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July 24, 2014

Homework Help: Economics

Posted by Mariah on Friday, November 17, 2006 at 1:42pm.

The chapter states that the elderly population in the United States 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.

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

I would think by the use of the word frozen that tax payment would be fixed and in that case total expenditures would be fixed and benefits per retiree would be fixed, as well. Is this correct?

No, not correct. If the PAYMENTS per employee were fixed, with the number of employees relative to the number of retirees decreasing, then the money available per retiree (and their payments) would have to drop.

Total expenditures would rise with the number of workers, which continues to increase in this country mainly as a result of legal and illegal immigration, but expenditures would not rise as fast as the retired population.

So the benefits per retiree, being that expenditures would not rise as fast as the retired population, would be on the decline, true or not?

True.

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