3) The chapter states that the elderly population in the US is growing more rapi

Question

3) The chapter states that the elderly population in the US is growing more rapidly than the total population. In particular, the number of workers is rising slowly, while the number of retirees is rising quickly. Concerned about the future of Social Security, some members of Congress propose a "freeze" on the program

A) If total expenditures were frozen, what would happen to benefits per retiree? To tax payments per workers? (assume that social security taxes and receipts are balanced in each year)

B) If benefits per retiree were frozen, what would happen to total expenditures? To tax payments per workers?

C) If tax payments per worker were frozen, what would happen to total expenditures? To benefits per retiree?

D) What do your answers to part (A) (B) and (C) imply about the difficult decisions faced by policymakers

Explanation / Answer

A) If total expenditures were frozen, what would happen to benefits per retiree? To tax payments per workers? (assume that social security taxes and receipts are balanced in each year) The benefits per retiree would begin to decrease since the population of retirees is growing. Tax payments per worker would also decrease since the population of workers is growing, but they would decrease much more slowly than the benefits per retiree since the population of workers is growing more slowly than the population of retirees. B) If benefits per retiree were frozen, what would happen to total expenditures? To tax payments per workers? Total expenditure would increase since the population of retirees is growing quickly. Tax payments per worker would also increase since the population of retirees is growing more quickly than the population of workers. C) If tax payments per worker were frozen, what would happen to total expenditures? To benefits per retiree? Total expenditures would increase slowly since the population of workers is growing slowly. Benefits per retiree would decrease since the population of workers is growing more slowly than the population of retirees. D) What do your answers to part (A) (B) and (C) imply about the difficult decisions faced by policymakers This is a very difficult problem to solve. It is impossible for the current work force to support paying benefits to such a large group of retirees without drastic increases in contributions. This problem should have been anticipated when the baby boomers entered the work force, so that their own contributions could have funded their retirement. Now, the money is simply not available. The current work force cannot support the current retirees and the problem is growing. The elderly cannot endure cuts to a program that they have been counting on and the current work force cannot endure paying for the program.

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