Wage Growth and the Measurement of Social Security’s Financial Condition

Andrew G. Biggs, Jagadeesh Gokhale and Stephanie Kelton

Chapter 11 in Government Spending on the Elderly, 2007, pp 272-311 from Palgrave Macmillan

Abstract: Abstract It is often argued in both policy circles and the popular media that faster economic growth could significantly reduce Social Security’s long-term funding imbalance.1 If, as many argue, Social Security Trustees’ projections for economic growth are unduly pessimistic, policy makers may ignore calls for policies to reform the system in the belief that faster economic growth will “bail us out.” However, Social Security’s financial status is normally analyzed under a truncated horizon of 75 years. Does the positive association of faster economic growth with improvement in the system’s actuarial balance survive under longer horizons? If not — that is, if faster economic growth fails to improve or even worsens Social Security’s actuarial balance over very long horizons — failure to enact reforms to make the system sustainable would be a more serious lapse than many policy makers and budget analysts realize.

Keywords: Social Security; Wage Growth; Trust Fund; Taxable Payroll; Fast Economic Growth (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-59144-8_11

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DOI: 10.1057/9780230591448_11

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