Social Security was a component of President Franklin Delano Roosevelt’s New Deal.
Social Security is a mandatory supplemental retirement system in the United States, established in 1935 as part of Franklin Delano Roosevelt’s New Deal. It was motivated in large part by the events of the Great Depression, which left many Americans unemployed and the country’s retired elderly often left in the most dire poverty. The intention of the program is to guarantee a minimum subsistence level below which any worker who has paid into the program cannot fall.
Social Security was designed to help keep seniors out of poverty.
The Social Security program is financed with payroll taxes; that is, a certain percentage of a worker’s salary goes directly into a fund to help provide benefits to current beneficiaries. In recent years, this has become a point of contention with some current workers, who complain that the system is unsustainable and that, after paying into the system their entire working lives, there will be nothing left for them to collect in their own retirement years. retirement.
Social Security has created a minimum subsistence level below which any citizen who has paid into the program cannot fall.
Social Security has long been the so-called “third rail” of American politics, an analogy to the electrified third rail of subway systems. Touch and you’re dead. It is an enormously popular program with a very large and powerful part of the electorate – retirees and those about to retire. Any attempt to change the program risks incurring its wrath, and elected officials are remarkably reluctant to anger such a powerful group of voters.
Recent attempts to put the program on a more sustainable footing have centered on the idea of privatizing it. That is, it was suggested that workers could invest their own contributions in the stock market, opting for the non-defined benefit system in favor of a defined contribution system. A major shortcoming of this proposal is that it never addresses the issue that caused the Social Security system to be created in the first place – namely, what happens in tough economic times when payments on private investments decline or there are widespread business failures that leave retirees with no income?
Rhetoric aside, the Social Security system is more solvent than system reformers would have you believe. Current estimates are that funds entering the system will be greater than or equal to funds leaving the system over several decades. Recent deficiencies in private pension plans, such as those faced by the major airlines, have made it clear that, whether or not privatizing the program is a good idea, it is certainly politically impossible at the moment.