Aileen Hui, Brian Halpern, Brittny Vizzi, Carla Workman, Benjamin Booher
November 3, 2014
Fiscal Policy Paper
Our country’s budget deficits, surpluses and debt, affect every American and it is the government’s responsibility to set fiscal policies whose goals are to influence these situations by changing tax rates and government spending when necessary. Cuts and increases in government spending greatly impact American households who might depend on governmental programs such as those that supplement healthcare, elder care, and education. When there is a deficit, there is a low supply of money. Individuals are called upon to close the budget gap by paying more taxes. This leaves less for the consumption and lowers the standard of living. As the supply of money improves, taxes might be reduced but not necessarily so. The extra tax revenue could be used to reduce some of our outstanding debt.
Future Social Security and Medicare Users
Social Security and Medicare taxes are withheld from every worker’s paycheck. The main purpose of Social Security and Medicare is to safeguard retired workers from living in poverty. When it was first created, the concept was to withhold enough so that benefits could be paid to current retirees while saving some for the future. When there are surpluses, the government can either try to save more or pay out more in benefits. During deficits, the government will borrow funds from the social security system. In addition, the aging Baby Boomer generation has caused a situation where more benefits are being paid out than there are funds coming in. The combination of national budget deficits and the Social Security Trust’s deficit has caused great concern over the future of the whole system. It is forecasted that “after 2020, Treasury will redeem trust fund asset reserves to the extent that program cost exceeds tax revenue and interest earnings until depletion of
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