Econ 2133 1st Edition Lecture 11 BEGINNING OF SECTION 3 Outline of Current Lecture PART I Entitlements PART II Fiscal Policy the Fed Banks and Financial Markets not here yet Current Lecture A Entitlements B Fiscal policy the Fed banks and financial markets A Entitlements payments to eligible citizens for our social safety net 1935 Social Safety Net in US by FDR wanted system of social security that protected old and disabled that guarantees income flow so they don t face uncertainty of bad negative economic outcomes Social Safety Net in 3rd World Countries children Intergenerational transfer program social security not private retirement fund Social security is a social contract we have with each other Promise we made that older generations taken care of by younger generations When it comes time for Dr Parker for retire we and our children s generation will pay for his social security Transfers income from males to females because women live longer Transfers income from smokers to nonsmokers because cigarettes kill smokers and thus nonsmokers collect on their social security payments Transfers income from druggies to non druggies because of bad combos of drugs and alcohol When Social Security started it would be a supplemental retirement account for elderly and disabled At beginning life expectancy 62 FDR sets retirement age 65 Called it a Jack Pot program because if you could make it to 65 then you hit the jack pot Old people started collecting while they didn t even pay into the system Mrs Fuller first to collect and got over 88 000 and only paid in 25 Not a lot of people will be paid after 65 and won t even be around for too long Most men didn t live to see 90 let alone 65 FDR borrowed 65 concept from Chancellor Bismarck in Germany in 1870 However now life expectancy is 82 Because of childhood obesity and will cause premature death through the diseases it raises Retirement at 67 now Can take 75 at 62 though Take SS at 62 then if you keep working the for every 2 you have to pay SS 1 that s a 50 TAX Go to 70 and you can get 100 plus bonus Longer people live after retired the more money there needs to be put into social programs So we got some issues 1 Increased longevity folks get paid much longer than they did before These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute So we need to increase the age eligibility can t keep system in balance on 145 year old way of thinking when clearly math and science shows we need to increase due to data 2 Worker Retiree ratio 1946 42 workers 1 Retiree Promise of a 1 tax on employee and 1 employer forever will never change WHICH IS BS However now if you re self employed you have to send 15 every quarter in addition to fed and state taxes 1960 9 1 2000 3 5 1 2030 3 1 2050 3 1 Demographic changes zero popular growth Need 2 2 live births female Germany 1 7 Spain 1 2 France 1 6 Japan 1 4 And Russia is really low