Suppose that your state raises its sales tax from 5 percent to 6 percent. The state revenue commissioner forecasts a 20 percent increase in of workers is rising slowly, while the number of retirees is rising quickly. Concerned about the future of Social Security, some members of Congress propose a “freeze” on the program.

a. If total expenditures were frozen, what would happen to benefits per retiree? To tax payments per worker? (Assume that Social Security taxes and receipts are balanced in each year.)

b. If benefits per retiree were frozen, what would happen to total expenditures? To tax payments per worker?

c. If tax payments per worker were frozen, what would happen to total expenditures? To benefits per retiree?

d. What do your answers to parts (a), (b), and

(c) imply about the difficult decisions faced by policymakers?