Does social security adversely affect savings - Essay Example

This has therefore started a debate on the reduction of the social security taxes, much because the incentives offered through social security system are not convincing. Considering the fact that, the social security taxes deducted from the earnings of an individual are offered to the retired officers of that time, which means that, deducted amount is neither invested, and it is a source of profitability, which can be later shared with the individuals. The social security system has been meant out, only to collect amount from one end, and distribute it among other party.

(Carolyn L. Weaver. Social Security's Looming Surpluses: Prospects and Implications. 1990. Longman. pp. 146) It is therefore more advisable that the individual save or invest the similar amount in some sort of business or financial scheme, and it is expected that the individual can earn appropriate amount during the period of his retirement. Critically, why should a person contribute towards such a system, which is neither investing nor offering any profit or return over the deducted amount, rather it only offers return back.

(Christopher Borgman. Social Security, Demographics, and Risk. 2005. Springer Publications. pp. 174) Feldstein hasIMPLICATIONS OF SOCIAL SECURITY SYSTEMFeldstein has provided sufficient material to prove that the system of social security is responsible for decline in the accumulation of total capital. The social security system has adversely affected the domestic productivity; it is because the individual is offered with no other option but to contribute towards the social security system. It the similar contribution had been made by the individuals in banking and businesses would have improved the increased the magnitude of local financial and capital production.

Feldstein has provided sufficient evidence to prove that the practice of Social Security is corrupted. It has been able to observe that the social security system is responsible for the reduction in the private saving and local investment, and therefore the magnitude of regression coefficient on the social security variable was negative. The magnitude of the regression coefficient was large enough to warn against the implementation was such exercise, because it had caused much setback for local savings.

A large drop in the saving scheme has been experienced since the plan of social security was launched. It has further deplored the situation, as it is important to support and encourage personal saving, so that the activities of banks and other financial institutions can gain momentum.It is being critically evaluated whether the government bonds are based on net wealth for a society. If there is increase in the percentages of the taxes, the government is likely to borrow lesser amount from public, and it can be expected that the government might reduced the percentage of taxes in the future years.

This entire system is analogous to the social security system, where the government cuts heavy rates from individuals during particular course of time, and later reduces it, and then offers the packages during the retirement period in corresponding quantities. This practice itself is not fair and appreciable, the amount of social security