EH.Net Mailing List Archive: SocSec

If Personal Retirement Accounts (PRA) are created by diverting some social  
security payments and there is not increase in other taxes or reductions  
in benefits, then the government will have to borrow to pay the shortfall.  
The increase in funds going into the credit market from the PRAs will be  
matched by the increased borrowing by the government.  Since there is no  
change in National Saving, then ceteris paribus, is it not true that the  
next generation cannot be better off? 
 
I am not sure how he would Feldstein would answer this question, but he  
does talk about how the deadweight loss of higher payroll taxes reduces  
work effort.  It is true that having PRAs would reduce payroll taxes,  
however, the interest on the new debt will increase someone's taxes. If  
those are paid by the same people then would not the deadweight loss be  
the same? 
 
 
Samuel H. Williamson     
Editor of SocSec 
samw at eh.net