Social Security mostly provides retirement benefits to eligible retired workers, but it also provides insurance benefits to the spouses and minor children of deceased workers, as well as workers who become disabled. Social Security is funded primarily by a dedicated payroll tax.
Like Medicare, Social Security is a pay-as-you-go system that was sold to the American people as a social insurance program but now is on the brink of collapse. When it was first enacted during the New Deal, Social Security entailed a one percent tax on employees. After years of the retirement age and payroll tax rate being raised numerous times, Social Security now involves a 7 percent tax, matched by employers, constituting an effective 14 percent burden on the cost of hiring workers. The self-employed must bear the full cost themselves.
The dirty secret is that Social Security was always destined to be a regressive, unfair tax on the young with promises to retirees that could not be kept forever. When it began, Social Security was a comparatively tolerable tax for those paying into it. However, the current condition of the program is far from stable. With the retiring of the baby boomer generation, the demography of the United States is shifting to an older population. This means young Americans will increasingly find themselves paying into a Social Security system that guarantees them no return.
Learn more about Social Security problems and solutions:
“Pay-As-You-Go Government: Inter-Generational Robbery”
Burt Abrams (MyGovCost) April 30, 2012
“Should Social Security and Medicare Be Means Tested?”
John C. Goodman (NCPA) June 11, 2012
“The Flaws of Social Security”
Anthony Gregory (Human Events) September 2, 2010
“Privatizing Social Security the Right Way”
Laurence J. Kotlikoff (The Independent Review) Summer 2000
“The Anatomy of Social Security and Medicare”
Edgar R. Browning (The Independent Review) Summer 2008
“Looking South on Social Security”
Alvaro Vargas Llosa (San Diego Union-Tribune) August 26, 2005
“Allow People to Invest Their Social Security Funds”
Richard K. Vedder; August 22, 1998