Ramesh, consider this:

Stronger productivity means that each worker at the margin produces more output and income (revenues). So in other words, while the fertility rate plays a role, (and I’m bullish on that because of my pro-immigration views) it’s the productivity rate that enables each worker and each new worker to create more output and income than would otherwise be the case.

It is productivity that gives the advantage and allows solvency. That’s the dynamic supply-side view, which by the way, requires continued low tax rates on capital.

Think of it this way: as a worker, I can pay off one retiree’s benefits (at least in theory). But if I’m a more productive worker, I may be able to pay off 1.2 retiree’s benefits. That’s a hypothetical, but I’m trying to illustrate the positive impact of productivity on the Social Security story.

If I pay off one worker’s benefits, but I become more productive because of better capital formation, equipment, education, etc, then I’m capable of funding more then one retiree. And that’s the advantage of productivity gains.