The topic I decided to write about was, “Instead of taxing young for social security, the government should fix food, clothing, and shelter prices to benefit the poor”. I happen to disagree with this statement. Although the government fixing prices on food, clothing, and shelter to benefit the elderly sounds like a nice idea, it will eventually cause the economy to end up in a disaster with bigger problems.
Fixing the price of something below the market clearing price may seem to benefit consumers, but this creates a shortage since the price mechanism is not allowed to react according to the Law of Supply, which in this instance would raise prices. If the government were to fix prices on food, clothing, and shelter to benefit the elderly, the economy would turn into a mess. Fixing prices is exactly what they do in socialist countries, and it has not been working out very well for them. Soviet Union was a controlled economy (socialism).
It became so corrupt and unsustainable it collapsed in the late 1980’s. China was there witnessing this taking place and decided to relocate to a more market-based economy (capitalism). Those countries that are still holding on strong to socialism, such as North Korea and Cuba, are in an economic sorry state. Young people pay into social security with hope that they will too benefit later on in life. When you are older, there will be enough young people who can pay for your social security.
When George W. Bush was president, he tried to change social security. He wanted each person to be responsible for saving for their own retirement rather than relying on the government. The change got shot down by members in Congress because it was going to hurt the elders. Therefore, having younger people pay for social security rather than elders is how things have been chosen to do. However, we may have a big problem paying for social security as the number of people taking it grows and the number of people putting into it gets smaller.
We will probably have to raise the amount people put in and lower the amount people take out. Some might see this as a type of socialism, but it is the system we inherited and it most likely will not go away. In conclusion, whenever prices are fixed by the government, a shortage is created. Eventually someone or something has to pay for it. Manufacturers lose motivation to produce and their production drops. Cost to produce eventually goes up, and less production is taking place. Soon, production and supply will collapse and cost to pay for the economic mess is huge.
Courtney from Study Moose
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