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April 7, 2005
Thought Experiment
Jim Glass has a great though experiment on his site about the "transition costs" of funding private accounts within Social Security:
Let us imagine that Social Security continues into the future operating exactly as it does today, with just one exception: the US government bonds that currently are deposited in the trust fund are distributed among individual private accounts created for Social Security participants instead, substituting for benefit promises of equal value -- the same benefits the bonds would finance under the status quo. Going forward, additional government bonds that would be deposited in the trust fund under the status quo system are allocated to private accounts as well.
Compared to the current system the change in government tax revenue is $0, there is no change in the government's use of its tax revenue, and there is $0 change in the government's liability on its bonds issued to finance future benefits.
Is there any "transition cost" to the government in creating such private accounts funded with the government bonds?
If yes, identify what it is. If "no", proceed...
The answer is no. Head over and read the whole thing...
Posted by Peter Mork at April 7, 2005 7:06 AM
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