Professor Camille Castorina
February 1, 2015
Social Security and Medicare are critical federal programs, in America, that promotes income stability among millions of households. Social Security does so by providing a steady stream of income to replace wages lost due to retirement, disability, or death. Medicare provided health benefits to the elderly and disabled. While both of these programs make sense, both are struggling to keep up with their growing demands.
Social Security is a tax that every working individual and their employer pays. These taxes do not go into a “personal” account; as one might think. Instead, the benefits that are received by the ...view middle of the document...
Scary prospects for retiring individuals that are depending on their Social Security benefits to cover their living expenses.
As the chart shows below, Social Security has and will pump millions into the United States economy. A substantial program that has helped many.
What is to become of Social Security in the future? Trustees state that by 2020, Social Security will have major funding issues and the money will have been depleted. Our legislation’s answer is to cut benefits, however; the chart below shows the effects of a cut and the results are not good.
Reduction of benefits will have a trickle-down effect to every part of the economy. Jobs will be damaged, retailers will struggle with no spending, and generated tax revenues will be lower.
So, what does that mean for the future retirees? First, a major governmental reform to the system will have to be enacted before 2020. Second, interest rates will have to be increased to cover the Treasury debt currently in place. Third, working individuals will have to work into retirement age just to make ends meet. Forth, the mind set of future retirees will have to change, making them want to save for their retirement and not count on Social Security to cover their future living expenses.
Social Security significantly impacts every aspect of the economy. First, the recipient will spend their benefits on goods and services. Second, the businesses receiving these dollars will use them to pay their owners and employees. They will also purchase additional items to sell, pay rent, taxes, and the other normal costs of doing business. Third, the business suppliers in turn use the revenue they receive to pay their employees and suppliers. This is a continuing cycle that is repeated each and every month; pumping billions of dollars back into the economy (as shown below). A cycle, if disrupted, could bring down this country’s economy. A cycle that cannot or should not be stopped.
Every state, whether big or small, will feel the effects of Social Security recipients spending their benefits. Businesses, labor income, employment, and tax revenues are all stimulated every month by the individuals adjusted Social Security payments. These payments also have a major impact on five of the most important economic variables…
1. Output: the dollar value of all goods and services produced and consumed,
2. Employment: the number of jobs Social Security benefits support,
3. Employee compensation: wages, salaries, and other forms of compensation paid,
4. Value added: things added to value of the goods and service; such as salaries, inventory changes, etc.