Political Science

Social security levels during the 1930s American society
The basic amendments that were ploughed in the law to provide a strong foundation of social security
The nature and scope of the social security investments process
The administration of the Supplemental Security Income (SSI) and the Old Age, Survivors and Disability Insurance (OASDI)
The basic criticisms subjected to the social security funds
Conclusion

Abstract
Reforms in the government have been powerful tools in addressing peoples problems in an appropriate manner. Particularly in the area of social security, reforms have been used to revise some of the practices by the governments that have not satisfied the requirements of the citizens. To date, reforms in the social security have been carried out although these efforts have been met with significant controversies. In this paper, a number of controversies emanating from the aspect of social security will be discussed. The historical overview of social security will be highlighted. Finally, in the paper, the reasons as to why social security is not a viable idea will be established.

Introduction
The efforts by governments to design programs which provide individuals with the basic economic welfare and security and their dependence have been proposed to play a crucial role in the effective service of the citizens by a state. Collectively, these efforts are termed as Social Security and programs under these efforts differ from state to state although all the programs are due to government legislation and all are meant to provide monetary assistance following the deficiency in or loss of income. Situations like retirement and disability are well addressed under these programs. However, one of the most disturbing questions which often remain unanswered is whether the Social Security programs are any viable.

Security state during the 1930s
Prior to 1935, the United States did not have any social security programs at the national levels until the Social Security Act was enacted as part of the President Franklin Delano Roosevelts program of the New Deal. The enactment of the act saw the establishment of two major programs of social insurance the old-age retirement insurance of a federal program and a federal-state program addressing the retirement of the old age insurance. The act also provided for federal grants which backed up the state efforts in addressing matters related to the problems of the aged, the disabled, vocational rehabilitations, public health services and the programs concerned with the welfare of the children (Disability Advoacte, n.d). During this time, the mandatory insurance for old-age provided benefits which were equivalent to the prior salaries for the persons who were over 65 with the accumulation of reserve funding through the payroll taxes on employees and employers. The tax rate was initially set at 1 percent and it would accumulate for the benefit of the retirees.

One major limitation was experienced with the original Social Security Act of the 1935 the provision only benefited the industrial and commercial occupants. However, after 1935, major amendments have been effected and there has been an escalation of the groups of individuals who are eligible for the benefits. For instance, in 1939, there were major amendments which provided for the benefits to all the survivors and dependants of the workers. Things were starting to be fine in 1950 when the amendment expanded the benefits to include the domestic and full-time farm workers. Other group of individuals in the local government and state and the not-for profit organization employees were also included in the coverage. The coverage was later extended to the members in the armed forces and the professionals in the self employment sector.

Basic amendments
Amendments in 1957 extended benefits to the insured workers who were aged over 50 and those who became permanently and totally disabled. The eligibility age for retirement was also lowered to 62 from 65 although there a lowering in the benefits for individuals who retired at the age less than 65. The congress enacted in 1965 the Medicare program which provided the people aged over 65 with the medical benefits. There was also an accompanying Medicaid program which was meant for the indigent regardless of the individuals age. The 1972 amendment tied escalation of the retirement benefits of Social Security to the Consumer Price Index increases. The 1974 saw the taking over of the Social Security insurance by the Social Security Administration and in 1983, partial taxation of benefits provided to the recipients in the upper income was allowed by an amendment. Payroll deductions for Social Security were then set to 6.2 percent of the annual wages less than 72,600 in 1999 (Randal, 2008). An additional of payroll deduction of 1.43 percent of annual wages was made from the Medicare with the employers donating the matching amounts.

Nature of social security fund investments
Usually, the Social Security funds are specially invested in the federal securities and in long-term bonds. However, in 1997, there was a government advisory panel proposal which required that some of the revenues should be invested in bonds and stocks in order to generate higher earnings. Although this seemed a good idea, the panel was highly divided over the decision whether the money was to be invested by individuals or government. There was a disagreement on the money which was to be shifted from government bonds. The two approaches by the different sides of the panel had their critics. Some critics regard the government investment in form of stock as a viable source of intrusive federal influence on the business activity in the U.S. yet still, other people feel that allowing the investments of the Social Security funds by individuals will greatly endanger the minimal postretirement safety net for every worker who the program is designed for should the individuals unwisely invest. The issue of personal Social Security accounts received a tight campaign from President George W. Bush.  A commission offering numerous options for permitting individual investment in stocks and bonds was appointed by the president serving as an annex to the Social Security program and also to secure the financial health of the program (USA.gov, n.d). Experts determined that the program would take over 3 trillion of extra revenue in the next 75 years and prospected that the benefits that were to be reduced in accomplishing both goals.

