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Asking "How to pay for Social Security" is Asking the Wrong Question

By   Follow Me on Twitter     Message Scott Baker       (Page 1 of 2 pages)     Permalink    (# of views)   3 comments, 3 series

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From Grand Bargain Watch - Save Social Security
Grand Bargain Watch - Save Social Security
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Although the economic literature, pundit bloviating, and ideological rants, love to ask "How to pay for Social Security," they are all asking the wrong question.

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The right question is "What is the Social Security Multiplier?"  The multiplier measures how much the national income goes up, or gets cut, by a given government expense or policy.  By convention, if the multiplier is <1, that means the government policy reduces the GDP by the fraction below 1.  So, Defense Spending is about .7, meaning that every dollar spent on defense reduces GDP by .3 (30 cents).  That's better than zero because some jobs are created, products made, etc, but it's a net loss because those things made tend to blow up and have to be remade, over and over. 

What is Social Security's multiplier effect then?

Well, AARP has a study that makes it clear:

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A new report from AARP, in fact, shows that every $1 paid out by Social Security generates, in turn, about $2 of total output for the U.S. economy -- or nearly $1.4 trillion in 2012.

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So, this means that there is a net GAIN for every dollar spent on Social Security and, though this is somewhat controversial, it may be as high as double the input.

Seen that way, we ought to fund SS unless the funding would cost us more than double the amount spent - say, with a 100% interest rate AND a government that did not have the right and ability to "coin Money" (Article 1, Section 8, clause 5 of the U.S. Constitution).  Since the U.S. has essentially an unlimited ability to borrow money, and at rates close to zero - not 100%! - there really is no question that we ought to do that. 

This is quite apart from the moral and societal impact of having millions of impoverished seniors that family members -- often in their prime earning years - and over-stressed private institutions, from churches to soup kitchens, would struggle to care for.  We've been there and done that, before we had Social Security.  It was mass poverty of seniors, well beyond the ability of the institutions of a hundred years ago, that caused FDR to create Social Security in the first place.  The need for Social Security really ought to be beyond debate now.  However, for those who still require proof, and who are not so blinded by theo-economic beliefs that nothing will convince them, the National Bureau of Economic Research says:

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Scott Baker is a Managing Editor & The Economics Editor at Opednews, and a blogger for Huffington Post, Daily Kos, and Global Economic Intersection.

His anthology of updated Opednews articles "America is Not Broke" was published by Tayen Lane Publishing (March, 2015) and may be found here:

Scott is a former President of Common Ground-NYC (, a Geoist/Georgist activist group. He has written dozens of articles for (more...)

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