Social security and private saving: theory and historical evidence

This article is a nontechnical presentation of the debate that has gone on during the past decade over whether the U.S. social security system has depressed private saving in the economy. The heart of the article is an assessment of economist Martin Feldstein's original evidence, presentation of the alternative evidence that concluded that currently available historical data do not support the proposition that social security reduces private saving, and an evaluation of the contradictory evidence presented by Feldstein in response to the alternative evidence. The article concludes that, although the total body of evidence is inconclusive, the historical evidence fails to support the hypothesis that social security has reduced private saving. The Office of Research, Statistics, and International Policy, as part of its ongoing research mission, investigates the interrelationship between social security and the economy. This article presents an examination of one of several aspects of this relationship relevant to public policy considerations and is intended to make previously published technical papers available to a broader audience.