Book contents
- Frontmatter
- Contents
- Acknowledgments
- 1 Funding Social Security: An Introduction
- 2 Funded versus PAYGO Social Security
- 3 Funded versus Privatized Social Security
- 4 Funded versus PAYGO Social Security with Individual Accounts
- 5 Funded versus Means-Tested Social Security
- 6 Questions and Answers
- References
- Index
6 - Questions and Answers
Published online by Cambridge University Press: 06 July 2010
- Frontmatter
- Contents
- Acknowledgments
- 1 Funding Social Security: An Introduction
- 2 Funded versus PAYGO Social Security
- 3 Funded versus Privatized Social Security
- 4 Funded versus PAYGO Social Security with Individual Accounts
- 5 Funded versus Means-Tested Social Security
- 6 Questions and Answers
- References
- Index
Summary
Is funding Social Security applicable to most countries?
Yes.
Is funding Social Security a new proposal?
No. This is made clear from citations and quotes throughout this book.
What are the two distinct components of funding Social Security?
Funding Social Security requires: (1) accumulating a large fund by setting taxes and benefits so that Social Security runs substantial annual surpluses; and (2) investing the fund in a diversified portfolio of marketable government securities, corporate bonds, and corporate stocks.
What does each component do?
Fund accumulation is the key to raising the capital accumulation of the economy, whereas portfolio diversification is the key to capturing a larger share of the economy's capital income for the Social Security system. Suppose an increase in the economy's capital accumulation would generate a return to the economy of 6%. Fund accumulation without portfolio diversification would raise capital accumulation (provided the balance in the rest of the government budget is unaltered) and generate a 6% return to the economy. Fund accumulation with portfolio diversification would raise capital accumulation and cause the Social Security system to capture some of this 6% return.
- Type
- Chapter
- Information
- Funding Social SecurityA Strategic Alternative, pp. 159 - 178Publisher: Cambridge University PressPrint publication year: 1999