Ian writes: >> But SS should be considered as part of the savings rate as it is a form of >> forced savings for the nation as a whole. By your logic, all taxation has >> an adverse effect on the savings rate and therefore we should abolish the >> state.
Just so I am clear, why would social security be treated as a form of savings? Worker Peter is taxed, which money is sent to Retired Paul, who presumably expends the money on consumption. Why would the net effect be any different on the economy than if Peter was not taxed and expended the money on consumption? In my ignorance, doesn't savings mean an investment that has an effect on capital formation? >> And just how much should every 'child' save for the provisioning of their >> parents on the chances that one of them will get, say, Alzheimer's or >> cancer, in addition to saving for retirement? It seems you implicitly >> assume that we can create insurance markets for all possible risks. >> "Converting Social Security's basic benefits into private accounts shifts >> risks onto individuals who are in no position to bear them" [Robert >> Reischauer]. Substitute the words 'nuclear family' for individuals and one >> can't help but think that 'diseconomies of scale' in the restructuring of >> risk would proliferate like rabbits. I assume the overwhelming percentage of the citizenry is capable of preparing for retirement. We allow people to self-finance and self-insure their cars, homes, life, etc., and the system generally works pretty well. You are implicitly assuming adults should be treated as children. David
