As Congress Tackles Social Security's Problems, Here Are 4 Ways Benefit Cuts Would Hurt Local Economies

While the "trickle-down theory" is often associated with President Ronald Reagan's policies, it dates backmost to the 1920s, erstwhile humorist Will Rogers coined the term. The trickle-down mentation involves giving taxation breaks and different perks to the richest Americans successful the content that they won't hoard the money, but rather, usage it to physique caller businesses and spur economical growth.

If there's immoderate information to the trickle-down theory, it's illustrated by the interaction those 63 million-plus Americans receiving Social Security status oregon survivors benefits person connected their section economies. Here's a look astatine however Social Security supports section economies and what we tin expect if the Social Security spot money is depleted, starring to a 25% chopped successful benefits for retirees and their dependents.

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A fiscal tsunami

With astir 1 successful 5 Americans receiving Social Security benefits, their monthly payments person an outsize interaction connected the U.S. economy.

According to Dan Doonan, enforcement manager of the National Institute connected Retirement Security (NIRS), Social Security benefits not lone supply fiscal information for millions but besides make taxation revenue, prolong jobs, and assistance support section economies strong. Doonan suggests that policymakers debating the semipermanent solvency of Social Security should retrieve that payment cuts won't conscionable harm retirees.

After all, each dollar of Social Security benefits spent successful the U.S. supports $2 of economical activity.

Based connected the mode Social Security dollars are spent, here's what you tin expect to hap if benefits are cut.

1. Drop successful profits

A 25% chopped means little to spend, which would rapidly construe to little income for section retailers, including market stores, covering stores, pharmacies, and state stations. Service businesses specified arsenic restaurants, barbershops, car repair shops, and location attraction companies would besides beryllium hit.

2. Reduced request for nonrecreational services

Due to Social Security recipients' cutbacks, determination would besides beryllium reduced request for section nonrecreational services, including healthcare practices, dental offices, optometric offices, ineligible firms, and fiscal services.

3. Financial symptom for businesses and employees

Less income from seniors means little income for suppliers and employees, who would past beryllium forced to chopped backmost connected their ain spending. As section spending falls, here's what typically happens: