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VOLUME
1, NUMBER 4, 2002
AUTHOR:
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Alan
D. Viard
Senior
Economist and Policy Advisor, Federal Reserve Bank of Dallas |
TITLE:
Pay-As-You-Go
Social Security and the Aging of America: An Economic Analysis
(PDF)
ABSTRACT:
Because it is
a mature pay-as-you-go retirement system, Social Security provides current
and future workers with below-market returns. These workers bear the burden
of the unfunded liability arising from windfall gains to past retirees.
Alan D. Viard uses these principles to examine the effects of three demographic
developments: the low birthrate since the baby boom ended in 1965, the
impending retirement of the baby boomers, and the downward trend in old-age
mortality. The low birthrate reduces Social Security’s long-run rate of
return as the unfunded liability is spread across fewer workers. The boomers’
retirement does not pose a separate problem, but marks the end of the
temporary gains provided by the high birthrate during the boom. Because
the downward mortality trend does not change Social Security’s long-run
rate of return or the number of workers across whom the unfunded liability
can be spread, it need not change any worker’s burden. However, policy
responses to the trend are likely to shift burdens from earlier generations
to later ones.
SUGGESTED
CITATION:
Viard, Alan D. (2002),
"Pay-As-You-Go Social Security and the Aging of America: An Economic
Analysis," Federal Reserve Bank of Dallas Economic and Financial
Policy Review, Vol. 1, No. 4, www.dallasfed.org/research/efprpdfs/v01_n04_a01.pdf
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