NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The True Cost of Social Security

Alexander W. Blocker, Laurence J. Kotlikoff, Stephen A. Ross

NBER Working Paper No. 14427
Issued in October 2008
NBER Program(s):   PE

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; its market value is 23 percent larger than the Social Security trustees' valuation method suggests.

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Document Object Identifier (DOI): 10.3386/w14427

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