Social Insurance Programs

The statutory and economic incidence of social security taxes are almost always identical for workers.

False

Workers are usually only willing to contribute to pension funds that are not fully-funded.

False

Paternalism

Paternalism is another rationale for social insurance programs.

Suppose in a given year Social Security taxes of $500M were collected and Social Security benefits of $600M were paid. Which would be a true statement under these conditions?

a SS deficit of $100M would arise

When an insurance company finds that "bad risks" are more likely to insure than "good risks" this is called:

adverse selection

Social Security Surplus

arises when, within a given year, the program collects more dollars in taxes than it pays in benefits.

Social Security

created in 1935, provides benefits to retired and disabled workers and their dependents.

Unemployment insurance

enacted in 1935, provides benefits to laid-off workers.

Which of the following best describes a well-run private pension plan?

fully funded

Which of the following individuals will tend to receive more positive income transfers from the Social Security program?

An individual who earned the minimum wage throughout their working life.

Social Security

Each pay an equal share and therefore our current (combined) tax rate of 15.3 percent consists of payments by both employee and employer of 7.65 percent each.

Bob receives a negative transfer when he receives more from the Social Security system than his contributions would otherwise have funded.

False

Suppose in a given year Social Security taxes of $500M were collected and SS benefits of $400M were dispensed. Which of the following would be a true statement under these conditions?

SS surplus of $100M would arise

Suppose in a given year that Soc. Security taxes of $800M were collected and Soc. Security benefits of $900M were paid. Which would be a true statement under these conditions?

SS trust fund would fall by $100M

transfer function

The other characteristic is the extent to which individual benefits are paid by someone else

A paternalistic rationale for social insurance would be when someone believes that, because Angela will not voluntarily save for future retirement, requiring her to contribute to social security is really intended to help her through government policy.

True

Bob receives a positive transfer he receives more from the Social Security system than his contributions would otherwise have funded.

True

Social Security operates on a pay-as-you-go funding requirement that is required only to meet the current year's outflow of benefits.

True

The Social Security Trust Funds consist of accumlated surpluses over time.

True

When the current year's Social Security taxes are less than benefits, a deficit occurs.

True

When the current year's Social Security taxes exceed benefits, a surplus occurs.

True

Medicare

introduced in 1965, provides for inpatient costs at hospitals and limited care at nursing homes.

insurance function

is identical to the function performed by private insurers.

Social Security Trust Fund

is where the annual surplus IOUs are housed, until they are reclaimed by the Social Security System when it operates a Social Security deficit.

Which of the following long-run effects is likely from the Social Security program to the extent that it lowers national saving?

lowers GDP growth

When an insurance company finds that people who are insured take less care of their insured property this is called:

moral hazard

Self-employed workers

must pay both shares for a total of 15.3 percent.

The "adverse selection" problem would suggest which of the following individuals would be most likely to apply for health insurance?

older stockbroker with chronic illnesses

Social Security is required to follow which type of funding requirement?

pay as you go

Social insurance programs

provide benefits to individuals and families for loss of income due to retirement, disability, illness and unemployment.

Which of the following would be a means of funding benefits during a year in which social security runs a deficit?

raise the retirement age