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Oct 24, 2013

Big Return From Social Security

     From a study by Gary Koenig of the AARP Public Policy Institute and Al Myles of Mississippi State University:
Social Security’s economic impact starts when its recipients spend their benefits on goods and services.The businesses that receive these dollars use them to pay their owners and employees, purchase additional items to sell, and pay rent, taxes, and the other normal costs of doing business. Their suppliers in turn use the revenue they receive to pay their employees, suppliers, and so forth....
 Every dollar of Social Security benefits generates about $2 of economic output. ...
Social Security benefit payments in 2012 supported:
  • About $1.4 trillion in economic output (goods and services)
  • Just over 9.2 million jobs
  • About $774 billion in value added (gross domestic product)
  • More than $370 billion in salaries, wages, and other compensation
  • Tax revenues for local, state, and federal governments exceeding $222 billion, including $78.9 billion in local and state taxes and $143.3 billion in federal taxes

1 comment:

  1. What is missing from this analysis is that every dollar paid by social security is a dollar taken from earnings of workers and businesses via taxes. This is not to argue that social security is or is not a needed program, but just to state that if the money was not taken in taxes, it would still have been spent for goods and services or saved or invested. This article gives paid social security benefits a 2X multiplier effect. Excellent analysis exists that shows the economic multiplier effect is greater when individuals and businesses are free to spend and invest in an open market, which drives economic growth and creates more jobs and goods and services (an all boats rising situation). It also shows a comparative negative effect when money is withdrawn from the economy, such as via taxes. There is a balance to be found that includes the government using an enforced retirement/disability saving program to provide for a more stable society, but please consider all sides in this analysis. The end result is overall there is not so great a net financial gain (or perhaps even a loss) to the economy due to social security programs but overall there is a net societal gain (political stability and emotional good will in helping the elderly and disabled) because of social security. The problem is to achieve that balance. The failure of a program such as social security comes when people providing the financial support (taxes) do not see that they will receive the promised benefit (an earned benefit that is fairly administered). At that point, a societal reverse multiplier effect kicks in, and everyone must stand back.

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