AARP's fuzzy math on Social Security - Economics - AEI:"The report concludes: "Because of the multiplier effect, every dollar of Social Security paid out translates to almost two dollars in spending in the United States."
Sounds like magic.
But what AARP overlooks is the money pulled out of the economy through Social Security payroll taxes to fund these benefits.
These taxes have what we might call a "divisor effect:"
For each dollar of taxes levied, workers have less to spend, and that reduction is passed on throughout the economy.
If workers spend the same percentage of their incomes as retirees, then the net economic effect of Social Security isn't $1.4 trillion or 9 million jobs.
It's zero.
The AARP report acknowledges that "A net analysis would subtract the economic effects of payroll taxes from those of the benefit payments."
But that acknowledgment comes in a footnote."
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