by James K. Glassman
Recently the Mercatus Center published “Limiting Security’s Drag on Economic Growth: Removing Disincentives to Personal Savings and Labor Force Participation” by Charles Blahous and Jason J. Fichtner. The article outlines how to reform Social Security to lessen some of the ways that it currently slows national economic growth. The paper is a more detailed version of the ideas in Chapter 15 of the book The 4% Solution, released earlier this year by the George W. Bush Institute.
In The 4% Solution Blahous and Fichtner argue that “Regardless of whether we aim for 4% growth, a lower figure, or a higher one, reforms to federal entitlement programs are essential.” In their recent paper for the Mercatus Center, they go even further in explaining how economic growth, including the national savings rates, labor force participation decisions, and growth of the potential labor force, is negatively impacted by the current design of Social Security. Blahous and Fichtner argue that “without effective entitlement reform, our nation’s future economic growth potential will be buried under a mountain of federal taxation and indebtedness.”