Social Security reform: benefit reduction and privatization proposals

Social Security

A proposal to change the program

Reducing Benefits: This can be done in various ways. Monthly benefits can be reduced by minimizing cost of living adjustments or by minimizing the primary insurance amount (PIA) for a certain average indexed monthly earnings (AIME). Other proposals include targeting reductions towards high-income retirees. Benefits can also be reduced by increasing the retirement age or imposing full taxes on social security benefits. These benefit reduction proposals are some of the simplest and cheapest to implement. If future clients expect lower benefits, they are expected to save more or work longer; all of which will have a positive effect on the economy (Midgley, 2006).

Complete privatization: one of the radical proposals is to erase the social security system and encourage individuals to save in their accounts held by private investment companies. Owners of accounts will have great discretion over their decision of investment and any balances retained after death will be passed to heirs. This proposal is likely to increase employees' relationship to their retirement benefits thus motivating individual saving and responsibility. A full privatization will also eliminate the subsidization of one-earner couples.

The most effective changes

Complete privatization will enable employees to divert a percentage of their salary taxes to private accounts. This will demand levying a new tax to continue to pay social security benefits to individuals who retired at the time of privatization. This means that privatization will be a viable substitute, producing efficacy gains. Recent studies on the issues shows that privatizing in a manner that reduces distortions of labor supply to current and future generations will not hurt initial retirees. This will be a Pareto improvement. The most common approaches to privatization will reduce distortions because they offer long-term relief in an effort to protect the value of previous contributions (Brown, Liebman & Wise, 2009).

By extending the life-cycle model, the accrued benefits of a household, observable by the government will become a source of an effective lump sum tax used to replace future revenue that would have collected from the household through a distortion of the labor income levy. Similarly, such an implicit wealthy tax can give participants a higher return on their future contributions. Therefore, this will decrease the effective tax rate on their supply of labor. On the contrary, the efficiency of the benefits of the U.S. will exceed projections although there must be caution because this approach ignores the costs associated with the personal accounts.

Do you feel society owes our older population monetary and medical assistance? Why or why not?

Even though the society owes the older monetary and medical assistance, the current financial crisis, coupled with the high unemployment rate and the ageing baby Boomer, there is insufficient money derived from pay tax revenue to pay the older population such assistance. This has left many Americans worried about the future of the social security especially as they retire. For social security to give our older population monetary and medical assistance, Congress needs to figure out a strategy to show up the deficit in the program. If not, it will have to pay out reduced benefits (Brown, Liebman & Wise, 2009).

Instead of the older population, relying on social security as a way of medical and monetary assistance, they should depend on their own savings and investments. Individuals must seek ways to ensure they protect their future and have a future that does not include social security. Forecasts by the social security board show that there must be enough funding coming into the system to cater for at least half of the expected benefits by 2030. Therefore, it is projected that individual benefits will reduce, partly because the lay contends that social security management can only pay benefits to the level of revenue it has. Therefore, if the revenue is insufficient, the government must devise new solutions given it does not want to reduce payments. This will call for policy reforms.

How to implement change to the current system

Change is seen as a fundamental element of continuous quality improvement in any program. An implementation approach will include introducing the change and measuring its impact. In the social security program, there is a need for system change supporting the efficacy of services. When implementing a change, it is crucial to factor in how individuals will be personally affected by the change. Change demands that persons engage in something they have not done before. In change implementation, people are often the most crucial resource, barrier, supporter, and risk in change management (Cross, 2010).

Guiding principles:

Communication

Communication must happen in different forms with all the affected by the proposed change, consumers, internal and external stakeholders. Early consultation and communication, while the implementation of change is still in the planning phase will help in getting people interested and ready to partake in the process of change. This will give them a sense of ownership of the project and will be interested in the success of the change.

Resistance

Resistance is acknowledged as a universal, natural, and an inevitable human response to change, which a different person believes is a good idea. Thus, resistance to change or improvement should not make a person narrow minded or bad.

Evaluation

One of the vital components of the change implementation is evaluation. As an element of the project implementation, decisions must be made regarding measures to establish if the planned changes will lead to an improvement.

Using a Pilot

I will engage a pilot as it is a good idea to use a small trial of the proposed solution that can be undertaken in a zone that is keen to be incorporated. Engaging samples in a zone who are enthusiastic about change increases the possibilities of success and paves way for a positive overall rollout. This pilot could be a particular department or specific group of participants.