Budgeting, Whether for the Household

¶ … budgeting, whether for the household or a larger organization is that one cannot output more than input for very long. That is exactly what is happening with Social Security. As of last year it paid out more in benefits than it amassed in payroll taxes -- something that was not supposed to happen until 2016. Fortunately, there is a surplus right now, but if current trends continue; 100% of that surplus will be exhausted before 2037 (or sooner) (Simple Steps to Fix Social Security, 2010).

If one looks objectively at the role Social Security was designed to play, though, one can see a few interesting issues that might help mitigate the problem. Social Security was a program designed to implement a social insurance during the Great Depression (1930s) when poverty rates among senior citizens often exceeded 50%. It was a part of President Franklin Roosevelt's New Deal, and as a way to limit dangers of modern life and an economic system barely on the brink of recovery (Achenbaum, 1986, 25-6).

First, we must keep in mind life expectancy and retirement age. The idea for Social Security was that individuals would work as long as possible, but not live too long after retirement, thus not collecting their benefits very long. For instance, in 1940, a male might retire at 58, but only have 10 years or so left to live. In 1940, there were only 9 million Americans over 65. Now, contrast that with 1990, in which the man who retires at 65 is now expected to live 15-16 more years, and there are 32 million people over 65. Granted, more money is being put into the system from workers, as a dollar amount, but not necessarily as a percentage -- given inflation and what it took to live in 1940 versus 1990 (Life Expectancy for Social Security, 2010).

So, if we take a utilitarian look at the issue -- meaning what is the greatest good for the greatest number of people, we are faced with the issue of reformatting social security to its actual purpose -- to provide a basic income to retirees for about 10 years after working; or change the program to a more socialist-based system that is designed for a different purpose. If we take the former approach, we must now combine men and women together demographically; women now work far more outside the home than they did in 1935. According to the United Nations, this is now roughly 80 years, meaning the retirement age should be pushed to 70, allowing 5-8 more years of pay ins, and far fewer years of pay outs (World Population Prospects, 2006). In addition, if we follow the original mandate, Social Security is a supplemental or emergency program, not meant for those who do not need it.