Ignoring Social Security Paints False Wealth Inequality Picture

Ryan BourneMyrecent paper with Chris Edwards concluded that studies estimating wealth inequality without accounting for Social Security would both exaggerate the level of inequality and overestimate its increases since the 1980s.We realized that increasing amounts of wealth for the bottom 90 percent had become tied up in Social Security claims over the past three decades. Anda host of evidence suggests that redistributive programs, such as Social Security, actively crowd out private saving among those on modest incomes.By reducing the incentive and ability for lower paid workers to save (not least because of payroll taxes), Social Security widens marketable wealth inequality, which has been the focus of most inequality studies. Perversely, critics of current levels of marketable wealth inequality then use these calculations ignoring Social Security as justification for increasing the generosity of transfer programs such as Social Security, that would iwiden their preferred wealth inequality metrics further.A new studyfrom University of Pennsylvania economists adds empirical blast to our intuition. Whereas the oft ‐​cited work of Thomas Piketty et al restricts wealth inequality statistics to the distribution of marketable assets, this new study estimates the present value of Social Security wealth too, before assigning it across the wealth distribution.Its conclusions are striking. Adjusting for Social Security wealth not only substantially reduces the level of w...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs