There is a case to be made that any decomposition of net national saving into private and government saving is arbitrary in that it reflects nothing more than the choice of accounting labels attached to various transactions between the two sectors. The corresponding growth in nominal net national product was 7.0, 10.1, 7.5, and 2.7 percent. According to the latest Social Security trustee report, a tax hike or a benefit cut will become unavoidable by 2013 to close the gap between the program's revenues and outlays. The report estimates that increasing payroll taxes by 1.9 percent immediately would eliminate the gap over a 75-year horizon. However, this estimate probably understates the true size of the funding shortfall because it ignores deficits that will accrue in year 76 and later and because, relative to historical evidence, the report's underlying demographic assumptions underestimate future improvements in survival rates.
Allowance is made for the earlier death of one spouse in a two-adult household.
Jagadeesh Gokhale is an economic advisor at the Federal Reserve Bank of Cleveland. The views stated herein are those of the authors and not necessarily those of the Federal Reserve Bank of Cleveland or of the Board of Governors of the Federal Reserve System . Economic Commentary is published by the Research Department of the Federal Reserve Bank of Cleveland. We invite comments, questions, and suggestions.