Fiscal Policy Paper

Instructor Sam Pirnazar
July 27, 2015


Here we will discuss as a group of like minds how and why the US’s deficits surplus and debt have an effect on tax payers and future social security and Medicare users.
Now in many cases deficit can affect multitudes while a surplus creates positive results for those on the receiving end. As you may know debt requires the liability to be paid or the liability in some cases it may be repossessed or rendered bad credit to the individual. Now while Americans face issues with debt, surplus, and even deficit it is important to know that the United States deals with it first hand as well. Several areas the three topics affect include tax payers, unemployed, Social Security, Medicare, imports, exports, and the GDP. A synopsis of Team B’s discussion of the topics follows, however in this reading we will focus on Taxpayers, fyture social security and Medicare users.
Tax payers
Fiscal deficit means government expenditure exceeds its revenue in any particular year. All taxpayers are affected by U.S.'s deficit and debt. Higher government debt crowds out private investment in the form of higher taxes and inflation. Higher debt raises several question marks on government ability to repay it. Due to higher debt levels, risk premium increases, which leads to rise in interest rates. High interest rates negatively interest rate sensitive sectors of the economy such as real estate, consumer durable. High government deficit results in increasing US debt. In order to reduce the current deficit, government hikes tax rate on taxpayers. High debt and fiscal deficit affect US taxpayers in the form of tax hikes, high interest rate on debt, reduced social security benefits/programs and weakening of currency. The overall effect of all these measures results in lower purchasing power of taxpayers and they are left with less money to invest or spend.
Fiscal surplus means government revenue exceeds its expenditure in any particular year. When the government runs surplus, it positively affect taxpayers. There are differing ways in which government could spend surplus money. The surplus money could be used to repay debt. Government can decide to issue tax refund to taxpayers or government can increase it’s spend on social security benefits and programs. The overall effect of all these measures results in higher purchasing power of taxpayers and they could spend or invest more money.

Future Social Security and Medicare users
The meaning of deficit is defined as, the amount by which something, especially a sum of money, is too small. The meaning of surplus is defined as, the amount of something leftover when requirements have been met; an excess of production or supply over demand. The meaning of debt is defined as, something that is, typically money, owed or overdue.
Now that the terms are in order and understood, the answers to how and why can now be addressed. The reason that the United States deficit, surplus, and debt effect future Social Security users is the following; according to "The Medicare Newsgroup" (2015), "Medicare significantly contributes to the federal budget deficit only through its general revenue financing under its Medicare Medical Insurance (Part B) program. Its outlays financed under its Medicare Hospital Insurance (Part A) or by individual premiums are features of the programs expenditures, but do not show up in federal budget calculations” (para. 1).
Social Security is currently running a surplus, due to all of its revenue figures that get combined and calculated determining the payroll taxes, trust fund interest, and income taxes earned from some of the Social Security benefits (Morrissey, 2011). According to the Economic Policy Institute, Morrissey (2011), "The trust fund, which currently has $2.6 trillion dollars, is projected to grow to around $3.7 trillion in 2022. But once Social Security starts drawing down the principle in the trust fund to help pay for the Baby Boomer retirement, Social Security will be running a deficit. Also, Social Security is currently running a primary deficit, which means it would be running a deficit absent the interest on the trust fund.” (Is Social Security running a deficit?).
Morrissey, M. (2011). Economic Policy Institute. Retrieved from
The Medicare Newsgroup. (2015). Retrieved from
How our national debt hurts our economy. (n.d.). Retrieved July 24, 2015.