Are national savings increased (or at least left unaffected)?
Some proponents of investing Social Security money in the financial markets see it as a means of increasing national savings. However, diverting Social Security funds into the markets by itself does little or nothing to savings. If there are no accompanying federal revenue increases or spending cuts, the government simply has to borrow the money to make up for the foregone revenues. With one hand it invests (or mandate that individuals invest), with the other hand it borrows — on balance there is no change. Other proposals raise Social Security receipts and/or constrain Social Security spending. In so doing, they reduce government deficits and thereby reduce what the Treasury has to borrow from financial markets (or perhaps some day reduce the outstanding federal debt held by the public). More money in the financial markets should make more money available for private investment. Economists would say that tax increases and spending constraints are likely to cut consumption and, thus,
