unemployment as the risks to be covered bysocial insurance was a natural development, since the Depression had wiped out muchof the lifetime savings of the aged and reduced opportunities for gainfulemployment.

The Act also provided Federal grants-in-aid to the States for themeans-tested programs of Old-Age Assistance, and Aid to the Blind. Theseprograms supplemented the incomes of persons who were either ineligible forSocial Security or whose benefits could not provide a basic living. The intentof Federal participation was to encourage States to adopt such programs. Legislationwas enacted in 1934, 1935, and 1937 to establish a railroad retirement systemseparate from the Social Security program legislated in 1935. While therailroad retirement system has remained separate from the Social Securitysystem, the two systems are closely coordinated with regard to earningscredits, benefit payments, and taxes. The railroad unemployment insurance was alsoestablished in the 1930’s.

Other programs also made advances in the periodsince 1935. In 1948, the last of the States adopteda workers’ compensation program. The laws relating to work-connected accidentsgradually improved the provisions for medical benefits and rehabilitation extensionservices. The scope of the basic national social insurance system was significantlybroadened in 1956 through the addition of Disability Insurance.

Benefits wereprovided for severely disabled workers aged 50 or older and for adult disabledchildren of deceased or retired workers. In 1958, the Social Security Act wasfurther amended to provide benefits for dependents of disabled workers similarto those already provided for dependents of retired workers. In 1960, theage-50 requirement for disabled-worker benefits was removed. The 1967amendments provided disability benefits for widows and widowers aged 50 orolder.

The 1977 amendments changed the method of benefit computation to ensurestable replacement rates over time. Earnings included in the computation wereto be indexed to account for changes in the economy from the time they wereearned. The 1983 amendments made coverage compulsory for Federal civilianemployees and for employees of nonprofit organizations. State and localgovernments were prohibited from opting out of the system. The amendments alsoprovided for gradual increases in the age of eligibility for full retirement benefitsfrom 65 to 67, beginning with persons who attain age 62 in the year 2000.

Forcertain higher income beneficiaries, benefits became subject to income tax.Financing             Perhaps the most confusing aspect of Social Security financing is themanagement of the trust fund cash flows on the books of the Treasury. Themethods of managing the funds can create the impression that the interestincome and even the investment holdings are mere accounting conventions.

However, if one looks past the cash flow transactions to the impact on actualpayments to and from the public, it becomes clear that an increase in trustfund reserves will be associated with a decrease in publicly held Treasurysecurities. That decrease in turn reduces the Treasury’s current cash needs forinterest payments to the public and its need to borrow to make those cashpayments. The purchase of Treasury securities from OASDI tax or interest incomeand the redemption of Treasury securities to meet OASDI expenses are actuallyhandled by the Treasury Department, whose secretary is the managing trustee ofthe trust funds. In addition to maintaining the trust fund investment holdingson the Treasury Department books—verifying that the purchases and redemptionsare properly accounted for and that interest income is regularly credited—theTreasury also handles the trust fund cash operations. Most of those operationsuse the Treasury’s operating cash accounts, which are held at the FederalReserve Bank of New York and several commercial banks around the country. Theprevious section described how trust fund tax income is essentially borrowed bythe general account as soon as it is received, in exchange for a security issuedto the trust funds. In practice, employers deposit workers’ payroll taxcontributions directly into the operating cash accounts, and a parallelbookkeeping operation credits the trust funds with the appropriate securities.Similarly, when beneficiaries receive their benefit checks, the checks arecashed from one of these operating cash accounts, and a parallel operationredeems the appropriate trust fund securities.

            Most of thewithdrawals and deposits, each totaling $8,273 billion, are in offsetting securityrollover transactions. Publicly held Treasury securities are continuallymaturing and being rolled over into newly issued securities, an operation thatrequires cash payment to the owners of maturing securities and cash receiptfrom the purchasers of newly issued securities. If the government were runninga surplus, only some of the maturing securities would be rolled over into newlyissued securities, and the table would also include a “net redemptions” entryamong the withdrawals. In an important sense, net new borrowing from the publicis a residual value because if any of the legislatively controlled primaryamounts changes, net new borrowing must also change to maintain the operatingcash level.

Each additional dollar of tax revenue requires one less dollar tobe borrowed from the public. Each additional dollar of general account or OASDIbenefit expenditure requires one more dollar to be borrowed from the public. Ineither case, borrowing from the public is adjusted to maintain the operating cashlevel. Thus, any changes to the OASDI transaction amounts would affect theresidual net new publicly held debt as well. Although OASDI taxes reduceborrowing from the public and OASDI benefit payments increase it, the totalpublic debt is not affected. The securities that are issued to the trust fundsreplace securities issued to the public, and public debt total Treasurysecurities remains unchanged. The same holds in reverse for OASDI expenditures:Securities redeemed to cover program expenditures are replaced by securitiesissued to the public.

