Jagadeesh Gokhale – författare

Many of us suspect that Social Security faces eventual bankruptcy. But the government projects its future finances using long outdated methods. Employing a more up-to-date approach, Jagadeesh Gokhale here argues that the program faces insolvency far sooner than previously thought.

To assess Social Security’s fate more accurately under current and alternative policies, Gokhale constructs a detailed simulation of the forces shaping American demographics and the economy to project their future evolution. He then uses this simulation to analyze six prominent Social Security reform packages—two liberal, two centrist, and two conservative—to demonstrate how far they would restore the program’s financial health and which population groups would be helped or hurt in the process.

Arguments over Social Security have raged for decades, but they have taken place in a relative informational vacuum; Social Security provides the necessary bedrock of analysis that will prove vital for anyone with a stake in this important debate.

Nobody who has even a passing acquaintance with economics could fail to realise that Western governments are highly indebted. Current generations have been consuming at the expense of future generations. However, just how indebted are we? The government measures how much it has borrowed to meet past spending commitments, but it does not measure how much money it needs to meet all the future pensions and healthcare promises it has made to tomorrow’s older generations. Furthermore, no funds have been set aside to provide for these costs. Governments are allowed to produce accounting information in such a cavalier fashion, using methods that would be illegal for private sector companies. Fortunately, though, scholars have been able to examine the detail of government policy and the financial commitments of future governments in order to determine just how indebted we are. This IEA publication brings such calculations to life by showing by how much spending will need to be cut and taxes raised in order to make the government’s fiscal position sustainable. This work should be of interest to politicians, to students and teachers of economics and, indeed, all who are interested in public policy and the sustainability of Western economies.

Nobody who has even a passing acquaintance with economics could fail to realise that Western governments are highly indebted. Current generations have been consuming at the expense of future generations. However, just how indebted are we? The government measures how much it has borrowed to meet past spending commitments, but it does not measure how much money it needs to meet all the future pensions and healthcare promises it has made to tomorrow’s older generations. Furthermore, no funds have been set aside to provide for these costs. Governments are allowed to produce accounting information in such a cavalier fashion, using methods that would be illegal for private sector companies. Fortunately, though, scholars have been able to examine the detail of government policy and the financial commitments of future governments in order to determine just how indebted we are. This IEA publication brings such calculations to life by showing by how much spending will need to be cut and taxes raised in order to make the government’s fiscal position sustainable. This work should be of interest to politicians, to students and teachers of economics and, indeed, all who are interested in public policy and the sustainability of Western economies.

Few realize how bad the federal government's finances are, because most evaluations are based on what happened in the pastnot what is likely to happen in the future.