PowerPoint PresentationSlide 2Slide 3Slide 4Slide 5Slide 6Slide 7Slide 8Slide 9Slide 10Justification for Government InterventionThe need for economic security 1. income adequacy - Relative income inequality:2. individual equity – “Should the government care about how much the poor have relative to the rich or relative to some absolute standard? 3. economic growth – Real GDP per Capita: $18,250 in 1967 (in 2002 dollars) to $36,386 in 2002 – (U. S. Department of Labor Homepage)Adjustment to changes in the economy 1. Inflation – Projections of social security payment failure are based on stander inflation rates (between 2 and 3%). 2. Question of aging populations: U.S. 1 in 4 will be elderly, verse Japan 1 in 3Comparisons with other countries that have social security Germany’s use of Social Security - Contributions to pension insurance, unemployment insurance, health insurance and care insurance are paid half by the employer and half by the employee, the companies accident insurance is paid only by the employer. Rentenversicherung (Pension insurance): 19.5 percent Arbeitslosenversicherung (Unemployment insurance): 6.5 percent Krankenversicherung (Health insurance): 14.3 percent (average) Pflegeversicherung (Nursing care insurance): 1.7 percent Total Expenditure as %age of GDP: 26.33% (1993)France’s Socialist system - The French social security system is highly complex and constitutes over twenty organizations each concerned with collecting or allocating contributions for various welfare programs. Total Expenditure as %age of GDP: 24.12% (1990) Coverage:a. All legal residents in France, i.e. employed, unemployed, pensioners and their dependents, are entitled to benefit from the French health care system.b. 100% of all costs related to pregnancy and childbirth are covered. c. Medical and pharmaceutical costs, hospitalization, appliances and prostheses are all free of charge.d. Old Age Pension: Pensions are calculated by age, length of career, salary levels and related contributions. You can retire from the age of sixty and the basic qualifying time is 37.5 years of employment.Comparisons with other countries that do not have social security Cuba ( some assistance given but very unorganized) – a. All wage earners are covered. The employer pays 14% while the employed covers none; government pays the rest including all burial costs. b. Disability pension: ~50% (minimum 59 pecos a month)c. Survivor pension: 100% to 50% only for several months afterd. Maternity pension: 6 weeks before and after baby (min. 6 pecos a week)e. Medical Benefits: free to all, continues until recovery. Total Expenditure as %age of GDP: 15.21% (1990) Underdeveloped nations – no system in placeThe Alternatives? (and why these ideas would NOT work)Dismantle Social Security - America’s lack of ability to save money - Social Security is very popular and well established Encourage private saving through incentives - What incentives? It would take a lot to make Americans start saving - It’s not likely that any number of incentives would outweigh the benefits of retaining Social Security Voluntary contributions to fund retirement for the elderly - Not consistent - Self interest would prevent this from going anywhereHold families responsible for retirement of their elders - Many families do this anyway but this idea does not ensure individual equity - Too many retirees may be left uncared forWhat are the benefits of having Social Security controlled by the government? - To ensure that its purpose is carried out- Democratic society helps retain influence of the people it serves - Power to serve all citizens and make sure no one is left