Social Security: Savings and Retirement I

Looseleaf elementary thoughts that can be collected into a conclusion. Most important concept: production (more goods) versus distribution (where the goods go.) I doubt you'll find this as Marxist/ian as the terminology might suggest. Skip 1 if you're pretty sure you remember how capital works.

1. In the abstract, savings represents a socially-legitmated call on future production, which is labor using capital, and while an individual's savings may have originated in labor, it has become capital. The actual economic value to society of the savings is therefore only the additional goods made possible by a higher level of production through more or better means and/or the redirection of the means of production to capital goods that will enable yet higher production in the future.

1a. Hmm, on reflection, I thought of something else: in an inflationary environment, an individual's savings which is stuffed into a mattress doesn't contribute in that way, but, to the extent it would otherwise have gone to consumer goods, it represents a voluntary foregoing of the goods for which they would otherwise compete, lessening inflationary pressures in what amounts to an act of distributive charity. The level of inflation dictates just what a sacrifice this might be, as the value of the matress-stuffing erodes. However, assuming that the inflation partly represents inadequate production relative to capital-enabled means, to the extent the money-in-mattress would have been available as an investment to increase production, the sacrifice damages both the saver and society. Mattress-stuffing in a deflationary environment has the opposite dynamic in relation to consumer and capital goods, damagingl in the first and helpful in the second, as it decreases the funds available for needless investment and therefore raises returns.

2. Okay, so we hear that Americans don't save enough. On an individual (not corporate basis) the savings rate is at an all-time low and periodically threatens to go negative, meaning we as a collective of individuals may go into hock. Add in corporate earnings accumulation and the savings rate looks better (Citibank and Exxon are more frugal than thou); subtract the Federal budget deficit and it looks worse.

3. Retirement connection: as a generation, we're real slackers in terms of making babies, slightly buoyed by higher reproductive rates among some subgroups (middle class white American rates look European), and somewhat more buoyed by an increased rate of immigration, since immigrants tend to come in at working age and with, if with dependents, with young dependents and their fertility rates once here tend to be higher than native-born Americans. The pyramid scheme that allows the current level of Social Security payments versus payroll tax receipts collapses without a continually expanding base of wage-earners. This would likely be the case even if productivity rates exploded, since social security is currently indexed to wage income growth rather than simply to the cost of goods. If labor benefits and therefore the percentage payroll tax increases, so do the benefits owed.

3a. Oh, and to show I'm even-handed despite being of one of the generations that will receive a lower level of benefits: while the preBaby Boomers will, on average, end up collecting much more in Social Security than their contributions plus accumulated interest, they also on average have shelled out far more of their own money to raise the current large generations of wage earners than they will receive. Speaking economically, we were great investments for society but lousy investments for our parents. Not true for the childless, of course, although they did kick in for public education, capital investments that will outlast them, etc. I will leave it to you to consider whether you've made the noneconomic returns to your parents worth their dough Probably better not to ask them: it's either fishing for compliments of uncertain sincerity or potentially very depressing. Anyway, no resentment here of our elders. I'm happy to have elders because when I don't, I'll be old myself, something preferable only to the stark alternative and eventually not even that.