One of the key components of the latest stimulus deal the President and the Republicans in Congress have hammered out is a decrease in the Social Security part of mandatory payroll taxes that just about everyone pays. The other part of the mandatory payroll tax is Medicare, but that is staying the same at 1.45%. Currently 6.2% is taken out of paychecks and goes to the Social Security Trust fund to be distributed to "old" people in the form of a monthly check. The compromise reduces this amount with-held by 2 percentage points, down to 4.2%. For example: at 6.2% every $100.00 a worker earns he/she pays $6.20 in Social Securtiy taxes. If the compromise becomes law, then only $4.20 will be with-held. Soooo, a worker will retain $2.00 more for every $100.00 earned. If a worker makes $500.00 a week, then their check will increase by $10.00. The assumption is this money will be spent on goods and services and will stimulate the economy.
There are two ways of looking at this. (1) The amount is so small for each person the stimulus will not be sufficient. After all, what can you buy with $10.00 additional dollars per week that will make a significant difference? (2) Although the amount is small, there will be no debate about saving it or using it to pay debt. People will fully spend this extra money and the economy will get the maximum impact of the whole amount being spent, rather than just a portion.
I am not really sure what to think, so I ask you...is this "good or bad" stimulus? Extra credit on the next test awaits!
I believe this is a bad stimulus, because not only will the economy not have a significant enough boost from the extra $2.00 per paycheck spent, but the size of the Social Security fund will diminish, further complicating the future problem of the Social Security fund. The government is, in effect, increasing its debt while hoping to provide a small boost for the economy now instead of in the long run.
ReplyDeleteNow about that extra credit...
Rafael...Very good response...your extra credit is 2 points, but with the multiplier effect (I am assuming you will save none of it) will yield 5 points added to the next test.... :)
ReplyDeleteTo me it seems that no matter how you cut it this is simply a bad stimulus. Would it be so wrong for the government to look more to the future? This extra 2 percent will not be a significant enough boost to the economy. Also our social security fund is already losing money. This would further complicate that problem. Why not simply stop further burying our country in debt and start worrying about paying off those debts? More money in our "government" would allow for production within our own borders, thus allowing us to pull away from our dependence on China.
ReplyDeleteYou know this is kind of ignorant. This is exactly what we've been talking about in class. If the government is aware that the social security fund is diminishing because of an increasing number of elderly people this is a pointless stimulus. The government is trying too hard to repair the economy, and not let it do so naturally. Exactly what FDR did in the great depression. In a sense the government is extending the "recession" rather than repairing it. Instead I whole heartedly believe the government should just let the economy run its course for a while, and stop trying to forcibly change its status.
ReplyDeleteThere are some food things and bad that COULD come out of this. People look at what a small percent this is but don't look at the fact that this effects the entire country. If you say that all this money will go to benefit the country, then you take the money from everyone. Even if this is only 10 dollars then multiply that by let's say 200 million people, then the economy would be boosted by 2 billion. This boost would occur multiple times a year. Now this is assuming that the entire amount in increase is used to help the economy, however we know this is not going to happen. However the premise behind it is a good one and if even a fraction of this money were put into the it the economy it would be a boost, especially long term. If this does occur then it would help the economy, and lessen the amount needed in social security because of this status of the economy. People are more envolved causing a more equalized economy with less inflation helping to keep prices low and lessening the amount of money people on social security require. So yes this would be a good thing if the money was spent as planned and the economy responded as planned, however we have seen that this is not necessarily the case.
ReplyDeleteThe decrease in taxes taken out for social security would benefit the economy. If someone Received $2000 paycheck they would be getting back $40, which is an extra Christmas present, dinner at a restaurant, etc. If every person was getting this much back ,even with the propensity to save, the economy would still benefit. On the other side we have less money when we retire , however; the government is already " borrowing" for this fund and may not even be available when we retire.
ReplyDeleteI believe this is a bad stimulus. Where it seems as though this migt be a good investment, it is not. It may create more money for individuals, but this increase in income is not significant enough to make a real impact in lives of people. 10 or 20 dollars will not create a different way of living for an individual. On this note, a decrease will only take money away from social security, thus taking money away from the elderly. Whereas today we find a scarcity of money within social security, a further decrease in funds will only hurt the economy. The reason for this is that statistics show that we have a larger population of elder people compared to younger. These statistics show that we wil need more money in the future to help fund the elderly. Because of this taking koney away from social security will hurt the economy.
ReplyDeleteI believe this is a bad stimulus because it's such a small percentage. This wouldn't help the individual, and it would be taking from the social security funds. We discussed in class about the ratio of elderly to the young. And because of the advancement in today's society, not many people will decease. Yes, this two percent will help us now, in the short run. But down the road, we will be the ones suffering, for just the few dollars today.
ReplyDeleteIn my opinion this is horrible stimlus plan! Taking money away from the social security (old people) is not nice and right! If this happens then in the future it would affect us, which is not good at all. I hope it won't work out.
ReplyDelete