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Social security in an aging society

  • L. Randall Wray

Most of the recent claims that Social Security faces major financial challenges in the years ahead rely on the recognition that the US population is aging. Indeed, the coming wave of baby-boomer retirements plays a continuing role in calls for 'reform' of the program. However, the general aging of the population ensures that the problem will not go away even when that generation passes on. This paper focuses on the demographic trends facing the US (and world)—why is the population aging, and how fast? Will this lead to an intolerable burden on future generations of workers? While most of the public discussion focuses on Social Security's long-term finances, what really matters is whether the economy will be able to produce a sufficient quantity of real goods and services to provide for both workers and dependents in, say, the year 2080. If it cannot, then regardless of Social Security's finances, the real living standards of Americans in 2080 will have to be lower than they are today. Any reforms to Social Security made today should focus on increasing the economy's capacity to produce real goods and services, rather than on ensuring positive actuarial balances. It will be demonstrated that projected demographic changes are surprisingly modest, and can be accommodated at a measured pace with fairly small policy reforms.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/09538250600797925
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Article provided by Taylor & Francis Journals in its journal Review of Political Economy.

Volume (Year): 18 (2006)
Issue (Month): 3 ()
Pages: 391-411

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Handle: RePEc:taf:revpoe:v:18:y:2006:i:3:p:391-411
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  1. L. Randall Wray, 1998. "Modern Money," Economics Working Paper Archive wp_252, Levy Economics Institute.
  2. David E. Bloom & David Canning, 2004. "Global Demographic Change: Dimensions and Economic Significance," NBER Working Papers 10817, National Bureau of Economic Research, Inc.
  3. Dimitri B. Papadimitriou & L. Randall Wray, . "Does Social Security Need Saving? Providing for Retirees throughout the Twenty-first Century," Economics Public Policy Brief Archive ppb_55, Levy Economics Institute.
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