Social security faces a $5.3 trillion shortfall over the next 75 years, but a co
ID: 1196349 • Letter: S
Question
Social security faces a $5.3 trillion shortfall over the next 75 years, but a congressional report says the massive gap could be erased by increasing payroll taxes paid by both employees and employers from 6.2 percent to 7.3 percent and by raising the retirement age to 70. a. Why is Social Security facing a $5.3 trillion shortfall over the next 75 years? b. Explain how the suggestions in the news clip would reduce the shortfall. c. Would the suggestions in the news clip change the generational imbalance?
Explanation / Answer
a. There is a shortfall because the total tax receipts were less than the social security payments. Hence, the deficit.
b. The news clip suggests increase in taxes as well as the retirement age. Increase in the taxes would increase the payment receipts to the Government. Also, by raising the retirement age, the Government can defer the payment to the retired.
c. The suggestions can imrove the balance. However, raising of the retirement age may not be justifiable to all.