Does the Present Social Security System deters net savings and capital formation ?
The direct transfer of funds from present wage earners to retirees has led to the supposition that present earners have reduced opportunities for savings. This might be true for individuals, but is it true for the entire economy? Retiree spending and the government use of the SS surplus brings SS funds directly into the economy where these funds circulate, providing increased consumer demand, increased production, and jobs. The funds eventually settle into bank deposits as savings. The net savings and capital formation for the entire economy might be increased rather than decreased. Has Social Security become a welfare system? Social security funds are directed to those who have previously worked in the system, who have paid their FICA taxes and who have participated in creating economic growth for future generations. Characterizing a system that assists American workers as a “welfare” system cannot be correct. As fallacies circulate and interfere with a proper assessment of the SS sys
