Annabel.L

    Though few people doubt the importance of Social Security reform in USA, people debate fiercely on forms of the reform and there isn’t an option that can be accepted by most people. The most popular reform option involves the introduction of private accounts, which is also backed by the Bush’s government. The private accounts are supposed to hold about 2% of workers’ payroll tax which used to be put in the Social Security Trust Fund, and workers can own, control and leave to their heirs their private accounts. By this measure, the Bush’s government hopes that workers can get chances to manage their own private retirement accounts through investments in stock and bond market. However, this “partial privatization of Social Security” reform plan has received a barrage of criticism since it was introduced, and it has become one of the hottest issues under dispute.

    Opponents of Bush’s Social Security reform plan advocate three main reasons against private accounts. Firstly, they think that the policy doesn’t take into account the interests of ordinary families. They doubt that the Bush’s plan will shrink ordinary families’ benefits in order to increase low-income workers’ welfare. Secondly, the private accounts of investment fund are too risky, which may endanger retirees and other social security beneficiaries’ lives. They think that Social Security should be a guarantee with no risk provided to citizens, rather than a profitable investment. They are not willing to give up guaranteed benefits for risky privatization. Lastly, the establishment of “private investment fund accounts” will require substantial start-up capital in next decade, which will make the Bush administration’s huge fiscal deficits problem worse. The “private investment accounts” plan will produce a transitional cost of 754 billon dollars in next decade.

    Supporters of Bush’s “private investment accounts” plan advocate that the only way out of the crisis is to change Social Security from a pay-as-you-go model to a system based on savings and investment. At least the Bush’s plan can cover current Social security system’s hole and help to offer Americans more stable retirement welfare. According to the White House Spokesman, the “private retirement accounts” plan will make up for up to 70% of the long-term Social Security fund gap. The spokesman also said the level of the whole welfare would rise, and low-income workers’ welfare would increase the fastest.  Meanwhile, lots of the supporters are economists and they believe the”private accounts” plan will effectively improve the operational situation of Social Security fund. What’s more, they believe that the plan will stimulate consumer spending and promote economic growth by investing “private retirement accounts” in stock and bond market. They also pointed out that those who disagree with the “private retirement accounts” plan have an obligation to tell the rest Americans how they would deal with the grim demographic reality.

    According to the US media opinion polls in 2005, 51% of the Americans are opposite to the Bush’s government’s reform plan, so the push of Bush’s reform plan will be hard and long-term. In order to win more citizens’ support, the President Bush visited five states and advocated the benefits of the “private retirement accounts” plan in 2005. However, even today most people still hold negative attitudes towards the “private investment accounts”.

    In my personal opinion, I support the Social Security reform in USA and the Bush’s administration’s reform plan, which involves the “private retirement accounts”, intended to be invested in stock and bond market. Following will be my personal four reasons to back the reform in USA and Bush’s reform plan. Firstly, as we all see, the 70-year-long Social Security in USA has faced a big problem that the Social Security fund will run out in 2042 if nothing is done. I believe that each system has its own lifecycle, and it has to renew itself constantly to adapt to the changing society. There can’t be a system which can last forever without any changes. So, since there’s a problem, it’s time to get something done and a reform is unavoidable. Secondly, I think the reform should start as early as possible. As you see, more and more retirees will take out money from the trust fund relative to the number of working people putting money in. So the money going out will exceed the money coming in, in order to take care of the baby boomers. Now you see, the longer the reform is delayed, the more severe the problem will get. If they don’t do with the problem now, it will only get worse with time. Thirdly, I think the “private investment accounts” plan is not so risky as some people say. The plan allows young people, on voluntary basis, to set some of their own money in their personal saving accounts. They own their personal accounts and they can invest the money in stock and bond market in order to earn more money, but it doesn’t mean that they’re allowed just to take the money and dump it anywhere. There will be guidelines for young workers to invest. In other words, there will be a safe way to invest, to be able to realize the compounding rate of interest. Lastly, I really appreciate President Bush’s courage to propose the Social Security reform, though maybe he takes his own political ambition into consideration. It will be the first reform in 70 years since the Social Security system was established. The result of the reform is really hard to tell and it will certainly affect Bush’s support rate. However, he still chose to face the challenge and advocated to solve the problems before they become acute, instead of passing the troublesome problems on to future Presidents and future generations. I really worship his courage and hope this courage will be always with him even when it’s too hard for the plan to be pushed.

    I think that the structure of Social Security in USA is such that you can’t avoid the fact that there’s a problem. And now is the time for them to reform. A reform always has its opponents and supporters, and reformers have to be courageous, confidence, and maybe sometimes a bit of ambitious to push their reform plans.

                                                       By Annabel.Lu