All other taxes are
put into another fund, so that welfare programs, defense,
space projects, and the other categories of government
spending are all financed from one giant, uncategorized bowl
of tax revenues(boskin p.62).
When the Social Security system was first established,
it was felt that a direct payroll tax, based on the pay of
the worker and paid both by employer and employee, would be
the fairest way for the people that were currently working
to pay benefits to those who weren't working, as well as to
provide for some future requirements and disabilities. Therefore, a specially constructed payroll tax was used
to fund the program.

By measuring the amount taken in by the tax to the
amount, not only that is taken out, but to the amount that
will be taken out in future years, opponents of the Social
Security system make the case that the system will be unable
to keep itself in such a manner indefinitely. And, if
Social Security were a private insurance program, it
wouldn't. But the fact is that Social Security is not
a private program. it is funded by the government.

Further, the government is in a unique position to
change the laws of commerce and contract to adjust the
system, making it more responsive to the needs of the
retired, which, in turn, would reduce their need for the
Social Security benefits. For example, the United states
Government should raise the mandatory retirement age. By
raising the age to sixty-eight, the Social Security System
could delay paying out benefits for several years to
thousands of people, saving the system a significant
amount of money in benefits.

For these reasons, the government is in a position
which cannot be compared to private industry. In this sense,
looking at social security as an insurance program
and comparing it to other insurance programs in the private
system could easily give the impression that the system is
gong bankrupt, when in the reality it isn't.

THE FUTURE OF SOCIAL SECURITY

The thing to keep in mind about the Social Security
system, then, is this: the system itself is in no
fundamental danger of collapse. There is only temporary,
cash flow situation that must be carefully looked at.
The federal government pays out 4.5 billion more in Social
Security benefits as it collects in taxes every year. In
fact, $4.5 billion is a small price, compared to the other
programs the federal government now finances from general
revenue. Besides tapping the general revenue fund and
raising the retirement limit to 68 or even 70,the government
has the option of raising the Social Security tax or even
reducing the benefits slightly. The government has so many
options with regard to financing the benefits that the
question becomes of the cash management, not quite as
significant as the huge deficits that the Social Security
has been accused of having.

The government is already under way to help alleviate

this cash flow problem.