The payroll tax now provides a third of federal revenues. And, because it nominally funds Social Security and Medicare, some liberals regard its continuance as essential to the survival of those programs. That’s almost certainly wrong. Public pensions and medical care for the aged have become fixed, integral parts of American life. Their political support no longer depends on analogizing them to private insurance. Besides, the aging of the population, the collapse of defined-benefit private pensions, the volatility of 401(k)s, and pricey advances in medical technology mean that, no matter what efficiencies may be achieved, Social Security and Medicare will -- and should —- grow. Holding them hostage to ever-rising, job-killing payroll taxes is perverse.This is all true, to a point. But I think part of the reason Social Security and Medicare have been politically popular -- besides the innate appeal of these programs -- has been on the strength of the analogy to insurance. They are not welfare programs, which Americans have historically been cool to, but are part of a social compact between generations. Everyone contributes their fair share during their working years, and in return, everyone enjoys a measure of comfort in retirement based on what they contributed. That's the ideal, anyway; my understanding is that Social Security, at least, is mildly redistributive in its effects, even though it is funded by a regressive payroll tax.
Decoupling funding for Social Security and Medicare from a payroll tax and shifting to either general revenues or a dedicated carbon tax or whatever would require us, I think, to revisit this narrative. We could get rid of the insurance analogy, of course, but preserving a connection between the money we pay into the system and the benefits we get out of it is crucial -- not merely for the viability of Social Security and Medicare, but of all government programs, as Mark Schmitt argues in his column today. This is why I think rebating all or most of the revenue from a cap-and-trade schemes is the best, and perhaps only, way to do carbon emissions regulation in the US. You could structure it so that it would be functionally identical to dropping the payroll tax for a carbon tax, as Hertzberg proposes, but the connection between pricing dirty energy and rebates given back would be much stronger.
Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss.
ReplyDeleteBasically it means as a equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed small loss to prevent a large, possibly devastating loss.the insurer is the company who is selling the insurance policy and the insured is the person who takes that policy.The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium.there are various types of insurance such as:-
1. house insurance
2. car insurance
3.human insurance called as medicare
4.shop insurance
and so on.
i mean to say that at present world atleast in all fields the insurance companies will provides this insurance facility to secure our property in the cricis.the insurance also protects our spent money in some field by providing their required amount of our damage property.if we claim for our damage property the insurance company will provide the required price of that property at present time.it's property i am talking about it covers all those things for which we takes the insurance policies.
here below i tell you about some losses and their premium and how the losses are calculated, so take a look on that:-
# Definite Loss. The event that gives rise to the loss that is subject to the insured, at least in principle, take place at a known time, in a known place, and from a known cause. The classic example is death of an insured person on a life insurance policy. Fire, automobile accidents, and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable. Ideally, the time, place and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements.
# Accidental Loss. The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be ‘pure,’ in the sense that it results from an event for which there is only the opportunity for cost. Events that contain speculative elements, such as ordinary business risks, are generally not considered insurable.
# Large Loss. The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses these latter costs may be several times the size of the expected cost of losses. There is little point in paying such costs unless the protection offered has real value to a buyer.
# Affordable Premium. If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that anyone will buy insurance, even if on offer. Further, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If there is no such chance of loss, the transaction may have the form of insurance, but not the substance. (See the U.S. Financial Accounting Standards Board standard number 113)
# Calculable Loss. There are two elements that must be at least estimable, if not formally calculable: the probability of loss, and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim.
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