This past March, the U.S. Senate voted 100-0 on a resolution
that said improving Social Security is “a vital national
priority.”
But Congress has not been as unanimous in agreeing on a set plan
to improve the United States’ largest government entitlement
program.
The first group of America’s 76 million baby boomers is
set to retire in 2008, and reformers state that over time, Social
Security will give more than what it takes in, meaning the program
will not have sufficient funds to operate.
Thus, students at UCLA may have much at stake regarding
President Bush’s Social Security reform plan.
Though retirees are now receiving their Social Security checks,
the picture becomes less clear for younger Americans.
Bush is advocating the creation of personal retirement accounts,
where individuals could invest a portion of their payroll taxes in
stocks and bonds. Signing up for these PRAs would be optional under
the president’s plan.
The partisan divide has been bitter, as Republicans largely
support the president’s plan and Democrats oppose it.
Supporters of the plan contend that Social Security will become
insolvent if nothing is done to fix the entitlement program. In
addition, they believe that investing in the stock market in the
long term will yield greater returns than what Social Security
currently offers.
Theodore Andersen, a professor at the UCLA Anderson School of
Management, is among the supporters saying Social Security will
benefit students in the long term.
To bolster his position, Andersen said that if students start
working at 22 and retire at 67, PRAs can build a nest egg of over
$1 million.
The calculation assumes students invest in mutual funds
averaging an annual rate of return of 8 percent, which is modest by
historical standards.
Though the “short-term markets are volatile,”
Andersen encourages students to examine the historical performance
of the stock market.
“Most people don’t know about the 8 percent,”
he said. “Most people do not live long enough to get back
everything they put into Social Security,” he said.
With PRAs, retirees can pass down savings to others, including
spouses.
Some students agree and see PRAs as a way for those in their
generation to support themselves during retirement.
“I think for younger people it can be beneficial,”
said Anthony Cimino, a third-year political science student.
Critics of PRAs, nevertheless, argue that transition costs for
Social Security reform could be as high as $2 billion.
In addition, they contend that the accounts will take money away
from the Social Security trust fund. Generally, Democrats say Bush
has refused to give specifics on a variety of areas in his
plan.
Some students on campus said they believe Social Security reform
is not going to help Americans.
“Privatization is unequal. … The rich get richer and the
poor have nothing to invest,” said Derek Lowrey, a third-year
political science student and also the events director for the
Bruin Democrats.
PRAs are not the only solution for Social Security reform, as
Federal Reserve Chairman Allan Greenspan has advocated increasing
the retirement age.
Increased life expectancy has led Greenspan to argue that
Americans should work longer. He has also proposed cutting
benefits.
Another option is to raise taxes, which the Federal Reserve
chairman does not support because he says boosting taxes would
decrease economic growth.
As the debate over Social Security reform lingers on, both sides
continue to have heated debates over the issue and what will best
benefit younger Americans.