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

(Article originally published here on March 30, 2014)

(The following article is a republished article from 3/2014 on Opednews, except for a second citation showing the multiplier effect of Social Security on the economy. It is republished here in response to other more recent articles on Opednews that describe how and why to save Social Security by using various additional tax scenarios. While these other solutions are technically valid, and while the reasons for saving Social Security are valid, the fact remains that asking how to pay for a program which is a net positive for the economy is the wrong question to ask. The following updated article also appears in my new book "America is Not Broke!" published by Tayen Lane and available here: https://tayen-lane.squarespace.com/america-is-not-broke)

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.

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 less than 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:

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.

Read the rest here:

http://blog.aarp.org/2013/10/01/social-securitys-one-two-punch/

And a paper from the Southern Rural Development Center says:

Similarly, results of an economic impact analysis of OASDI payments at 2009 levels
(discussed more in depth below) indicated an output multiplier of about 1.8 in the
U.S. economy. As such, every dollar paid in OASDI generated an additional 80 cents
in the economy. To put it another way, the $675 billion paid in OASDI benefits
during 2009 translated into an economic output of slightly over $1.2 trillion dollars
in the U.S. economy.

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