Re: Bush busts Social Security with massive deficits

From: Igor (jjweatherby_at_houston.rr.com)
Date: 10/03/04 

Date: Sun, 03 Oct 2004 19:33:37 GMT

William F Hummel wrote:

> Here you completely ignore the effect on the macroeconomy that would
> result from your proposal. Increasing payroll taxes is precisely the
> wrong thing to do in terms of promoting vigorous growth in our
> productive capacity. If there is a future problem in SS, it will be
> in our productivity, not are financials.
>

It will have little effect on the Long term economy. Yes there could be
a short term hit but not a long term hit. It will effect capital little
in the long run. Capital to labor ratio are steady in the long run. See
Kondor's Stylized facts. This is what drives Solow '56. Returns to
capital are dimishing and capital reaches a steady state in the long run
in which taxes do not effect. We can't get much more return from
physical capital. It is human capital and research and development that
fuel long run growth. These may not be subject to dimishing returns. I
will say may because the evidence is not clear yet.