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The True Cost of Social Security

Alexander W. Blocker, Laurence J. Kotlikoff, Stephen A. Ross, Sergio Villar Vallenas

Chapter in NBER book Tax Policy and the Economy, Volume 33 (2019), Robert A. Moffitt, editor
Conference held September 27, 2018
Published in July 2019 by University of Chicago Press
© 2019 by the National Bureau of Economic Research
in NBER Book Series Tax Policy and the Economy

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 fi scal 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 86 percent higher than the Social Security trustees' valuation method suggests.

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Document Object Identifier (DOI): https://doi.org/10.1086/703231

This chapter first appeared as NBER working paper w14427, The True Cost of Social Security, Alexander W. Blocker, Laurence J. Kotlikoff, Stephen A. Ross
 
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