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Social Security

Social Security. Democrats and Republicans Competing visions of retirement. The debate. SOCIAL SECURITY. What is a Ponzi scheme?. How does Social Security work?. Introduced in 1935. Each generation pays for the generation ahead Taken out of payroll taxes.

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Social Security

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  1. Social Security Democrats and Republicans Competing visions of retirement

  2. The debate SOCIAL SECURITY

  3. What is a Ponzi scheme?

  4. How does Social Security work? • Introduced in 1935. • Each generation pays for the generation ahead • Taken out of payroll taxes. • Currently has $2.6 trillion in funds. • Requires healthy ratio of workers to retirees.

  5. Reason to worry: population

  6. Reason to worry: life expectancy

  7. How is it funded? • Payroll tax. • 2011: took in $805 billion; paid out $735 billion. • 2.87 workers per beneficiary.

  8. Concerns • Baby boomers began retiring last year. • There is a projected shortfall that will cost $8.6 trillion over the next 75 years.

  9. Republican concerns • Ideological concerns: Social Security takes up 5% of GDP. • Should the government be able to control your retirement? • Should you have to pay today for tomorrow’s retirees?

  10. Republican proposals • Privatization: • Individual retirement accounts invested in the financial markets. • Possibility of higher rate of return. • Can pass the account to your heirs.

  11. Criticism of Republican plan • Privatization is subject to the financial markets. • Social Security is tied to inflation, it always pays more. • Privatization would be a financial boom for Wall St. • What happens to people who invest poorly?

  12. Democrat Proposals • Raise taxes • Cut benefits • Some combination of the two. • Example: cut benefits by 1%. Raise taxes 1%. Slowly raise the retirement age to 67.

  13. Degler Bernstein Doc. A because…

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