Is the US Social Security System Helping the Economy? (May 2018)

On the macro-level, frugality or extreme saving is not always a good thing because the economy needs a certain level of consumption to work properly. In this essay, I show that the US retirement plan system, where current earners make contribution to the collective “savings” account (the Social Security Trust Funds) rather than to their individual savings account, keeps people from over-saving their earnings. This is because as the mandatory social security contribution reduces the amount of private saving, which is only true when the certain conditions are met. I reviewed various financial indicators to show that the US public pension plan is keeping the saving rate at the level to maintain the sound consumption level.