Social Security has not been that a viable concept and the proposals for Social Security relies on the anticipation that the program costs as currently structured will outstrip the raised and invested revenues in the wake of the 21st century up to the mid of the century. It is anticipated that the benefits will have to be paid solely from the revenues which are obviously expected to be too inadequate for such a robust project. It has been criticized by most experts that if the project is amended, it shall put a heavy burden on the entire federal budget. When this happens, especially the hike in federal budget, there will be a need to reduce the benefits of the civilians or still in another perspective it will lead to the significant increment of taxes to the citizens. Although the historical returns from stocks and bonds investments over a century earlier suggests that investing the funds in such securities will preclude the financial difficulties of the program, the fluctuation in prices of stock in and after the market bubble in the late1990s has provided too much pauses, especially where the investment accounts of an individual are concerned.

The Supplemental Security Income (SSI) and the Old Age, Survivors and Disability Insurance (OASDI)
The administration of the Supplemental Security Income (SSI) and the Old Age, Survivors and Disability Insurance (OASDI) is wholly vested in the Administration of the Social Security. This administration was part of the U.S Department of Health and Human Services up to a time when it became an independent agency in the year 1995. The centers for Medicare and Medicaid Services of the Departments of Health and Human Services are responsible for the administration of the Medicare and Medicaid programs. Under the overall administration by the U.S Department of Labor the administration of Unemployment Insurance is done by every individual state (Tanner, 2004). The internal Revenue Service is charged with the responsibility of collecting the contributions and the benefit checks preparation and trust funds management is done by the Department of the Treasury.

There is need to examine the situation in other countries in order to judge if Social Security programs are any viable in the U.S. this will provide fact based evidence in making decisions regarding the complex issue of Social Security especially under President Obama administration. One fine scenario to examine is the Social Security programs in Germany. In Germany, a Social Security program was adopted in the 1880s. Chancellor Otto von Bismarck campaigned for the social legislation in order to both benefit the workers and to forestall all the socialists programs. He supported the socialist programs in order to gain support of the workers who belonged in his party.

In Germany, the legislation was set up to provide compulsory sickness insurance where the worker paid up to two thirds of the cost whiles the employer paying the remaining fraction of one third. This legislation was passed in 1883 in Germany. The adoption of the compulsory old-age insurance which necessitated that the employee, employer and the government share the cost was adopted in 1889. However, it took up to 38 years for the unemployment insurance legislation to be passed in Germany in 1927 (Dixon, 1999).

The economic insecurity in the most industrialized countries among workers increased and the number of programs of social security were increasingly enacted. For instance, in Great Britain, David Lloyd George devised the National Insurance Act which got passes in 1911. Following this passage of the National Insurance Act, the compulsory unemployment insurance program and the old-age insurance and sickness programs were also established. The weakness of the unemployment insurance system exempted many workers who included government employees, casual workers, nurses and any person who earned salary of  250 and above per annum. In 1925 a survivors insurance program was adopted and in 1942, Sir William Henry Beveridge presented parliament with a plan for a more expanded program of social security. Sir William Henry s plan was enacted mainly after the Second World War.

In 1905 France adopted a program which aimed at providing voluntary unemployment insurance. This program was followed by the plan to provide compulsory insurance for the old age and the sick in 1928. The diverse programs of social security were also adopted in the entire Europe but had differing natures depending on the types of instituted insurances, the categories of eligible workers, the proportion an employee pays, the employer, the government, the conditions for benefit receipt, the benefit amount and the total effects of the programs (Adler, et al, 1991). The Soviet Union on the other hand adopted in 1922 a comprehensive social security plans as part of their economy of socialism. In the entire Latin America countries, Chile became the very first one to adopt a program of social security in 1924.

Criticisms subjected to the social security funds
There have been substantial criticisms over the program of social security in the states making efforts to enact such programs. Social security is likened to a mechanism which redistributes wealth to the wealthy from the poor. Here, in the program, workers are entitled to pay up to 12.4 percent and an additional 6.2 percent employers donation of their wages below the Social Security Wage base which was set at 102,000 in the year 2008. This suggest that there will be no taxation on the excess of 102, 000 which then means that those who earn big will pay a lower percentage of their total income and the low earners will have to pay very high percentage on their small wages (Queisser, 1997). This reasoning of social security is absolutely not viable. This situation has led to a general perception that payroll taxes are absolutely regressive. It has also been argued that the wealthier individuals have a longer life expectancy and will definitely expect to receive better benefits for a very long time than when the poor earners are put on the same examination. For instance, the program has greatly discriminated the poor tax payer and favored the wealthier individuals who have higher life expectancy. A poor individual who dies before reaching the age of 62 will not receive any retirement benefits with the longer period of paying social security taxes notwithstanding. Contrary, a rich individual dying at the age 100 is guaranteed his payment which is actually more than what he initially paid to the system (Social Security Online, n.d).