When trust fund reserves grow each year, as they aredoing now, increasing amounts of general account debt are shifted to trust fundholdings. When reserves are drawn down toward their longer-term levels, as willbegin to occur in a few years, the general account debt held by the trust fundwill once again be shifted to debt held by the public. Total general accountdebt the gross public debt is not affected by these transactions.

Federal Budget (S.S.)            The federal budget looks both backward and forward. It looks backward toaccount for all receipts and expenditures of public money.

It looks forward toprovide a framework for allocating resources over the next few years across theagencies and functions of the federal government. The “unified budget”framework provides a set of definitions and conventions that apply governmentwide, supporting detailed Congressional appropriations at the agency level.That framework also allows the tabulation of annual receipts and expenditures forthe entire federal government.

That budget convention should be kept in mindwhen interpreting the place of OASDI interest income in the budget. When anagency has a small amount of interest income from a fund under itsjurisdiction, it might be quite appropriate to treat that interest as income ofthe government at large, rather than of the agency. However, that convention isless satisfactory for the OASDI trust fund. The Social Security Act expresslyauthorizes the payment of benefits from trust fund reserves composed ofaccumulated tax and interest income without needing annual reauthorization, andthe interest income is an important component of the long-term financing. OASDIreserves will reduce publicly held debt, at least until the date at which thereserves are projected to be depleted, and will continue to do so beyond thatdate if OASDI taxes and benefits have by then been adjusted to forestalldepletion. Until those adjustments are made, however, the baseline budget willshow but only after the projected depletion date and only for budget scoringpurposes a hypothetical addition to the consolidated government debt thatcannot actually materialize.            SocialSecurity benefits are partially taxable for beneficiaries whose incomes exceeda threshold.

The revenues are remitted to the OASI, DI, and hospital insurance(HI) trust funds. The trust fund balances also earn interest from the specialinterest-bearing Treasury bonds. Congress sometimes adds to the trust fundsdirectly from general funds. For example, when the payroll tax was cuttemporarily as a stimulus measure in 2011 and 2012, the trust funds werereimbursed for the lost revenue. To restore long-term trust fund solvency,policymakers will have to make changes to the program through some combinationof raising the payroll tax rate, reducing benefits, and tapping other sourcesof revenue. To avoid the effect of the ever-growing deficit of benefitsrelative to taxes already occurring, which add to the unified governmentdeficits, policymakers need to act soon. The sooner policymakers makeadjustments, the less dramatic those adjustments will need to be.

Public Debate            The solvency of Social Security has been debated for decades since itsinception among republicans, democrats, and libertarians. Policymakers lastaddressed Social Security’s solvency in 1983, when President Ronald Reagan, aRepublican Senate and a Democratic House enacted a balanced package of taxincreases and benefit cuts that ensured a half century of solvency.Importantly, the benefit cuts were phased in and won’t be fully in place until2022.  Currently, workers and theiremployers pay a combined 12.

4 percent payroll tax (6.2 percent each) onearnings up to a cap ($118,500 in 2016). Benefits are determined by aprogressive formula based on these taxable earnings that replaces a largershare of lower-wage workers’ earnings than of higher-wage workers’ income.Democrats are against the privatization of social security due to theinstability and fear of the private market taking over. In their argument they pointout correctly that in prior years, Social Security did not contribute to thefederal deficit and, in fact, made the deficit smaller since it ran a surplusfor many years. These proponents of the program say that Social Security shouldremain off the table for deficit reduction, since the program hasn’tcontributed to the federal deficit in the past.

Democrats believe that adignified retirement is central to the American Dream, and its foundation isbuilt on two long-standing institutions charged with realizing that dream:Medicare and Social Security. Also they are against raising the retirement ageranging from early benefits as early as 62 to full benefits to 67.             Republicansand Libertarians believe that the retirement pay in plan should work in thebenefits for younger Americans.  The goalof any reforms of Social Security should be to give it a sound fiscal basisthat will give workers control over their investments, as well as a soundreturn on their investments. Republicans believe that the sooner we act thebetter, as this will not only give those closer to retirement reassurance thatthey will see their benefits, but will also give younger workers more time toplan their own retirement within the new system.

Republicans stress that thereforms they seek should not include tax increases, and should not affectanyone currently receiving Social Security, or close to receiving SocialSecurity. Most Democrats believed that the government and employers should playa role in retirement funding. In terms of whether or not employers shouldcounsel their employees on managing their retirement savings. The disagreementrevolves around the role of government in the retirement years regarding asteady pension. The Trump administration has been attempting to spin itsproposed $64 billion in cuts to Social Security Disability Insurance as somehownot cutting Social Security. The Social Security Administration has undertakenmany demonstration projects over the years to test new ways to encouragebeneficiaries to return to work, and they have consistently shown limitedresults or proven not cost-effective.

In the end the insolvency of entitlementsincluding Social Security, Medicare, and Medicaid are coming to fruition and ifno real solution is met within the next 10 to 15 years, the programs will haveinsufficient funds for beneficiaries.