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Fiscal Policy Paper

1978 words - 8 pages

Running Head: FISCAL POLICY

Fiscal Policy Paper
ECO/372
September 1, 2012

The team has learned that deficits, debts, and surpluses are accounting measures. There are many things to consider as important whether a budget is in surplus or deficit. The true importance is the health of the economy. The state of the economy needs to consider when to make a decision about whether deficits or surpluses are beneficial for the United States. Taxpayers have implemented how their money is in use when paying off deficits and how surpluses are in use to give back to the country. Debates of how taxpayers should use their money extremely important on how it ...view middle of the document...

During a surplus the taxpayers can receive a refund from the government. With this refund a tax payer could have more money to save, spend, or invest. With surplus taxpayers could also receive lower interest rates. Acquiring lower interest rates allows an individual to purchase items such as a home, car, or a family vacation. Businesses would be able to expand their company and have potential to hire more workers.
In the United States, the Social Security Administration operates a fund that pays benefits to eligible retired and disabled persons or surviving children or spouses of such persons. This fund is the Social Security Trust Fund. There are two sectors of the Social Security Trust Fund and two types of payable benefits; the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds. These funds hold federal government debt obligations known as social security benefits. The Old-Age and Survivors Insurance (OASI) Trust Fund is the larger of the two types of funds, which both fund types hold special interest bearing government securities in a trust that include purchases with surplus payroll tax revenues (www.ssa.gov).
These trust funds are considered to run surpluses, which primarily causes the system to operate “pay as they go.” This means that the benefits are issued on a monthly basis and are derived from the payroll taxes, which currently are being deducted from the paychecks of the present workforce. Also because the current deducted payroll taxes used to supply to the benefits is more than the payout; there is a surplus. The surpluses are given to the U.S. Treasury (and thus become part of the general federal budget) in exchange for special U.S. government securities, which are deposited into the trust funds (www.ssa.gov). In the same respect in the event more benefits are paid out than the amount deducted payroll taxes used to fund the benefits; the program will begin to run deficit. If the trust funds begin running deficits, the Social Security Administration has the ability to redeem the securities and use those funds to cover the deficit.
According to the projections of the Social Security Administration, the Trust Fund will continue to show net growth until 2022 because the interest generated by its bonds and the revenue from payroll taxes exceeds the amount needed to pay benefits. After 2022, without increases in Social Security taxes or cuts in benefits, the Fund is projected to decrease each year until being fully exhausted in 2033. At this point, if legislative action is not taken, the benefits would be reduced (www.ssa.gov).
Government cannot manage the employment or economic factors as well as the American people think. If that were the case there would not be a recessions as everything would be predictable and lead to no unemployment. Based on a current review democrats mention cutting jobs in a weak economy may be unwise; however, republicans say deficit and spending cuts control are a...

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