Critical Thinking: The Privatization of the Social Security System
The main argument given by the author is that there is no way to effectively prevent benefit cuts from Social Security in the US without an increase in taxes. If the privatization of the US Social Security system were to go ahead and they were required to save a percentage of their earnings then the benefit payouts would vary widely between individuals. Although some people would be able to save substantial amounts before retirement, there would be a large number of people who were unable to save sufficient funds to last them through retirement. In the opinion of the author, any system which does not ensure that the needs of all are met should be considered a failure.The author explains the reasoning behind this theory in relation to the Chilean system of reforms which took place in their Social Security system. The author recalls that when the privatization of Social Security was debated in 2005, the Chilean reform system was often cited as a prime example of the benefits of privatization. The author highlights that recently, the government in Chile has however realized that the reforms which they have imposed are failing in providing for the elderly in their country. The reforms which occurred in Chile replaced state run
While this resulted in individuals having more income at the particular time it greatly reduced payouts from private accounts in the long term. The evidence from this case would suggest that Social Security should not be privatized in America. The arguments which are presented in relation to how the political parties could change spending habits in order to increase benefits is convincing. Overall, the evidence suggests that while there have been cases such as Chile in which privatization has not been successful, the identification of the factors leading to failure may lead to improvements which would allow the process to succeed in America. Part 2Overall, I do not agree with the argument which was given in the essay. The author suggests that the required increases in funds should also involve changes in the current spending by both political parties. The evidence presented in the essay uses the case example of Chile. Another paper by Packard (2002) analysed the economical systems of eighteen South American countries between 1980 and 1999 and found that there were advantages to the introduction of private retirement accounts, although they were only realized in the long term as employers and employees adapted to the new systems. This research suggested that there were ways in which privatization could be achieved with a positive outcome, such as through limiting the choices of participants to a small number of selected investments. The author claims that a similar system would produce similar outcomes in the US. While returns from the private accounts appeared to be large in the beginning, changes in the financial markets saw high interest rates fall from 35% at the peak in 1989 to -2. The author believes that the better solution to proposed reforms would be to increase taxes to provide the required increase in funds. The payouts from the accounts were designed to last for a number of years based on average life spans, although there was no account taken of individuals who would live for significantly longer than this (The Century Foundation). There have however been other economies which have opted for privatization of Social Security that have not met with failure in the same way as Chile.
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Acceptance Essays
