The true cost of Social Security
Ross, Stephen A.
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Citation (published version)Laurence Kotlikoff, Alex Blocker, Stephen A Ross, Sergio Villar. 2019. "The True Cost of Social Security." Tax Policy and the Economy, https://doi.org/10.1086/703231.
Implicit government obligations represent the lion's share of government liabilities in the U.S. and many other countries. Yet these liabilities are rarely measured let alone properly adjusted for their risk. This paper shows, by example, how modern asset pricing can be used to value implicit fiscal debts taking into account their risk properties. The example is the U.S. Social Security System's net liability to working-age Americans. Marking this debt to market makes a big difference. Based on our preferred estimate, its market value is 86 percent higher than the Social Security trustees' valuation method suggests. Our alternative APT specifications range from 74 to 115 percent higher than that of the Social Security Administration.
Rights© 2008 by Alexander W. Blocker, Laurence J. Kotlikoff, and Stephen A. Ross. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.