Social Security: Will It be There?

Purpose Statement 

The purpose of this proposal is to inform and encourage action to be taken to fix the social security program. Thus promoting a more balanced budget and encouraging  grow in the economy with more investment. 

Problem 

Issue 1

Social security is an expensive program that is running on fumes. The funds eventually will run out and leave the economy crippled.  Up until now there have been no politicians willing to take up the challenge of fixing it.  It has been estimated that in 2029 most of the 80 million baby boomers will retire and use up all of the funds (1). The younger generation is paying into a program that will reap them no benefits.

Issue 2

Another issue that contributes to the problem is the AARP.  They are one of the biggest lobbyist in Washington DC as they have a lot of members and money to throw around. AARP will fight to keep Social security benefits coming to its members.  Their lobbying power in Washington and the number of votes that come from the older generation have a lot of political influence. This is crucial to this issue as Social Security can become very emotional, and elected officials all want to be reelected. 

Issue 3

Transfer payments (Medicaid , Medicare, and Social Security) are about one third of the national budget, and government spending is up to 32.6% of GDP(2). Currently the government is running a substantial deficit. In times of a strong economy a budget deficit is offset by foreign investment. However, in times of economic down turn the foreign investment falls. Classical economists always want less government involvement, but even the Keynesian Macro Economic model shows that in a down turn economy, foreign investment is directly affect and drops.  See figure 2. 

Figure 2

I = S + (T-G) + (X-M)

I= Investment, S= Savings, G= Government Spending, T= Taxes, X= Exports, M = Imports 

As the equation shows “I” will fall if net taxes (T-G) or next exports (X-M) fall and become negative. Foreign investment is considered an import in this model. If the economy slows and M falls and all else is constant then I must fall. See Figure 3.

Figure 3

7 =7+(1-1)+(2-2) vs. 3 = 7+(1-3)+(2-4)

Savings that would normally fund investments now fund government operation, this is know as crowding out. The loss of investment will continue to slow the economy. Investment dollars drives the economy as firms buy new machinery and replace old machinery. If capital or the machinery stops growing and starts decreasing that will slow the economy.  The current program causes crowding out and slows investment.