Assignment:
Increasing Full retirement age would increase the amount of people in the labor force as the older generation would stay in longer hereby creating a surplus of employees, a potential increase in unemployment rate and a decrease in compensation. (Arnold, 2014) Reducing cost-of living adjustment means that retirees' real income would fall as they will be unable to keep up with inflation. (Arnold, 2014) Additionally, reducing benefits by subjecting benefits to higher taxes for all retirees would just also lower retiree's real income as they would incur additional out of pocket expenses and hereby also reducing the demand for health care services and goods.
This option would definitely lower the GPD. The last option made the more sense, lowering benefits for future High-income retirees should have a limited effect as higher income earners have more disposable income to make up the difference. Lastly, even though the High-income retirees will now have less disposal income to spend on leisure activities, this option will not affect GDP as leisure expenses are omitted from GDP calculations. (Arnold, 2014) Revenue wise, raising the payroll tax rate and apply payroll tax to health care premiums would not only negatively affect employers but also employees as it would lower the National Income as compensation for employees and corporate profits would decrease. (Arnold, 2014)
Further, this option would lower the demand for employees as now the cost for that employee has increased hereby increasing the supply and creating a surplus. This surplus would most likely drive down salaries. Subjecting higher wages to social security payroll tax by eliminating the cap would certainly reduce the amount disposable income for employees with higher wages hereby reducing leisure spending and probably some goods and services but the effect on GDP would be minimal as opposed to the other proposed options.Arnold, R.A. (2014). Microeconomics (12th ed.)
150 to 200 words