Wed Mar 30 11:02:11 EST 2005
Re the trust fund: Actually, lots of other countries have accumulated funds
that partially back their PAYG systems, although these accumulations are not
called "trust funds" and they are not legally required. For example, these
accumulations are common in the early years of a PAYG scheme--but they
typically get used up later on. They are commonly invested in government
bonds but sometimes in other assets, usually with low rates of return. The
same issues that we have regarding influence of temporary accumulations on
total government debt arise in these other countries.
Recently, some countries with more mature schemes have decided to build
reserve funds with diversified investments, in the hope that this will cover
part of the cost of the baby boomers' retirement without increasing total
government debt. Canada is one example. Since that fund is only a few years
old, we don't know how that will work out in the long run.
At the core, I don't believe it's accurate to say that the US situation is
unique (although every country has unique wrinkles). All systems need to
think about streams of revenues and expenditures, these frequently don't
match in the short run, what you do with any surplus matters, and of course
impact on saving, work and therefore real goods and services is most basic
in all cases.
Estelle James
ejames at estellejames.com
202-338-1451 (phone)
www.estellejames.com