Social security began in 1972 and the congress increased the social benefits by twenty percent. The amendments also introduced automatic cost-of-living increase that was tied to the consumer price index in the year 1975. The widows of deceased retirees were given benefits that saw them earn incomes without diminution in their pensions. This essay delves into the Bush’s proposal to social security and points out the weaknesses in his ideology.
Bush’s social security plan was shortsighted, because it was not brought forward in detail, and he was not able to explain it in terms of how the weakening social security was at the interest of the Nation. The proposal will cut benefits and this will end up in a more national debt.
The private account was intended to raise the national saving thereby increasing investments and growth of the economy. Besides, it is suggested that private accounts are likely to pay rates of return, which are higher than that of social security. This is said to be bogus, because a large portion of the payroll tax would be diverted into the creation of private accounts, whereby the federal governments will be required to borrow the funds for paying the benefits or it may be obtained by selling the bonds of the government. This will see the investor exchange of one paper for another, which will result in no real value. This tends to benefit only large investors, where they create an increased paper value; but there is no greater pool of saving that is likely to finance the investment.
The social security bankruptcy projections tend to assume that the average rate of growth for the period of seventy-five years is one point eighty percent, and this is after inflation, whereas the scenarios of privatization assume that stock investing will give a higher return rate of six point five percent as compared to the government bond. These two are incompatible assumptions, because the price of stock rises indefinitely, but in reality the economy is subjected to creeping along at a pace which is slower. The White House admits that the privatization cannot solve the so called social security fiscal crisis, as it is attested in a letter by Peter Wehner, where he said that there is a need for the cuts in almost all the benefits. Pumping of a very high amount of money into private investments accounts generates colossal income, which is ample of opportunities for fraud as well as for swindling, when millions of the inexperienced and small scale investors are making their way with help of the stock exchange
This may result into the trillions being diverted into private accounts, where baby boomer benefits will be slashed and money from unidentified sources are used to replace the funds that have been diverted. These private accounts will create a financial crisis that requires a sharp benefit cut as well as large infusions of money from the sources that are not identified.