Re: [PEN-L] A thought about a Levy Inst. Policy Note

[Max B. Sawicky]

The neo-classicals say the solution is insufficient saving and more private capital. Randy says it is more public capital.  Some resemblance there, no?   More capital of whatever type in the usual NC growth models raises GDP to some new stable path; it does not increase the rate of growth beyond that.  So it should not increase the rate of productivity growth either. For how many years does anyone think the investment share of GDP can be continuously increased? Faster economic growth with faster real wage growth (not automatic, obviously) improves the SS deficit outlook but it does not eliminate it. Faster wage growth raises payroll tax receipts, but it also increases future scheduled benefits.   Note in the "low-cost" scenario it is not just better (and realistic, IMO) productivity growth that fixes the problem; there are an associated set of additional factors that have to kick in as well:  fertility rates, death rates, immigration, inflation, unemployment, etc.   Near the end of the piece, Randy says f** all that, it's only two percent of GDP anyway.  That's his best argument.   mbs       -----Original Message----- From: PEN-L list [mailto:[EMAIL PROTECTED]On Behalf Of Eugene Coyle Sent: Friday, August 25, 2006 6:41 PM To: PEN-L@SUS.CSUCHICO.EDU Subject: A thought about a Levy Inst. Policy Note L. Randall Wray wrote the Levy Institute Policy Note:  "The Burden of Aging:  Much Ado About Nothing, Or Little To Do About Something?"  2006/5.  (Available online at www.levy.org.) Illuminating about the issue he addresses -- is there a problem Social Security because the population is aging?  Wray persuades that the burden of an aging population is not much to worry about. He says: "In this policy note, I have sought only to answer a seemingly simple question:  given that the real burden will rise, is there anything we can begin to do today to attenuate that increase?  The answer seems to be that we should essentially follow the sme policy prescriptions that would make sense even if our society were not aging:  1)  more human capital: more years of schooling, fewer dropouts, higher quality schooling, and enhanced apprenticeship programs;  2)  more public investment: new and improved public infrastructure, better maintenance of existing infrastructure, and reduction of adverse environmental impacts; and 3) more private investment:  new and improved private production facilities to enhance growth.  The last item will almost certainly require maintencance of high aggregate demand today and over the near future." It is this last item, # 3, that puzzles me.  As I understand it, it says "We need high demand now to require the high investment necessary to produce the output to meet the high demand."   He is recommending, therefore, a treadmill to infinity.  Which conflicts, inevitably in my view, with his advocacy of "reduction of adverse environmental impacts." Gene Coyle  I am using the free version of SPAMfighter for private users. It has removed 20951 spam emails to date. Paying users do not have this message in their emails. Try SPAMfighter for free now!