Question

SOCIAL SECURITY OLD AGE INSURANCE IS THE TOPIC

These are the topics to include:

• Part 1: Use positive economics* to analyze the current situation.

• Part 2: Use normative economics** to analyze the current situation. Do you believe the current situation comes down too much on the side of equity or efficiency? Explain.

• Part 3: Come up with a plan for how you believe the situation could be improved. In this section, you will need to come up with at least one (1) specific policy that the government could implement and how you believe this policy will change the situation both domestically and potentially globally.
  *Positive economics is an analysis of facts; what is.

**Normative economics uses economics to make value judgments about the situation.

Answer 1

Solution:

In the current situation the US has been using  federal Old-Age, Survivors, and Disability Insurance (OASDI) program and it is administered by the Social Security Administration.. Social Security is funded primarily through payroll taxes called Federal Insurance Contributions Act tax (FICA) or Self Employed Contributions Act Tax (SECA). Tax deposits are collected by the Internal Revenue Service (IRS) and are formally entrusted to the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund, the two Social Security Trust Funds,  all salaried income, up to an amount specifically determined by law , is subject to the Social Security payroll tax. Nearly all of the working people have a social security number . Some federal, state, local and education government employees pay no Social Security but have their own retirement, disability systems that nearly always pay much better retirement and disability benefits than Social Security. These plans typically require vesting—working for 5–10 years for the same employer before becoming eligible for retirement. But their retirement typically only depends on the average of the best 3–10 years salaries times some retirement factor (typically 0.875%–3.0%) times years employed

Now talking about the normative analysis part the poverty of the people in the age above 65 has reduced from 40% to 10% . But there are various issues too attached to it

• Claim of discrimination against the poor and the middle class

Workers must pay 12.4 percent, including a 6.2 percent employer contribution, on their wages below the Social Security Wage Base ($110,100 in 2012), but no tax on income in excess of this amount.Therefore, high earners pay a lower percentage of their total income because of the income caps; because of this, and the fact there is no tax on unearned income, social security taxes are often viewed as being regressive.

• Social Security Number theft

  Because Social Security Numbers have become useful in identity theft and other forms of crime, various schemes have been perpetrated to acquire valid Social Security Numbers and related identity information.

• Private retirement savings crisis Unlike a pension, for example, Social Security pays disability benefits. A private pension fund accumulates the money paid into it, eventually using those reserves to pay pensions to the workers who contributed to the fund; and a private system is not universal. Social Security cannot "prefund" by investing in marketable assets such as equities, because federal law prohibits it from investing in assets other than those backed by the U.S. government.

One of the policy which i think can be implemented is that making different stratas for poor class . middle class, rich class and determing different tax rates for them.Hence this create an equality among all the tax payers also less burden on the poor and middle class people.

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