Tuesday, February 11, 2020

Rising Unemployment Puts Strain on Social Security Fund Article

Rising Unemployment Puts Strain on Social Security Fund - Article Example However, with the recent financial crisis, the number of jobholders has been diminishing significantly leading to severe unemployment problem which in turn resulted in the reduction in inflow to social security trust fund. The origin of problem due to rising unemployment has been vividly described by Lori Montgomery (2009) in the article entitled â€Å"Rising unemployment puts the strain on Social Security fund† in Washington Post. Montgomery describes the negative impact of the U.S. recession on the Social Security trust fund that affected the social security benefits for nearly 51 million retirees and other recipients. More alarmingly, due to the existence of this situation, total surplus funds at the moment may get eroded by end of 2010 far earlier than expected period. The main concern is that a lot of necessity exists at the moment for the US government to spend on infrastructure and human resource development and the shortfall of social security fund is expected to make the financial balance sheet worse. In general, the Treasury Department borrows money from the Social Security trust fund to finance government operations and this option will no longer be available in nearby future due to this recent crisis. This would certainly force US government to borrow an additional $700 billion over the next decade from other countries like China and Japan. Another concern is that by 2017, the Treasury would have to start repaying the billions it has borrowed from the trust fund over the past 25 years, which forces the government to widen its external debt. This would force the US government to enhance the tax rates considerably on the limited number of employees. Recent Congress budget presentation in August 2008 revealed that the earlier projections were satisfactory, but the condition changed towards negative trend very rapidly with loss of more than 4 million jobs coupled with the recession.  

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