• printer friendly
• mail this article
• iPod format
• digg

Photo

Demonstrators hold up signs opposing the U.S. government’s proposed privatization of Social

Photo

President Bush tours the Bureau of Public Debt in Parkersburg, W.V., on April 5. The president de

This past March, the U.S. Senate voted 100-0 on a resolution that said improving Social Security is “a vital national priority.”

But Congress has not been as unanimous in agreeing on a set plan to improve the United States’ largest government entitlement program.

The first group of America’s 76 million baby boomers is set to retire in 2008, and reformers state that over time, Social Security will give more than what it takes in, meaning the program will not have sufficient funds to operate.

Thus, students at UCLA may have much at stake regarding President Bush’s Social Security reform plan.

Though retirees are now receiving their Social Security checks, the picture becomes less clear for younger Americans.

Bush is advocating the creation of personal retirement accounts, where individuals could invest a portion of their payroll taxes in stocks and bonds. Signing up for these PRAs would be optional under the president’s plan.

The partisan divide has been bitter, as Republicans largely support the president’s plan and Democrats oppose it.

Supporters of the plan contend that Social Security will become insolvent if nothing is done to fix the entitlement program. In addition, they believe that investing in the stock market in the long term will yield greater returns than what Social Security currently offers.

Theodore Andersen, a professor at the UCLA Anderson School of Management, is among the supporters saying Social Security will benefit students in the long term.

To bolster his position, Andersen said that if students start working at 22 and retire at 67, PRAs can build a nest egg of over $1 million.

The calculation assumes students invest in mutual funds averaging an annual rate of return of 8 percent, which is modest by historical standards.

Though the “short-term markets are volatile,” Andersen encourages students to examine the historical performance of the stock market.

“Most people don’t know about the 8 percent,” he said. “Most people do not live long enough to get back everything they put into Social Security,” he said.

With PRAs, retirees can pass down savings to others, including spouses.

Some students agree and see PRAs as a way for those in their generation to support themselves during retirement.

“I think for younger people it can be beneficial,“ said Anthony Cimino, a third-year political science student.

Critics of PRAs, nevertheless, argue that transition costs for Social Security reform could be as high as $2 billion.

In addition, they contend that the accounts will take money away from the Social Security trust fund. Generally, Democrats say Bush has refused to give specifics on a variety of areas in his plan.

Some students on campus said they believe Social Security reform is not going to help Americans.

“Privatization is unequal. ... The rich get richer and the poor have nothing to invest,” said Derek Lowrey, a third-year political science student and also the events director for the Bruin Democrats.

PRAs are not the only solution for Social Security reform, as Federal Reserve Chairman Allan Greenspan has advocated increasing the retirement age.

Increased life expectancy has led Greenspan to argue that Americans should work longer. He has also proposed cutting benefits.

Another option is to raise taxes, which the Federal Reserve chairman does not support because he says boosting taxes would decrease economic growth.

As the debate over Social Security reform lingers on, both sides continue to have heated debates over the issue and what will best benefit younger Americans.