By Sarah Sheafer
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In 1935 President Franklin Roosevelt signed the Social Security Act. Two years later, a payroll tax was implemented to support the program. Although the taxes were initially only 2 percent, it has dramatically increased over the years. They are now 7.65 percent (employed) and 15.3 percent (self-employed). This number will continue to rise or the benefits will have to shrink unless dramatic reform occurs.

The reason why Social Security will face future problems is because the baby boomers have not produced enough children to replace themselves, which will cause the number of taxpaying workers to shrink. When the baby boom in the 1950s was just getting started, each retiree benefit was divided among 16 workers. That number has dropped to about three workers per retiree, and in 2025 it will reach about two workers. For years our parents have benefited from the wave of prosperity created by the surge in population in the 1950s.

However, what lurked beyond the corner was always imminent. As the baby boomers approach retirement, Social Security’s annual cash surplus will shrink, eventually disappearing completely. The program will not be able to pay full benefits and will have to consume general revenue dollars to meet its needs. Our generation is affected because we will be the ones who will have to pay for the baby boomers’ retirement.

Not only is our generation affected, but the government is as well. It is estimated that in 2040 Social Security and Medicare combined will consume about 60 percent of income taxes collected. The government would only have 40 percent left to run the rest of the government. At this point in time, the current administration already has four times the deficit of the one in the past. This basically means the government is already spending more than it takes in.

The 2009 Social Security Fund Trustees’ report predicts the program’s trust fund will be unable to pay retirees full benefits by 2037. This is four years earlier than predicted last year, which means that the forecast is getting worse each year. The report also said the trust fund will begin to spend more money than it takes in through tax revenue in 2016. This prediction has also been shortening in years.

Three solutions have been put forth to solve the program’s problems: raise taxes, reduce benefits or allow a portion of the money to go into PRAs (personal retirement accounts). This idea is not at all popular in Congress, because it would not have any control over this money or be able to tap into it. However, PRAs would actually pay more in benefits than today’s Social Security. Right now, if my parents died, I would not receive any of the benefits my parents should have received for retirement.

But with PRAs, workers would be able to build a nest egg to pass on to their children. Politicians, such President George H.W. Bush who called any reform of Social Security “a nutty idea” in 1987, fear any change in the system. However, time is running out, and if we do not change the program soon, our generation will be left with no retirement money from Social Security. The current administration will most likely not do anything about the problem because it is already spending more money than all the other presidents combined. We will probably face higher taxes and reduced Social Security benefits unless the administration changes.

I would recommend that our generation not depend so much on Social Security as our parents. Once we enter the workforce, we should start to save for our own retirement, because we might not get any money from the system. Social Security is anything but secure.

Sarah Sheafer is managing editor for the HiLite.