How Social Security’s problems may be affecting the economy today


Here’s an interesting article in tomorrow’s (Sunday’s) NY Times titled “Social Security's Future? First, Consider the Present”:

Start with some facts. The bulk of the people who will be receiving benefits in 2042 will be 70 to 85 years old. Today, those people are 33 to 48 - in other words, they are the core of the nation's work force.

Now say those people just found out that Social Security would pay 73 percent, not 100 percent, of their benefits in retirement. How would that news change their behavior?

The author goes on to suggest that because so many Americans now believe they’re not going to see full Social Security benefits (see graph above), it’s affecting the savings rate and the labor market. How’s this for a conclusion:

Millions of Americans already doubt that Social Security will be around when they retire, and they may have already begun to change their behavior. But that doesn't mean these effects are nonexistent. Rather, it means that doing something about Social Security's seemingly far-off problems could unlock considerable economic gains today.

Wow: the Times they are a’changin’.