Despite this evident mistake in the social security program, the supporters of the system argue that despite the regressive tax formula of the system, the social security benefits are computed by taking into mind the progressive benefit formula which replaces a higher percentage of the workers having lower income. All this is translated to the pre-retirement income which is higher in wealthy individuals than in poor tax payers despite the higher rate of tax paid by the low income earners. There has also been an acceptable analysis that relative to the high income workers, the social security disability and survivors benefits which are paid on behalf of the low income earners offsets to a large margin any of the retirement benefit which may actually be lost due to a shorter life expectancy (Rapid Immigration, n.d). Some other critics have identified that survivor benefits which are alleged to be an offset is actually an exacerbation to the problem since the survivor benefits are not granted to single persons who include widows or widowers who are married less than the nine preferred months except in specific conditions. The divorced widow or widowers married less than 10 years are not also entitled to the benefits. The cohabiting or the same-sex partners or couples, except those who are legally married, are not also entitled to the benefits. In the U.S, there has been an observation that the unmarried individuals are less wealthy than the married ones hence creating more questions about the social security.

There is also a growing claim that the social security program has mainly been pushed forward by prominent politicians who have the ill motifs to exempt themselves from the long hand of a taxman. For instance, when the federal government formed the Social Security program,  every federal employee such as members of the congress including the president were not responsible in paying any tax to the Social Security program and were not also legible to receive the benefits of the program (Peter, 2004). The exemption was later changed in 1983 by the Social Security Amendment which saw all members of the Congress, the Vice President, the President, executive political appointees, the federal judges and all the federal employees who were hired after 1984 January 1st .

Criticism has mounted that the government might have made empty promises concerning the maximum tax. There are claims that the federal government has not obeyed to the promises it made concerning the maximum Social Security tax. Critics use data from 1936 to 1949 to support their arguments. It is maintained by the critics that during 1943, the federal government made promises on the maximum level of taxation which was to be used for Social Security. The federal government announced that the maximum tax the employee and the employer would pay would amount to 3,000 which is less than 6.2  (actually 1) charge currently. This promise was broken as it can be seen from the figures appearing on the websites of Social Security in 2008. As at 2008, the employee and the employer is charged 6.2 percent which raised the maximum contribution from the promised 3,000 to 6,324 by both the employer and employee. To make thing not work at all for a dynamic state, the maximum taxable income was raised to 102,000 meaning that the wealthier individual would significantly get too little bother from the ling hand of a taxman (Neal, Ralph, 2008).

Economics critics and analyzers have purported that the scheme of Social Security provide a very low rate of return at the long run. This is when the program is compared to the result obtained in private retirement accounts which seem to be higher. Critics have also pointed out that under the laws of Social Security which existed in the past, several employees had an option to take the program of Social Security or leave it in the wake of 1980s. The employees in Texas had an option to have their money kept in private retirement plans instead of the government controlled Social Security plans. Comparatively, the employees who opted to take the government plan of Social Security and had earnings of 50,000 per annum wolf have collected only 1,302 per month. This figure is smaller compared to what private account investor could have (Infoplease, n.d). The private plan had payments up to 6,843 per month. At the same time, the employees who had earning up to 20,000 per annum would have gained 775 for every month under the plan of Social Security benefit while the private security plan would have provided up to 2,740 per month. The figures relate to the interest rates which prevail led in 1996. These complications of the Social Security hassled to some individuals proposing for the privatization of the plan. The proposed scheme will be the Galveston pension which will serve as a model for the reforms in the Social Security (Anders, Hulse, 2006). Drawing yet still an array of controversies is the GAO report to the Means Committee and the House Ways. This report indicate that for the employees belonging in the capacity low and middle income earners especially those with short histories of work, the results for Galveston pension might also be discouraging.

