College students facing the work force may have the most to lose with President Bush’s plan to reform social security. In his State of the Union Address on Feb. 2, Bush announced that his plan to reshape social security will ensure economic security for future generations.
For some students at the University of La Verne, social security is on their radar and for others it is a distant issue.
“I really never worry about that,” said Gerlaine Kiamco, a senior anthropology major. “I’m still trying to figure out where I’m going to be when I’m 25.”
Michael Stallings, a music major has definite concerns with social security reform.
“The stock market is a gamble,” Stallings said. “That’s almost like, as they say, putting all your eggs into one basket because interest rates can easily fluctuate.”
The proposal will allow workers under the age of 55 to place up to two-thirds of their payroll taxes into personal retirement accounts and invest those accounts in securities such as stocks and bonds.
In exchange for these accounts, people’s guaranteed social security benefits will be cut.
Current retirees and those nearing retirement will not be affected by the new plan.
These accounts would be voluntary and the funds will be restricted prior to retirement.
This means that through personalized social security, because it is assumed that the rewards would be greater, workers will be able to make enough money to compensate what they are going to lose in benefits. However, it will be at the workers’ own risk.
Without the ability to predict what direction the economy will take in the next 50 years, nobody knows for sure what the returns will be from those investments.
“If we put all of our money into these private accounts, and the stock market collapses, those privatized accounts could be wiped out by some kind of financial tragedy,” said Richard Gelm, professor of political science at ULV.
“So in which case, if you didn’t have social security guaranteed benefits, then a retiree would go back to the pre 1930s era where when you retired you where basically on your own,” he added.
At this time issues are not clear and opinions vary.
Jason Neidleman, associate professor of political science at the University, disagrees with Bush’s proposal.
“If you create private accounts, that’s a windfall for people who manage those accounts, and for companies that receive the investments,” Neidleman said.
He believes that some people are capable of managing their investments and would do well, while many more people would fail.
In general, he thinks that the plan only benefits those at the higher end of the economic scale.
“I would resist it because I see it as a benefit to those who already have wealth and detriment to those who lack,” Neidleman said.
Many questions arise about the status of our current system.
Bush indicates that if immediate action is not taken, social security is headed for bankruptcy.
Some people also question the urgency for privatized accounts.
A low-risk alternative might simply be raising social security tax.
If we pay higher social security tax, more money would be put into the system for retirement later.
This would also eliminate government borrowing to make up for the money that Bush’s plan would allow people to put aside.
“The Bush administration is manufacturing a crisis in social security,” Neidleman said.
“The goal is to work toward what they call an ‘ownership society,’ allowing people as they would say to control their own destiny by managing their own funds,” he added.
“It is analogous to, I would say, the fear tactics used to win support for the PATRIOT Act and intervention in Iraq.”
Jessica Warden can be reached at jesselw@verizon.net.