Economic Effects of Social Security

Economic Effects of Social Security

Economic Effects of Social Security

Economic Effects of Social Security

Excerpt

THE SOCIAL SECURITY SYSTEM--the largest government domestic program in the United States and an important source of retirement income for a large number of Americans--began to suffer from serious financial problems during the mid-1970s. At first, the deficits reflected the sharp slowdown in current economic growth. But even larger deficits were projected for the twenty-first century under the impact of declining birthrates and an aging population.

For these and other reasons, economists undertook theoretical and empirical work to measure the economic effects of the social security system. The result was an outpouring of analyses, increasingly technical and inaccessible to lay observers, but increasingly important to them because of the decisions that will have to be made affecting their taxes and retirement benefits.

In May 1981 President Reagan proposed a number of reductions in social security benefits. In response to the hostile reception his proposals received, the president created a bipartisan National Commission on Social Security Reform. The issues to be addressed by the commission will be on the public agenda for many years.

As the nation turns to the important decisions on social security that lie ahead, it is important that members of Congress, the press, and the public understand the influence of social security on saving, labor supply, and the distribution of income. The book is intended to contribute to that understanding. It is another in a series of Brookings books that reflect the Institution's continuing concern with the adequacy and financial soundness of the social security system. They include Social Security: Perspectives for Reform , byJoseph A. Pechman,Henry J. Aaron , andMichael K. Taussig (1968); The Payroll Tax for Social Security , byJohn A. Brittain (1972); The Future of Social Security , by Alicia H. Munnell (1977); and Policymaking for Social Security, by Martha Derthick (1979).

Henry J. Aaron is a senior fellow in the Brookings Economic Studies . . .

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