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Paying for the Welfare State Without Raising Taxes

Despite the old economic adage that there’s no such thing as a free lunch, there is a way for governments to finance social-welfare programs without imposing a higher burden on taxpayers. National treasuries should establish Social Care Funds that borrow money at low interest rates and invest the proceeds in the stock market.

LONDON – The current value of the US government’s unfunded pension and Medicare liabilities is $46.7 trillion, or roughly two and a half times US GDP. Other estimates put that figure much higher. In the United Kingdom, a similar calculation by the Adam Smith Institute yields a £1.85 trillion ($2.34 trillion) “hidden debt time bomb.” And the situation in Switzerland, France, Belgium, Germany, Austria, and Spain is little different. It seems that all advanced economies are facing public-finance trouble ahead.

Or maybe not.

What if there really is such a thing as a free lunch? What if there was a way to raise the money to pay for social-welfare programs, such as pensions and health care, without imposing extra taxes? In fact, there is: national treasuries should establish Social Care Funds that borrow money at low interest rates and invest the proceeds in the stock market.

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