11CMcConn17SocSec_DL

11CMcConn17SocSec_DL - security to its people One...

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1 11C Social Security Debate Social Security is not a pension system. Social Security is not “going broke!”
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2 Real issue: role of G Should G provide a “safety net” to decrease risks of market economy? Social Security (OASDI) (retirement, survivors, disability) FICA (Federal Insurance Contributions Act, 1938) Unemployment insurance Medicare, Medicaid (1965) Minimum wage Welfare and Food Stamps Housing subsidies (Section 8)
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3 FICA (Federal Insurance Contributions Act, 1938) Now pays for Social Security and Medicare.
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4 1980 – present: shift the risk From G and business to individual and family: Decrease G on income security (“safety net”) Weaken unions (PATCO, 1981) “Welfare reform” (1996) Bankruptcy Law (2005) Corporations: Decrease medical benefits “Defined benefit” pensions to “401k’s” Shifts risk from corporation to retiree
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5 Social Insurance Society commits itself to a level of economic
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Unformatted text preview: security to its people One generation cares for another. (Who supported you as a child?) A pay as you go system. 6 Going Broke? Trust fund: running a surplus since 1980s tax increase. Reason: prepare for retirement of baby boomers. Trust fund buys Treasury bonds with surplus. This allows govt to report a lower unified budget deficit. Example : Soc. Sec. surplus: $100b Deficit w/o trust fund (federal funds): $500b Deficit with trust funds (unified budget): $400b 7 2015 to 2020: fund will start to have an annual deficit . Why? Bonds must be paid when due. 8 How will Government pay back Bonds when Due? May not want to because this would increase the deficit even higher! Alternatives: Raise general taxes? Cut benefits...
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11CMcConn17SocSec_DL - security to its people One...

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