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September 27, 2009


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And, crucially, none of these options has the slightest influence on affordability. In a funded scheme, you've got to sell securities and collect coupons to pay the pensions; therefore someone must be generating surpluses and buying securities to the same value of the pension payments, just as in a nonfunded system someone must be paying contributions.

It's a transfer payment and there's no way around it. If you have a lot of people retiring, it's a big cost to the economy. Whether that cost is on the public or private sector's cash-flow statement is a detail. There is no pony.

Things that are different: risk and distribution effects.

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