The social security system is unsustainable in the status quo

Social Security is in Crisis. Social Security in the United States, as in most western liberal democracies, is a pay-as-you-go system and has always been so. As such, it is an intergenerational wealth transfer. The solvency of the system therefore relies on favourable demographics; particularly birth rate and longevity. In the United States the birth rate when Social Security was created was 2.3 children per woman but had risen to 3.0 by 1950. Today it is 2.06. The average life expectancy in 1935 was 63 and today it is 75. While this may be representative of an improvement in quality-of-life for many Americans, these demographic changes also indicate the increasing burden that social security systems are being put under.[1] As a result of changing demographic factors, the number of workers paying Social Security payroll taxes has gone from 16 for every retiree in 1950 to just 3.3 in 1997. This ration will continue to decline to just 2 to 1 by 2025. This has meant the tax has been increased thirty times in sixty-two years to compensate. Originally it was just 2 percent on a maximum taxable income of $300, now it is 12.4 percent of a maximum income of $65,400. This will have to be raised to 18 percent to pay for all promised current benefits, and if Medicare is included the tax will have to go to nearly 28 percent.[2] Social Security is an unsuitable approach to protecting the welfare of a retiring workforce. The social security system as it stands is unsustainable, and will place an excessive tax burden on the current working population of the USA, who will be expected to pay for the impending retirement of almost 70 million members of the “baby boomer” generation. This crisis is likely to begin in 2016 when- according to experts- more money will be paid out by the federal government in social security benefits than it will receive in payroll taxes.[3] In many ways Social Security has now just become a giant ponzi scheme. As the Cato Institute has argued: “Just like Ponzi's plan, Social Security does not make any real investments -- it just takes money from later 'investors' or taxpayers, to pay benefits to the scheme’s earlier, now retired, entrants. Like Ponzi, Social Security will not be able to recruit new "investors" fast enough to continue paying promised benefits to previous investors. Because each year there are fewer young workers relative to the number of retirees, Social Security will eventually collapse, just like Ponzi's scheme.”[4] Faced with this impending crisis, privatizing is at worst the best of the 'bad' options. It provides an opportunity to make the system sustainable and to make it fair to all generations by having everyone pay for their own retirement rather than someone else’s.[5] [1] Crane, Edward. "The Case for Privatizing America's Social Security System." CATO Institute. 10 December 1997. http://www.cato.org/testimony/art-22.html [2] Crane, Edward. "The Case for Privatizing America's Social Security System." CATO Institute. 10 December 1997. http://www.cato.org/testimony/art-22.html [3] San Diego Union Tribune. "Privatizing Social Security Still a Good Idea." San Diego Union Tribune. http://www.creators.com/opinion/daily-editorials/privatizing-social-security-still-a-good-idea.html [4] Cato Institute. “Why is Social Security often called a Ponzi scheme?”. Cato Institute. 11 May 1999. http://www.socialsecurity.org/daily/05-11-99.html; [5] Kotlikoff, Lawrence. "Privatizing social security the right way". Testimony to the Committee on Ways and Means. 3 June 3 1998. http://people.bu.edu/kotlikof/Ways&Means.pdf