Posted by Mike on .
a. If total expenditures (Social security) were frozen, what would happen to benefits per retiree? To tax payments per worker? (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 worker?
c. If tax payments per worker were frozen, what would happen to total expenditures? To benefits per retiree?
d. What do your answers to parts a, b, and c imply about the difficult decisions faced by policymakers?
you will need to make some assumptions about whether the retiree population is growing, shrinking, or remaining constant relative to the working population. A likely assumption is that the retiree population is growing faster than the working population.
So then, just think logically about each situation.