Social Security, Saving, and Capital Formation

Much controversy has developed recently over capital formation and the claim that the eocial security system has reduced savings and a3 a reeult the potential for economic growth in this country. Concerned that there was much misunderstanding with respect to the subject, the Comm483ioner of Social Security asked the Ofice of Reeearch and Statietics to make a presentation to top-level stag to clarify the Concept, 8timUlate intelligent discuseion, and place the issues in proper perspective. This article is based on the presentation made at the Executive Staff Meeting on April 18, 1975. To facilitate understanding of the issuea, the artmle begin8 with a discussion of the general nature of capital formation and it3 relationship to eavang and economic growth. The balance of the artzcle focusee on three questions: What (8 the impact of social security on saving? If 8ocial 8ecurity reduce8 satiing, is this necessarily bad? If it (8 desirable to increase saving and economic growth, w-hat alternative policies can be coneidered?