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SEA at ASU. Student Economics Association. Student Economics Association. Economics is a social science concerned with the logic of scarcity, cost , value, and choice Economics is not all about money , math, and numbers Money is just a medium of exchange;

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Sea at asu

SEAatASU

Student Economics Association

Student Economics Association


What is economics

Economics is a social science concerned with

the logic of scarcity, cost, value, and choice

Economics is not all about

money, math, and numbers

Money is just a medium of exchange;

it is not a productive resource.

What is Economics?


Sea at asu

Does the system really need changing?


Sea at asu

What a (New) Deal !

SS Check #00-000-01 --- $22.54

1935

Franklin Delano Roosevelt

signs Social Security Act

in the Cabinet Room of the

White House.

Golden Years:1940 - 1975

Ida Mae Fuller collects social

security checks for 35 years

(until age of 100) – receiving

$22,888.92 after paying $24.75

over a three-year period.


Sea at asu

Choices

1. Do you need the government to force you

to save for your retirement? Does anyone?

2. Do “we”, as a society, have a responsibility to care

for those who have not prepared for their retirements?

3. Do you think you will ever receive social security

benefits?

4. Should the “rich” help pay for the

retirement of the less fortunate?

To what extent?


Sea at asu

How does Social Security Work?

Federal Insurance Contribution Act (FICA)

Payroll Taxes: 15.3% of Earned Income

Employee pays 6.2% for SS

1.45% for Medicare

Employer pays matching funds

Earnings “cap” of $90,000

(maximum tax of $11,160)


Sea at asu

Federal Taxing and Spending

All of this (and more) is spent as it comes in. There is no special

account where social security contributions are earning interest.

You do have a social security “account”: a computer entry of

what you have contributed, how much the government “owes”

you, and when you can start collecting it.

Future taxpayers own future retirees a LOT of money.


Sea at asu

What’s wrong with

Social Security?


Sea at asu

What’s wrong with

Social Security?

Statistical projections of all those

IOUs add up to about $2 Trillion.

In 2006, total social security tax

receipts will more than cover

payments to retirees.

Over the next 60 years, projected

payments will exceed social

security taxes by about $7 Trillion.


Sea at asu

“Your turn”

to retire…

“Baby Boomers”

Are Retiring


Choices

Choices

Try to fix the current system:

tinker with taxes and benefits

“Privatize”: continue forced savings, but

but create personal investment accounts

accounts (with some federal regulation).

Terminate social security: pay off obligations,

but government stops administering

saving and retirement benefits.


Proposals to fix social security

Proposals to “fix” Social Security

Raise the retirement age

Raise the income cap on the

Social Security portion of FICA

Raise the FICA tax rate for Social Security

Reduce scheduled benefits


Raising the retirement age

Raising the Retirement Age

Changes the definition

of a retiree

Reduces the number

of retirees

Reduces the number of years

retirees will be paid benefits

… but this must be phased in

slowly and will take a long time

to implement fairly


Raising the income cap

Raising the Income Cap

Increases taxable income

Increases tax revenue

Makes payroll tax

less regressive

Retirement

System

OR

Welfare

System

???

Duh ?


Raising the fica tax rate

Raising the FICA tax rate

More Regressive

Fewer Jobs

Laffer curve effects


Reduce scheduled benefits

Reduce Scheduled Benefits

Reduces Obligated Payments

Closes Gap Between Workers’ Payments and Retirees’ Receipts

Default on Obligations !!!


Sea at asu

“Privatization”


Privatization pros cons

Privatization: Pros & Cons

Establishes private accounts,

With (same old…)forced savings

Allows for investment of savings

to earn interest on money

More freedom

More personal responsibility

Personal control is two-edged

sword: lack of investment expertise

raises significant risk of loss.


Pay out current obligations terminate program the friedman plan

Pay out current obligations – terminate program (the Friedman plan)

Government no longer

supplies retirement

  • Individuals control

  • their own money

    Ends “the problem”

  • of Social Security

  • Stops the losses


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