16 MISC. PUBLICATION 570, U. S. DEPT. OF AGRICULTURE 



ployed after he reaches the age of 65, but also to his aged wife (or 

 widow if he is deceased), to dependent children, and to parents of 

 deceased workers. 9 



If the originally scheduled increases in tax rates beyond 1945 were 

 put into effect, annual tax payments into the reserve fund would 

 probably be substantially higher than benefit payments for many 

 years in the future. Indeed, probably not until 1975-80 would bene- 

 fit payments exceed the tax income of the fund for any substantial 

 length of time. Benefit payments may reach levels of 300 to 450 

 million dollars per year by 1955, according to projections by the 

 Board of Trustees of the Fund. 10 Nevertheless, the continuous accu- 

 mulation of funds in the reserve would have a depressing influence 

 on private expenditures, because funds which would otherwise largely 

 be spent by workers and consumers would be transferred from their 

 hands to the reserve account. This would not necessarily be true, 

 however, of total expenditures. As the reserve fund accumulates it 

 would be invested in Government bonds. If the proceeds from the 

 sale of these bonds to the fund were spent for goods and services, and 

 if Government expenditures were larger than they would otherwise 

 be, by an amount equal to the accumulating reserve, there would be 

 no depressing effect of the old-age and survivors' insurance program 

 on total expenditures. The financing of the program, however, 

 through a continuous accumulation of large reserves — that is, by 

 currently collecting more than is paid out for the next 30 to 35 years — 

 is not a mechanism conducive to an expansion of private consumption. 



Nevertheless, if this financing mechanism is continued, the Social 

 Security Program as a whole will still have a tendency to stabilize 

 private expenditures, because benefit payments would be heaviest 

 during periods of unemployment, and tax collections would be heavi- 

 est in periods of full employment. The effects of benefit payments in 

 keeping the expenditures of the beneficiaries up could be quite instru- 

 mental in retarding the tendency of a small amount of unemployment 

 to "snowball" into a major depression. Moreover, the program makes 

 it possible for many workers to retire at an earlier age than would 

 otherwise be done, thus reducing the number of active job seekers. 

 Both results may be important contributions to the post-war main- 

 tenance of full employment. 



The program could be improved in its power to encourage private 

 consumption expenditures during periods when unemployment begins 

 to develop by amending it: (1) So that annual payments out of the 

 fund are approximately equal to payments into the fund, thus pre- 

 venting the further accumulation of reserves, (2) to provide a sub- 

 stantial proportion of the payments into the fund from the general 

 revenues of the Treasury, which are derived from sources other than 

 regressive pay-roll or excise taxes, and (3) by extending the pro- 



8 The amount of benefit payment is related to the previous earnings of the individual 

 in covered employment, and is determined in part by the number and type of his depend- 

 ents. For instance, the average primary benefit paid to a retired worker over 65 years of 

 age was $23.23 per month in June 1043. In addition, payments to wives aged 65 or over 

 brought the family income from the old-ago and survivors' insurance program to $36.62 

 a month, and payments to children made this total about $4S. The primary benefit pay- 

 able to an eligible worker is 40 percent of the first $50 of his monthly average wage in 

 covered employment, plus 10 percent of his wage alxive the $50 level, with a small 

 additional allowance for length of time in insured employment. 



10 For a full explanation of the methods used in making these estimates see: Fourth 

 Annual Report of the Hoard of Trustees of the Federal Old-Age and Survivors' Insurance 

 Trust Fund. House Document No. 620, 78th Congress, 2d Session. 



