When the Social Security system enters its deficit years and the bonds held in the trust funds are drawn down,
A) overall taxes will be reduced as the trust funds are used to pay benefits to retirees.
B) the payroll taxes used to finance Social Security benefits can be reduced because the trust funds will be sufficient to pay the retirement benefits of the baby boom generation.
C) income and other federal taxes will have to be raised (or additional funds will have to be borrowed) in order to redeem the bonds held by the trust fund.
D) income taxes will have to be reduced in order to keep the revenues and expenditures of the Social Security system in balance.

Question

Quizplus · Accepted Answer

When the Social Security system enters its deficit years and the bonds held in the trust funds are drawn down, the income and other federal taxes will have to be raised (or additional funds will have to be borrowed) in order to redeem the bonds held by the trust fund. This means that the government will have to find new sources of revenue to ensure that Social Security benefits can continue to be paid out to retirees. Cutting income taxes or reducing payroll taxes would only exacerbate the problem by reducing the system's revenue.

When the Social Security System Enters Its Deficit Years and the Bonds