PAM 230 REVIEW PRELIM II - PAM 230 REVIEW PRELIM II Content...

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PAM 230 REVIEW PRELIM II Content of articles, studies and outcomes, section questions on videos Social Security What is SS? o Aid for the aged o Disability o Retirement and survivors benefit o Four trust funds OASI (typical what ppl refer to when ss) DI disability insurance HI hospital insurance SMI (parts b and d for medicare) o Pay-as-you go system- our generation is paying for generation before us o Current workers pay for current retirees (we don’t get money back) o Taxes are regressive- larger % of money is paid by higher income bracket, richer are paying larger % of taxes. Ppl with more money have more burden o Benefits are progressive- larger replacement rate for ppl with lower income. Poor ppl pay fewer taxes and give you more benefits. o Trust fund is not REALLY a trust fund : (pickle jar- contain funds, get paid out from a lil whole, money comes from the taxes, but the pickle jar only contains IOUs. The money that gets put in is immediately paid for the retirees) Only holds IOUs Some money from general revenues- other income and recourses govt has. (taxes from income n property tax, bonds, loans) Will be a surplus until 2017: more people working than receiving benefits o See slides 18,26,32,and 33 for trends- lead to problems in SS Whats the pt of SS?? Progressivity (vertical equity)- transfer of fund, redistribution from higher income to lower income Fair returns (individual equity) -benefits related to taxes. (contradict each other but there will be some sort of balance) Horizontal equity- equal assessment of those with equal earnings Economic efficiency- society is getting the most of resources being put in program so were not wasting any funds For low income workers, SS makes up larger portion of income (slide 42) 80% of ppl rely on SS as their main source of income- will lead to trouble if in the future were cutting benefits, so the poor are being affected the most Different from regular private insurance, bc mandatory program and theres no pooled risk Promises of future payments (slide 46) –problems with solvency, were not going to be able to pay the baby boom generation bc of flaws of pay as u go system What is wrong with SS? o Demographics-not leading cause but huge impact. Huge imbalance of old ppl to young ppl bc of baby boob generation starting to retire really soon.
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o Life expectancy- ppl are living longer, retirement age the same, and problem bc the amount of money ppl are getting in benefits is larger bc their livin longer o Dependency ratio Non-working elderly/total work force See slide 39 for trends Solutions to SS o Must adhere to four goals from before. Some are contradictory so we need to figure out which to favor, and what to do o 7 solutions presented in lecture Review each and refer to readings for explanations: pts for and against each solution o Bush proposal- no reduction of benefits and adhering to all goals Partial private retirement accounts- allow ppl to take some of the
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PAM 230 REVIEW PRELIM II - PAM 230 REVIEW PRELIM II Content...

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