Other critics have tagged the Social Security plan with the name Ponzi or pyramid scheme. This criticism comes for the libertarians who criticize the pay-as-you-go funding of the Social Security as taking after the illegal Ponzi scheme. In Ponzi scheme, the investors are usually paid off from the funds which are collected from other investors. This is contrary to what should be done conventionally there should be a pay off from the profits realized from the business activities and not a trust fund. A critical look at the usage of trust fund will help draw a picture on how the Social Security is never a viable option. Trust funds are estates of securities and money which is held in trust for the beneficiaries the fund is meant for. Social Security Trust Fund on the other side is the accounting of the disparity between the benefit flows and tax. Here it means, when tax goes beyond the benefits, the federal government takes the excess in return for the bond paying the interest which is an IOU which the government grants itself (Cooke, 2005). The controversy is made worse when the government does not invest the money in carrying out projects which may help the retirees instead the government puts into use the money in projects like buying foods or building bridges and supporting defense departments.

The observation that Social Security is not viable is not a new view. In 1936, Rep. Alf Landon in his presidential campaigns termed the trust fund as a nasty hoax which was cruel to the civilians. The committee of Republicans observed that the funds which was branded reserves for the old age insurance was no reserve at all, since the fund will have nothing other than the empty promise from the government to pay. The taxes which are collected in the disguise of premiums will be used carelessly by the government in wasteful political schemes. Those of the civilians who defend the pay-as-you-go scheme say that the Social Security will only qualify to be a Ponzi scheme only when the US government has plans to repudiate the debts it owes (Crane, 1997). Very minimal incidences has the Social Security Administration wanted to redeem the securities in the scheme and if there have been attempts to redeem the securities, enough honors has already been awarded but the criticism is sour which should inform the Social Security Administration that something is not very straight.

Response from the Social Security Administration tries to defend that the Social Security plan is never fully analogous to the Ponzi schemes and the pay-as-you-go programs of insurance. The administration however admits that there exists some rather superficial analogy that the money collected from the later contributor is directed to pay the earlier contributors their benefits. The direction of funds to other uses is the only identifiable similarity between the Social Securities and the Ponzi scheme according to the Social Securities Administration. The administration further notes that the pay-as-you-go scheme is like a simple pipeline with both the front end and the back end. The money from the earlier contributors comes in the front end and the money to the current recipients is paid out the back end (Edward, 2006). The administration explains that as long as there is a balance between the money which come into the pipe and the money which gets out of the pipe, investors can be ensured of their money security. The investors can be assured that the system will run forever without a collapse.

Perhaps the most current controversies will show this claims that Social Securities are never viable among the citizens. One of such controversies is that the Social Securities contrast with those of private pensions. This pulls the Social Securities far from the likeness of private pensions although to some extent there are often comparisons which have lately been termed as imperfect comparisons. The observation that the Social Security is a purely a social insurance and not as perceived to be a retirement plan clearly separated the Social Security from the private pensions. The Social Security plans engage in paying for the disability benefits while the private schemes do not do this (Gokhale, 2004). This shows that the two systems are very different from each other. Private pensions accumulate money which is paid into it and the reserve is used to pay the workers their pensions. Another difference it the private systems are not universal like the Social Securities.

The court interpretation of the Social Security may provide some light on how the system is never near from being viable. It may appear that the United States Court of Appeals for the Seventh Circuit favors the Social Security Act. However, the court affirms that the Social Security At should be interpreted liberally in favor of the claimants at the time of deciding on what counted as the covered wages for the need of achieving the quarters of the coverage prerequisite in making a worker qualify for the benefits. The courts interpretations therefore have it that the Social Security has the moral role in serving the men and women and save them from poverty (Haveman, et al, 2003).

The viability of the Social Security should only be realized with major changes in the entire system. The point of assuming that everything is fine does not hold and should be regarded as an enemy to development. A majority of advocates have proposed major changes in the system and have pointed out that a rapid action is needed since the Social Security is facing serious crisis. President Bush in 2005, during his State of the Union Speech noted that indeed the Social Security was facing bankruptcy or a major crisis. In his speech, Bush described the entitlement reform as a national challenge that would expose the subsequent congress to very hard choices (Olivia, Micth, 2005). These choices include the immense deficits, deep cuts in all the categories of spending and the staggering tax increases.

Summarily, it can be seen that the Social Security is a necessity to the citizens of any state. The plan can help individuals after retiring or disability. The criticism surround the plan is not meant to demonize all the activities and endeavors of the Social Security but to make it better suited to serve the intended persons. Criticism will help do away with various biases which try to create a dark image to a potentially helpful tool in the society. Therefore, any defect observed in the system should be analyzed and rigorously criticized so that the refined end product is provided to the end-user or the common citizen (Stephen, Tobbie, 1999). Several awareness campaigns have been conducted and the leaders in the regulatory position have all heard it. It is time for action and a solution should be found in order to propel the states forward. Concentrating on a single problem for a long time encourages laziness and laziness is an enemy to development.